Insurance Coverage for Psychedelic Treatment: Breaking Down the Costs and Access

Legal psychedelic treatment doesn’t mean much if no one can afford it. The cost of psychedelic-assisted therapy is undoubtedly high, and ensuring equitable access is one of the issues the industry strives to solve. 

The big question here is— will insurance cover the cost of treatment? The short answer is yes and no. The long answer is a bit more complicated.

The answer for this one is mostly no, with a tiny bit of yes. Insurance will only cover the cost of drugs that are FDA approved. As a result, the only psychedelic currently covered by insurance is an FDA-approved drug called Spravato. 

Spravato is currently the only psychedelic drug approved for any kind of mental health issue. The drug is a version of ketamine, which is often used to treat depression, anxiety, PTSD, and addiction. Ketamine has been used as an anesthetic in the US for decades but wasn’t available for other uses until 2019 when Johnson & Johnson had its esketamine drug approved for treatment-resistant depression.

Traditional ketamine can be prescribed off-label, and it is. About one in five ketamine prescriptions are off-label. However, it is very expensive to receive treatment because patients must pay out of pocket. A series of ketamine infusions for mental health issues often cost several thousand dollars. As a result, Spravato has become a popular alternative to generic ketamine, though it is still only available for one indication.

Even when a drug is FDA-approved, dealing with insurance can be tricky. Operating company Numinus has had a difficult time figuring out the reimbursement process, and it is even more challenging for smaller companies. 

Numinus covers the cost of treatment with Spravato until the reimbursement from insurance comes through. According to CEO Payton Nyquvest, the company could be down over a million dollars at any given time. Smaller companies and individual clinics simply don’t have the resources to foot the cost while waiting for the bureaucratic wheels of insurance to turn. So you see, even where insurance is involved, getting coverage for psychedelic treatment is no easy task.

As for all other psychedelic medicines, insurance coverage is currently out of the picture. Insurance companies won’t touch anything that isn’t legal on a federal level. Even though psilocybin is now legal on a state level in Oregon, there is no chance of people getting their treatment reimbursed. 

Insurance coverage for psychedelic treatment is currently very challenging and, more often than not, just completely out of the picture. However, that will be changing drastically over the next five years. Insurance coverage of psychedelic-assisted therapy will increase as new drugs become FDA-approved, and it isn’t just the cost of the drug that will be reimbursed. 

Like it or not, FDA approval of psychedelic compounds is crucial for widespread patient access. Fortunately, it looks like that will be happening within the next couple of years.

The next psychedelic compound to be approved will be MDMA for the treatment of PTSD. The exact date of approval is unknown, but it will likely be in the first half of 2024, at which point insurance will begin covering treatment. This is a big deal for people struggling with PTSD who have been unable to access treatment. 

Under current laws in the US, anyone seeking psychedelic treatment is forced either to the underground market or to legal markets in other countries. Traveling out of the country and footing the bill for an expensive retreat is out of the question for many people who desperately need treatment. Having a psychedelic treatment that is covered by insurance is a major win for people struggling with mental health conditions. However, it is not enough for insurance companies to cover just the cost of the drug itself. 

The reason that psychedelic treatment is so expensive is not because a tab of LSD or a few magic mushrooms costs an arm and a leg. But rather, the experience lasts six or more hours, and most people prefer to have a trained professional on hand the whole time— the FDA certainly does. The American Medical Association is aware of this need and is working to address it. 

The American Medical Association recently announced that it is developing billing codes for long-form psychedelic treatment— meaning that it will cover the cost of therapy as well as the price of the drug. This is a huge win for the future of affordable psychedelic treatment. It is crucial that insurance companies reimburse the entire cost of psychedelic treatment. Though it’s impossible to say for certain what the insurance framework will look like. It is reasonable to expect that insurance will be covering psychedelic-assisted therapy as it becomes FDA-approved. 

It is important to note that doctors will be able to prescribe MDMA and psilocybin off-label— just like doctors are doing now with ketamine. However, in those cases, the treatment will not be covered by insurance. It is going to take some time for psychedelics to be approved for all indications that they can successfully treat. As a result, the underground and international market for psychedelic treatment will continue to thrive.

So the answer is yes— the future is a place where people can access psychedelic treatment without having to pay the astronomical cost out of pocket. After the approval of MDMA, it is expected that several other psychedelic compounds will gain FDA approval, ensuring insurance coverage of treatment. 

Compass Pathways is currently pushing a synthetic psilocybin drug, COMP360, through its pipeline. If all goes according to plan, it will be approved for treatment-resistant depression, PTSD, and anorexia nervosa in the not-too-distant future. The first indication to make it through the approval process will be treatment-resistant depression. Predictions put approval around 2025.

Given the number of clinical trials currently testing a wide range of psychedelics, there will likely be several other compounds approved over the next ten years. This means that the number of psychedelic compounds available through insurance coverage will continue to grow.

To sum it up, while insurance coverage of psychedelic treatment is currently limited and tricky to navigate, there is hope on the horizon. The FDA approval of psychedelic compounds is essential for ensuring widespread access through insurance reimbursement of treatment. With the imminent approval of MDMA treatment for PTSD, insurance coverage will expand, providing significant breakthroughs for individuals who have long struggled to access effective treatment options. 

Furthermore, the American Medical Association’s development of billing codes for long-form psychedelic therapy, which includes the cost of therapy alongside the drug, is a crucial step toward affordable psychedelic treatment. As more psychedelic compounds, such as Compass Pathways’ COMP360, make their way through the approval process, we can anticipate a future where insurance coverage for a variety of indications becomes a reality. Although it will take time for psychedelics to receive approval for all their potential uses, progress is underway to ensure a future where the cost of psychedelic-assisted therapy is covered by insurance.