After years of talk and speculation, psychedelics — mind-altering substances like psilocybin that may have a medical use — may finally be ready to become mainstream.

At the moment, only ketamine is legal as an antidepressant, and only in clinical settings as a nasal spray (intravenous and intramuscular are also legal in certain Canadian provinces). But efforts are underway to legalize other substances, including psilocybin (“magic mushrooms”), MDMA and dimethyltryptamine (DMT).

Psychedelic drugs administered within professionally supervised healthcare settings have shown promise in helping treat depression, anxiety and post-traumatic stress disorder when traditional medications have limited efficacy.

The organizations that will have a stake in the psychedelic drug market are varied in their aims and purposes. Some clinical startups focusing on providing ketamine-assisted therapy hope to expand to other compounds as they become legal. Others are manufacturers focused on growing and synthesizing APIs (active pharmaceutical ingredients) for sale to clinicians, researchers and drug developers.

Some organizations are working to create new synthetic designer psychedelic compounds ranging from clinical research organizations that may want to open clinics using ketamine, to life science companies looking to develop and sell psychedelics, to universities and researchers running trials. And other, publicly traded companies not in the pharmaceuticals space are developing their own psychedelic compounds for sale.

Different risks and different coverages in psychedelics

As in the cannabis business, the different businesses involved in psychedelics — along with its stigma among carriers and its uncertain legal status — makes risk management and insurance planning difficult.

The market can be roughly divided into companies who want to make and sell psychedelics, and practitioners and medical practices that want to administer psychedelics in a clinical setting.

Many companies wanting to make and distribute psychedelics are considering going public to fund their operations. This adds significant professional risk for corporate leadership.

Delays and timeline restrictions are common in licensing, building facilities and listing on a stock exchange. As a result, many entities run a risk of private investors losing patience and pulling out their investment, creating a need for these operations to have adequate Directors and Officers (D&O) coverage.

That’s in addition to standard property and casualty (P&C) insurance to cover operations and products liability to cover psychedelic compounds insurance in regards to products.

As for any medical professional, clinicians administering psychedelic drugs need medical malpractice insurance, errors and omissions (E&O) insurance and professional liability insurance. (Canadian doctors should not assume Canadian Practicing Medical Association insurance covers all of the above risks.)

Special considerations for clinics

For medical clinics already treating patients with psychedelics, reducing liability is critical. The following best practices will help mitigate risk and enable clinics to secure coverage:

  • Implement a formal abuse policy. Patients under the influence of psychedelics are considered to be vulnerable to harm. Consequently, clinical practices must have strict policies and procedures in place to protect these patients. When seeking coverage, insurance companies will require processes and policies to be documented around abuse, including staff training on the topic.
  • Require informed consent forms. Patients must sign a form detailing the type of treatment, the drugs being administered and the risks associated with that treatment.
  • Develop suicide risk management policies and procedures. This is important for treating individuals who have not been helped by other medications. Formal documentation will be required by carriers as well.
  • Develop clinically adverse events policies and procedures. All treatment rooms must be properly equipped to address potential adverse reactions to psychedelics such as cardiac arrest or anaphylactic responses, with emergency medical professionals onsite.

Contact HUB International to learn more about the emerging market in psychedelics.