FTC Launches Investigation Into Telehealth Startup Cerebral

The Federal Trade Commission is investigating telemental health startup Cerebral, according to a letter obtained by the Wall Street Journal.

The letter from the FTC states that the agency will investigate whether Cerebral engaged in deceptive advertising or marketing practices. Specifically, it plans to investigate the company’s subscription billing and cancellation processes, according to the report. The letter also asked Cerebral to save documents.  

Cerebral told mHealthIntelligence that it is cooperating with the FTC and has no additional comment.

According to the Wall Street Journal, several patients had trouble closing their Cerebral accounts and getting refunded for services. Some patients even had to ask their financial institutions to block the company.

The news of the probe follows a grand jury subpoena Cerebral received in early May. The subpoena is related to a federal investigation into the company’s potential violations of the Controlled Substances Act, according to Bloomberg.

Cerebral provides treatment for various mental health conditions, including anxiety, depression, insomnia, opioid use disorder, and attention-deficit/hyperactivity disorder (ADHD). News reports from as early as March indicated that the company pressured its employees to prescribe ADHD medications and overprescribed the drugs.

In addition, Matthew Truebe, former vice president of Cerebral, sued the company in April. First reported by Bloomberg Law, the suit alleges that the company "planned to increase customer retention" by prescribing stimulants to all ADHD patients. Several Cerebral executives, including co-founder and CEO Kyle Robertson, stepped down from their roles in May.

Following the subpoena, the company announced it would stop prescribing most controlled substances but would continue prescribing controlled substances for opioid use disorders.

“Cerebral officially ceased new prescriptions for controlled substances as of May 20 and had put into place plans to gradually transition patients currently taking controlled substances to establish a treatment plan to either transition their controlled substance to a non-controlled substance medication, titrate off of their controlled substance, or transfer their care to a local provider by October 15," according to a statement provided last month to mHealthIntelligence.

At the end of May, CVS Health and Walmart both said that they would stop filling prescriptions for controlled substances provided by Cerebral and another telemental health company Done.

Further, Aetna and UnitedHealth’s Optum removed Cerebral from their respective networks, according to the Wall Street Journal.

The company’s recent troubles follow the meteoric rise of the company. Cerebral’s valuation rose to $4.8 billion after the company closed a $300 million funding round last December, according to Bloomberg. The round was led by SoftBank Vision Fund 2.

Cerebral spent millions on advertising, which was the driving force behind its rise, the Wall Street Journal reported.  

The urgent need for virtual mental health services also likely contributed to its success. During the early months of the pandemic, telehealth use for mental healthcare outpaced that for physical care. Even now, as virtual outpatient care has declined overall, 36 percent of patients with mental health and substance use disorders are using telehealth.