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Dude, where’s my cure? On the road to benefits coverage of psychedelics

Included in Discovery: Atlantic Education & the Law – Issue 12

By Dante Manna[1]

Once known for recreational use, psychedelics are slowly gaining medical legitimacy as research emerges on possible therapeutic benefits for mental health issues and addiction. Recent global events have had a marked effect on people’s mental health, and coupled with new research showing potential to treat illness such as depression, anxiety, and PTSD, it is not surprising that employers are beginning to consider coverage of psychedelic treatments through workplace benefits.[2] With American insurance providers beginning to offer psychedelic therapy benefits,[3] and the recent introduction of regulated use in Alberta,[4] these drugs are slowly entering the mainstream.

Changing our minds on psychedelics

“Psychedelics” is a blanket term for a class of psychoactive drugs that can elicit changes to human perception, mood, and cognitive processes.  It includes a variety of substances such as LSD, MDMA, and psilocybin (the psychoactive compound in “magic mushrooms”).  These are compounds that often occur naturally in plants or fungi, or can be isolated or manufactured in laboratories.  For purposes of this article, we will distinguish cannabis from psychedelics, despite the aptness of the above description.

In modern Western history, the proliferation of recreational use of such drugs, LSD in particular, is linked to 1960s “counterculture” and similar social movements.  It is thought the neuroplasticity afforded by psychedelic substances helped some embrace alternative lifestyles.  Unfortunately, this history has also led to some negative associations of recreational drugs such as hedonism, promiscuity, illicit activity and other anti-social behaviour.[5] It is also known that psychedelics can lead to addiction; even in therapy, use must be carefully monitored for occurrence of side effects.[6]

Recently, traditional stigmas surrounding these substances have been giving way to recognition of their most redeeming qualities:  unlocking the ability to change one’s mind. The need for this is readily apparent:  the WHO estimated nearly a billion people (14% of adolescents) were living with a mental disorder as of 2019,[7] and prevalence of anxiety and depressive disorders rose an estimated 25% during the first year of the pandemic.[8] This has led the health community to return to studies of psychedelic treatments as a way to tighten the treatment gap.

A recent clinical trial on psilocybin therapy, at the time the world’s largest to date, with participation from the Canadian Centre for Addiction and Mental Health (CAMH), showed psilocybin therapy to have a rapid and sustained response in patients suffering with treatment-resistant depression.  With the assistance of a federal grant, CAMH is now studying the question of whether therapeutic effects of psilocybin can be de-coupled from their psychoactive properties.[9]

These positive early results promise that the use of such substances may soon proliferate and possibly even supplant the use of traditional psychiatric medications, which must be taken daily for months or years to be effective, and have their own potential side effects to consider.  For example, selective serotonin reuptake inhibitors (“SSRIs”), one of today’s most common anti-depressants, are linked to weight gain, lack of libido, and sleep problems.[10]

Access through employment benefits?

Renewed interest and research vigour in the treatment of psychiatric disorders have provided limited access to psychedelic drugs for eligible patients with the resources and determination.  However, there are several barriers standing between psychedelics and mainstream benefits coverage.

  1. Legal restrictions and regulations

Drugs of this type are highly regulated and their legal use is very limited.  Until they are more widely permitted, the discussion of health benefits coverage may be moot

Most psychedelics are considered “controlled substances” under the Controlled Drugs and Substances Act and “restricted drugs” under the Food and Drug Regulations, meaning that possession and sale are generally prohibited outside of licensed dealers, clinical or laboratory researchers, or individuals pursuant to exemptions at ministerial discretion.  In short, as compared to cannabis, psychedelics are relatively far from being decriminalized for recreational use – despite the appearance of the odd legal challenge[11] or illegal dispensary.[12]

The exception is ketamine, a psychedelic substance which is currently classified as a narcotic under the Narcotic Control Regulations,[13] and as such is already available for use in a clinical or therapeutic setting, subject to medical regulations.  Ketamine had been approved for use as a sedative and anesthetic, but also has uses in treating depression and anxiety.  In the past few years, small ketamine clinics have sprung up in metro areas around the Atlantic Provinces.

Other psychedelics such as psilocybin and MDMA are less readily available, though they can now be legally accessed by eligible patients who are approved by the Federal government.  On January 5, 2022, Health Canada made significant amendments to the Special Access Program (“SAP”) that now allows doctors to request access to psychedelics for eligible patients.[14] This broadens the prior approval regime under which access was mostly limited to participants in approved clinical trials.[15] 

Medical regulations may not be the only controls over the use of any psychoactive drugs.  Alberta has introduced new health protection regulations, effective January 16, 2023,[16] that further regulate psychedelic-assisted therapy in the province.  Psychedelic drug treatment service providers (except no-cost services provided under approved clinical research) will be required to hold a licence.[17] 

The related standards that will apply to service providers as a condition of maintaining their licences include specific assessment and clinical oversight measures, specific qualifications for the medical professionals involved, and other requirements including safety and security policies.[18] As psychedelic therapy services become more prevalent, it is expected other provinces will follow suit and enact similar regulation.

  1. Cost

Because of the resource-intensive nature of the current model of treatment, the sheer cost is anticipated to make psychedelics inaccessible without benefits coverage, and an expensive option to cover. As noted above, the drugs themselves are not widely available, and their use is expected to be heavily regulated, which also drives up the cost.

As a category of drugs that impacts users in drastic and irreversible ways – both positively and negatively – psychedelics are only available for treatment of mental health conditions in conjunction with psychotherapy in a controlled environment.  Medical staff must be present to supervise while an individual is experiencing the drug and provide medical care as necessary to respond to any adverse reaction.

There is also the associated time cost of a day spent under the influence – time that a person receiving treatment will not be able to work – not to mention the travel that may also be required to reach a therapy provider.

Will naturally occurring compounds like psilocybin eventually be produced by large pharmaceutical companies under patents, such as may later give way to lower cost, generic versions?  The possibility still seems rather far away.  One issue is that psilocybin itself, along with other compounds that have been in use for centuries, are generally considered to lack the “novelty” required to obtain a patent.[19] On the other hand, there are currently active patents in Canada for related technologies, such as methods to extract psychoactive compounds from the fungus.[20] Related compounds with similar effects may also be patentable, and the race for intellectual property is underway.

Many investors are optimistic manufactured psychedelics will become the next billion-dollar business. With this, many companies have emerged wanting to take advantage of what could become a lucrative market.[21] However, concerns over legality continue to loom over this emergent sector.

  1. Provider Choice

Cost and the regulatory status of drugs can both be difference makers affecting coverage under employee health benefits plans. Many plans require Health Canada approval and/or a drug identification number (“DIN”) as a precondition for a particular drug to be covered.  Cost is also relevant, as not every benefits plan will cover every available drug.

Such limits to coverage may be legally viable, even for health and welfare trustee boards that owe fiduciary duties to plan beneficiaries.  Provider choice was recognized by a Nova Scotia court in Canadian Elevator Trust Fund v Skinner. [22] In that case, the employee’s doctor had authorized his use of medical cannabis after conventional drugs were shown ineffective in treating his chronic pain. The employee applied for coverage through his employment benefits plan and was denied on the basis that the plan excluded drugs, including cannabis, that Health Canada had not approved.

The same employee later attempted to claim WCB coverage of medical cannabis (his pain condition resulted from a workplace injury), but was again denied on the basis that lack of Health Canada approval meant that his required treatment “would be inconsistent with Canadian healthcare standards”.[23]

Though the Nova Scotia Court of Appeal recognized the benefits of medical cannabis in connection with the employee, they upheld the denial of benefits in both cases – thus supporting the choice of the welfare trust, and WCB policy, to limit reimbursement of these benefits.  Importantly, the trust’s choice to exclude reimbursement of medical cannabis was found non-discriminatory; it did, after all, provide coverage for other pain treatment options.

Similarly, it is anticipated that access to psychedelics may be categorically excluded from benefit plans at least until government-approved for safe use.  Meanwhile, traditional psychiatric medications will continue to be an option.

It is also expected that employers and employees alike would also make choices on coverage based on cost. A higher cost option therefore may not be as widely marketable.

Everything old is new

It is expected that calls for legalized psychedelics will increase over time, particularly as research results about the efficacy of treatments, and innovations in the drugs themselves, continue to materialize.  The Boomer generation may yet live out their former dreams of a kinder, gentler, more open-minded society – though likely through different means than they once would have imagined. “Nothing behind me, everything in front of me, as is ever so on the road.”[24]

This client update is provided for general information only and does not constitute legal advice. If you have any questions about the above, please contact the authors.

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[1] Acknowledgments to Mamie McGinn, Articled Clerk, for assisting with this article.
[2] Sophia Smith and Janina Conboye, Psychedelics are the latest employee health benefit, Financial Times.
[3] A.J. Herrington, Insurance Provider Enthea Offering Psychedelic Therapy Coverage As An Employee Benefit, Forbes.
[4] Government of Alberta, Psychedelic drug treatment service provider licensing.
[5] Erika Dyck, LSD:  a new treatment emerging from the past, Canadian Medical Association.
[6] National Institute on Drug Abuse, Hallucinogens DrugFacts.
[7] World Health Organization, WHO highlights urgent need to transform mental health and mental health care.
[8] World Health Organization, World mental health report: Transforming mental health for all – executive summary.
[9] Centre for Addiction and Mental Health (CAMH), CAMH receives first Canadian federal (CIHR) grant to study psilocybin.
[10] Bethany Halford, Drug companies are investing big in psychedelics, but can they engineer out the trip?, Chemical and Engineering News 100(9).
[11] The current regime for accessing medical psilocybin has been challenged in Federal Court on the basis of s. 7 of the Charter of Rights and Freedoms in Hartle et al. v. Canada, T-1560-22.
[12] Sara Jabakhanji, Police will keep raiding Toronto magic mushroom dispensary if city doesn’t step up, says expert, CBC News.
[13] Narcotic Control Regulations, C.R.C., c. 1041.
[14] Health Canada, Regulations Amending Certain Regulations Relating to Restricted Drugs (Special Access Program): SOR/2021-271.
[15] Amanda Siebert, Why Canada Could Be Next To Allow Psychedelic Therapy (And How It’s Already Changing Lives), Forbes.
[16] A. Reg, 202/2022, amendment to Mental Health Services Protection Regulations, A. Reg. 114/2021.
[17] Ibid. at s. 34.
[18] Government of Alberta, Psychedelic Drug Treatment Services Standards
[19] Luis Millan, The New Cannabis?, The Canadian Bar Association.
[20] See, for example, CA 3124367, “Aqueous Extraction of Psychoactive Compounds from Psilocybin Fungus“.
[21] Sandy LaMatte, How Psilocybin, the Psychedelic in Mushrooms May Rewire the Brain to Ease Depression, Anxiety and More, CTV News.
[22] Canadian Elevator Trust Fund v Skinner, 2018 NSCA 31
[23] Skinner v. Nova Scotia (Workers’ Compensation Appeals Tribunal), 2018 NSCA 23
[24] Quoting from Jack Kerouac, On the Road (New York: Viking Press, 1957).



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