AMA Clears Way for Reimbursement of Psychedelic Therapies

The American Medical Association (AMA) recently approved a CPT III code for psychedelic therapies...

The American Medical Association (AMA) recently approved a CPT III code for psychedelic therapies. This is a significant development towards allowing physicians and other qualified healthcare professionals to seek reimbursement for delivering psychedelic therapies and thereby facilitate improved access to groundbreaking treatments.

Growth of Psychedelic Therapies

Psychedelics are a class of natural and synthetic compounds that includes psilocybin, MDMA (3,4-methylenedioxymethamphetamine), ibogaine, and DMT (dimethyltryptamine). Several psychedelics have shown great promise in treating a variety of psychiatric and behavioral disorders, including depression, obsessive-compulsive disorder, smoking cessation, alcohol and drug addiction, cluster headaches, and cancer-related or other end-of-life psychological distress. As a result, the U.S. Food and Drug Administration (FDA) has twice designated psilocybin as a “breakthrough therapy.”

Much like cannabis, the majority of psychedelics are regulated on Schedule 1 of the federal Controlled Substances Act (CSA), which covers those substances with “no currently accepted medical use and a high potential for abuse.” As a result, psychedelics are illegal to produce, sell, possess, or consume without special government authorization. The Schedule 1 designation also means that federal funding of clinical research involving psilocybin and MDMA is largely unavailable.

Given their potential medical benefits, several states and municipalities have taken steps to decriminalize psychedelics at the local level. Other states have adopted regulations to greenlight further research into the potential therapeutic uses for psilocybin and other psychedelics. From January 1, 2019, to September 28, 2022, 25 states considered 74 bills that proposed to reform existing laws restricting access to psychedelic drugs or proposed further research into reform legislation, and 10 of those bills had been signed into law by seven states, according to the American Psychiatric Association (APA). Oregon was the first state in the country to establish a regulatory framework for the regulated therapeutic use of psilocybin, and earlier this month issued the nation’s first psilocybin service center license. In Colorado, lawmakers recently passed legislation establishing a regulatory framework for psychedelic substances, which were legalized via a voter-approved initiative in 2022.

In New Jersey, the “Psilocybin Behavioral Health Access and Services Act” would decriminalize psilocybin, as well as authorize the production and use of psilocybin for behavioral healthcare and treatment. The bill, Senate Bill 2934, was introduced by Senate President Nicholas Scutari in June 2022 and an identical companion bill was introduced in the Assembly (A4911) in December. Both bills are currently in committee review.

AMA Code for Psychedelic Therapies

On March 3, 2023 the AMA published the Summary of Panel Actions, which included the acceptance of the new CPT III code for “Psychedelic Drug Monitoring Services.” The application titled, “Continuous In-Person Monitoring and Intervention during Psychedelic Medication Therapy,” was a collaboration between two companies that are leading research efforts currently in the final stages prior to applying with the FDA.

Medical professionals use CPT codes in electronic health records to track medical services and procedures for reimbursement. CPT III codes are a set of temporary codes assigned to emerging technologies, services, and procedures and are intended to be used for data collection to substantiate more widespread usage or to provide documentation for the FDA approval process. 

What’s Next?

The AMA is expected to release full details of the code by July 2023. The code will take effect when it is published on January 1, 2024.

FDA approval of two psychedelic therapies is also on the horizon. Last July, the Biden Administration stated that it “anticipates” that regulators will approve MDMA and psilocybin within the next two years for the treatment of PTSD and depression, respectively.

According to a letter sent by Assistant Secretary for Mental Health and Substance Use Miriam Delphin-Rittmon to Rep. Madeleine Dean (D-PA), the administration is “exploring the prospect of establishing a federal task force to monitor” the growing use of psychedelic treatments. According to the letter, the task force, which would be comprised of federal agencies and private sector entities, would be formed to address “the myriad of complex issues associated with the anticipated approval by the [FDA] of [MDMA] for the treatment of post-traumatic stress disorder and psilocybin for the treatment of depression within approximately 24 months.”

If you have questions, please contact us

For businesses and entrepreneurs, the psychedelics industry presents a wealth of opportunities. However, given the ongoing regulatory uncertainty, we encourage interested entities to consult with experienced counsel before taking any action. Scarinci Hollenbeck’s Cannabis Law Group is closely monitoring this rapidly evolving area of law. Partner Daniel T. McKillop co-chairs the New Jersey State Bar Association’s (NJSBA) Psychedelic Law Subcommittee. If you have any questions or if you would like to discuss the matter further, contact us at 201-896-4100.