Telehealth Company Cerebral Agrees to Pay Over $3.6 Million in Connection with Business Practices that Encouraged the Unauthorized Distribution of Controlled Substances

Press Release

Non-Prosecution Agreement Resolves Investigation of the Company's Efforts to Increase Prescriptions of Adderall and Other Controlled Substances via Telemedicine

Breon Peace, the United States Attorney for the Eastern District of New York, and Anne Millgram, Administrator of the U.S. Drug Enforcement Administration (DEA), announced today that the online mental healthcare company Cerebral, Inc. (Cerebral) has entered into a non-prosecution agreement (NPA) with the U.S. Attorney's Office for the Eastern District of New York (the Office), and has agreed to pay more than $3.6 million for engaging in practices that encouraged the unauthorized distribution of controlled substances from 2019 to 2022. An additional fine against Cerebral has been deferred in light of the company's current financial condition.

Under the terms of the NPA, Cerebral agreed to forfeit $3,652,000 to the United States. The NPA requires Cerebral to continue to cooperate with and provide information to the United States for at least the 30-month term of the agreement. The NPA also requires Cerebral to pay a fine of $2,922,000, which the Office has determined that Cerebral does not currently have the ability to pay; as a result, it will be deferred for the term of the NPA, and waived at the expiration of the NPA if Cerebral is in compliance with the NPA and unless the Office determines that Cerebral's financial performance has changed such that payment of all or a portion of the fine would be warranted. In the event that Cerebral violates the NPA, the Office may prosecute Cerebral for any of the conduct that gave rise to the NPA and any newly discovered criminal activity.

"People seeking care for their mental health conditions should receive high-quality care that is not motivated or driven by greed," stated United States Attorney Peace. "Cerebral sought to increase its bottom line by increasing the prescription of drugs, including controlled substances that can be highly addictive and dangerous. Since my Office's investigation came to Cerebral's attention, the company has cooperated fully and taken significant steps to remediate the institutional failures that allowed this situation to occur in the first place. This resolution ensures that Cerebral will be financially accountable for its unacceptable conduct and serves as a reminder to the healthcare industry that my Office is committed to ensuring patient safety and protecting the public from business practices like those of Cerebral."

"Today's settlement holds Cerebral responsible for their failure to protect patients from the harms caused by the unnecessary or overprescribing of potentially-addictive ADHD medications," said DEA Administrator Anne Milgram. "Cerebral's exploitation of telemedicine flexibilities deceived patients who were legitimately seeking medical care, putting them at risk in exchange for profit. DEA remains committed to telemedicine accessibility that supports the health of all patients while also ensuring that telemedicine companies and practitioners prioritize patient health and safety above all else."

Cerebral's Operations

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Cerebral is an online mental health company that operates primarily as a direct-to-consumer business. Since October 2019, Cerebral has promoted or sold subscription services offering online health care treatment, including mental health treatment and medication management services, through its online platforms, to hundreds of thousands of patients struggling with depression, anxiety and other mental health issues. Cerebral generated revenue by offering tiered monthly subscription plans to its patients. Certain of Cerebral's subscription plans offered patients the ability to obtain medication from Cerebral's treatment providers.

Attention-Deficit/Hyperactivity Disorder (ADHD) was one of the mental health conditions Cerebral offered treatment for. Cerebral first launched its ADHD line of service in or around February 2021 and began offering ADHD treatment services to the public across the United States, rolling services out on a state-by-state basis. Cerebral's ADHD services were perceived to be a profitable line of business with the potential to increase patient retention at the company.

Beginning in October 2020, Cerebral expanded its medication offerings to include controlled substances. In addition, beginning in February 2021, Cerebral permitted its treatment providers to prescribe stimulant medication, such as Adderall, to its patients. Prescription stimulants, such as Adderall, are Schedule II drugs under the Controlled Substances Act.

Cerebral's Prescription Practices

Between February 2021 and October 2022, Cerebral instituted internal measures to increase the prescriptions of medications with the goal of boosting patient retention and, by extension, Cerebral's revenue.

Cerebral monitored the rates at which its providers prescribed medications, including controlled substances, primarily through two metrics which measured: (1) the number of drug prescriptions issued to patients who enrolled in a medication management subscription plan after their first 30-minute telehealth visit (the Initial Visit Rx Rate); and (2) the number of stimulant prescriptions prescribed to patients diagnosed with ADHD who had no comorbidities (the ADHD Stimulant Rx Metric). Cerebral did not consult with any members of its clinical advisory board-which included multiple experts in the fields of psychology and psychiatry-prior to implementing targeted campaigns to improve both metrics.

Between May 2021 and May 2022, Cerebral sought to increase the Initial Visit Rx Rate to 95%. Cerebral recognized inherent problems with the Initial Visit Rx Rate, including the fact that the metric did not take into account whether patients were diagnosed with conditions where drug prescriptions were clinically appropriate, and that the 95% target goal was not based on any established data or benchmark in medical or scientific literature. Cerebral also recognized that there were a variety of legitimate reasons why its treatment providers would not prescribe drugs to patients immediately after the patient's first visit, and that the Initial Visit Rx Rate could perversely incentivize its treatment providers into prescribing medication that was not necessary. Nonetheless, the company reviewed treatment providers' performance using the Initial Visit Rx Rate and engaged in coordinated efforts to increase the Initial Visit Rx Rate, including by implementing a bonus structure that awarded bonuses to supervisory individuals if they increased the Initial Visit Rx metric among their supervisees; and conducting regular reviews of providers' individual Initial Visit Rx Rate. Despite the Company's efforts to increase its performance on the Initial Visit Rx metric, it did not improve after December 2021. Cerebral ceased using the Initial Visit metric in or about May 2022, after Cerebral's former Chief Executive Officer was terminated.

Beginning in at least October 2021, Cerebral also took initiatives to measure the percentage of controlled substances prescriptions issued to patients who had been diagnosed with ADHD without comorbidities. Cerebral subsequently developed an internal plan to increase the ADHD Stimulant Rx Metric to 100% or "near 100%" and regularly audited its providers' ADHD prescription practices. Cerebral also considered disciplinary measures, such as issuing "flags" and "strikes," for individuals who the company considered to be underperformers for this metric. Cerebral instituted these measures despite the fact that certain of its treatment providers had expressed concerns to Cerebral's management about drug diversion risks with ADHD patients. Cerebral ceased all use of the ADHD Stimulant Rx Metric by October 2022.

In addition to the above tactics, Cerebral also provided financial payments that incentivized its providers to issue stimulant medication for ADHD patients. Specifically, prior to May 2022, Cerebral paid its providers an additional $10 to conduct required pre-prescription checks of Prescription Drug Monitoring Programs (PDMP)/Prescription Monitoring Program (PMP) databases. Cerebral did not compensate its providers for conducting PDMP/PMP checks for patients with any other medical diagnoses or patient needs.

Cerebral's Diversion Risks

According to Cerebral's admissions, Cerebral also did not maintain effective controls against drug diversion, even when risks of drug diversion were elevated to or acknowledged by its management. For example, Cerebral had thousands of duplicate patient accounts (i.e., multiple accounts that belonged to the same individual) that were not fully addressed internally until at least early 2022. As a result of the failure to timely identify and remove duplicate accounts, at least one patient was able to obtain stimulant prescriptions from multiple providers at Cerebral, even after having been previously flagged as having misused stimulants. As another example, prior to 2022, Cerebral also permitted drug-seeking patients who were not prescribed controlled substances in the first instance to seek reassignment to different providers.

The Non-Prosecution Agreement

Cerebral has agreed to forfeit $3,652,000 to the United States, which represent the amount of proceeds that could be reasonably attributed to the monthly increase in ADHD revenue generated by patients who were diagnosed with ADHD and subsequently prescribed stimulant prescriptions. Cerebral has also agreed to pay a fine of $2,922,000, which the Office has determined that Cerebral does not currently have the ability to pay; as detailed above, it will be deferred for the term of the NPA.

The Office reached this resolution with Cerebral after carefully weighing all of the factors relevant to the appropriate corporate resolution. The NPA recognizes that, although Cerebral's serious misconduct was reported to the Office before Cerebral self-disclosed it, Cerebral voluntarily took a number of substantial remedial measures beginning in May 2022 to mitigate and correct the effects of the practices described above, including terminating its former Chief Executive Officer, stopping all use of the prescription metrics described above, and improving its compliance measures. In October 2022, Cerebral voluntarily stopped prescribing controlled substances to all of its patients, and has agreed not to prescribe controlled substances in the future. Cerebral also has no prior criminal history in the United States. Furthermore, Cerebral has cooperated extensively with the Office in its investigation, including through detailed disclosures, and has agreed to continue to cooperate fully with the Office.

The agreement announced today is the result of an investigation conducted by the Drug Enforcement Administration, New York Division, Buffalo Diversion Group, Tactical Diversion Squad. The government's case is being handled by the Office's International Narcotics and Money Laundering Section and Business and Securities Fraud Section. Assistant United States <_w3a_listitem listvalue="Choose an item."><_w3a_listitem listvalue="Attorney" datavalue="Attorney"><_w3a_listitem listvalue="Attorneys" datavalue="Attorneys"> Attorneys Genny Ngai, Gillian Kassner and Miranda Gonzalez are in charge of the prosecution, with the assistance of the Office's former Paralegal Specialists Sophia Cronin, Riley Martinez and Jordi Martinez.

The <_w3a_listitem listvalue="Choose an item."><_w3a_listitem listvalue="Defendant" datavalue="Defendant"><_w3a_listitem listvalue="Defendants" datavalue="Defendants">Defendant:

CEREBRAL, INC.
Claymont, Delaware

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Updated November 4, 2024