The arrests of Done Global executives could not have come at a worse time for the industry.
Granted, there is never a good time for such an event. It just so happens that, right now, the arrests of executives of the heavily scrutinized digital ADHD treatment provider could play heavily in how several unresolved industry trends and developments play out.
And the arrests are not something that industry advocates can just handwave away. The actions of one or even a small handful of bad operators in any one industry do not represent its totality. However, eye-popping events such as the arrest of Ruthia He, Done Global co-founder and once-CEO, and Done Clinical President David Brody reveal and, in some cases, prove the severity of issues plaguing an industry. That proof can be enough to justify potentially detrimental decisions by key stakeholders.
On June 13, several federal agencies announced the arrests of He and Brody, confirming previous rumors that Done Global’s practices of easy access to controlled substances like Adderall had caught the attention of law enforcement. Prosecutors allege that Done’s practices around controlled substances prescribing for ADHD represented fraud, calling it a “$100 million scheme.” On top of that, the grand jury indictment released by prosecutors alleges criminal conspiracy to obstruct justice, commit health care fraud, and distribute controlled substances.
In this week’s BHB+ Update, I break down what some of the fallout Done Global arrest may mean for the behavioral health industry and, in a rare instance for us, beyond.
Done Global exec already spent some time in jail
It happens all the time — a scandalous development rips through some part of health care and the commentary invariably includes the sentiment that the alleged wrongdoers should go to jail. While sensational, this sentiment makes intuitive sense at a gut level. The industry that employs our community healers should be free from injustice. Individuals seeking care should not be harmed by providers.
Much of that discourse focuses on the moral/ethical implications and vague notions of potential patient harm and illegality. But rarely do we see such a material development that proves the discourse about jail time has something to it. The only more extreme example is the death of a patient.
In its short life, the case has been treated with a high degree of gravitas by the courts.
What court documents are available to the public show that the judge initially hearing the case — U.S. Magistrate Judge Alicia Rosenberg of the Central District of California — ruled for “permanent detention” before trial until He can have a bond hearing in California’s northern federal court, the “prosecuting district.” These documents were signed by Rosenberg on June 18.
In Rosenberg’s order, He was deemed a flight risk because of her Chinese citizenship, connections abroad, allegations that significant funds from her work have been transferred out of the U.S., and that He’s residence was “unknown.” The order also said that releasing He represented a risk to the community because Done Global was still operating. The order alleged Done Global is able to be operated from outside of the U.S.
Public documents do not yet show that the case is before the Northern District. It’s not clear if He has been released. An attorney for He has not yet returned a request for comment.
The courts ordered Brody’s release from federal custody on bail conditions that included a $250,000 unsecured bond, according to public court records. Other details were not available.
Telehealth regulations may be impacted
The Done Global case may give the Drug Enforcement Administration, which is involved in the case, the pretense that it needs to stick to a more austere approach to the use of controlled substances in telehealth.
For the last few years, the DEA has been working on new rules for the use of telehealth in prescribing controlled substances. These come after pandemic-era regulations caused a massive natural experiment in the proliferation of telehealth for all sorts of health care services that involve controlled substances. The addiction treatment and mental health industries saw huge amounts of venture capital flood the space as the uptake of virtual services was seen to be a more convenient, scalable, and trackable care model to compete with the historic bricks-and-sticks model.
The DEA released proposed rules that advocates successfully shouted down. After the comment period for those rules, the DEA backed off, rolled out a listening tour, and gave itself another year to make another proposed rule.
The timing of recent additional action on these rules presents another troubling portent. The DEA submitted a proposed rule titled “Telemedicine Prescribing of Controlled Substances When the Practitioner and the Patient Have not had a Prior In-Person Medical Evaluation” to the White House on the same day that the Done Global action was announced — June 13 — for a late-stage review. The DEA and the White House don’t have a deadline to publish the rule. As of the writing of this article, the rules are not yet available.
The DEA may be eager to show that it is doing everything it can to keep Americans safe from cavalier prescribing practices, such as those that led to the opioid epidemic in the first place.
During the decade’s long sojourn of the country through the opioid epidemic, the DEA has been found lacking in some instances due to its own actions and the actions of Congress. Last year, a top deputy to DEA Administrator Anne Milgram resigned after revelations that he spent the four years after his initial departure from the agency consulting for pharmaceutical companies, including Purdue Pharma, one of the big baddies behind the opioid epidemic.
Politics and perception aside, it does not behoove the DEA to loosen regulatory frameworks that have the express intention of increasing access to controlled substances as the country deals with a fourth wave of this epidemic.
Investment in virtual care may be depressed further
Several reasons lie behind why investors have largely backed off from the digital health space at large. An increasing amount of bad publicity of both startups and mature digital health companies sure wasn’t helping. The addition of the Done Global criminal proceedings makes things much worse.
Investment in virtual behavioral health companies has fallen to slightly lower levels than pre-pandemic lows. In 2023, investing totaled $1.2 billion, a far cry from the peak of the industry’s investment action of $5.7 billion in 2021. In 2018 and 2019, funding totaled $1.5 billion and about $1 billion, respectively. All figures come from data tracked by Rock Health.
A handful of digital behavioral health companies have run afoul of federal regulators due to their digital marketing and advertising practices. BetterHelp, a division of the telehealth company Teladoc Health (NYSE: TDOC), announced it settled with the FTC last year, while the startups Cerebral and Monument faced similar actions by the agency.
The use of questionable tactics by all of these companies was aimed at scaling up their offerings and defeating the inevitable and apparently insurmountable challenge of customer/patient churn. Such a challenge motivated the pivot of Talkspace (Nasdaq: TALK) to do a near 180° pivot away from direct-to-consumer to business-to-business. With potentially underhanded tactics off the table, the viability of virtual direct-to-consumer care models is questionable at best. And the examples above also illustrate how getting things wrong in this space will end up being.
What’s more, BHB has tracked diminished but continued funding for digital health organizations that are a step or two away from the actual delivery of care. These companies can impact a lot of the pressing challenges of the behavioral health industry but have a lower likelihood of mistakes or bad actions resulting directly in patient harm.
More ammo for limiting nurse practitioners
It’s a long-running debate: What is the correct role of non-doctoral health care providers — sometimes called physician extenders — in health care, especially when it comes to prescribing medication.
On the pro-doctor side, advocates maintain that the level of training nurse practitioners and the like get is insufficient to truly handle the totality of care. On the other side, advocates outright dispute that claim and often point to the need to rework the provider system to make up for a diminishing number of doctors in the U.S. Previous research finds that the rapid increase in psychiatric mental health nurse practitioners (PMHNPs) is not making up for a lack of psychiatrists in the U.S.
Prosecutors allege that Done Global’s nurse practitioners did not have the proper authority and oversight to prescribe the medications that they did. This could be used by powerful advocacy groups such as the American Medical Association to further advocate for limiting the scope of practice for nurse practitioners and similar clinicians.
Some research finds that nurse practitioners and physician assistants are overrepresented in over- and under-prescribing opioids. Another study finds similar overrepresentation in both extremes of prescribing habits when treating older adults but concludes that nurse practitioners were no less safe when it came to prescribing.
Even if more details emerge that nurse practitioners were largely not responsible for prescribing illegal medication, the proximity to the matter is more than enough for advocates to make political arguments against nurse practitioners.
Perverse incentives in fee-for-services paradigm
While the means were questionable, the quest to maximize patient volume, as Done Global sought to do, is endemic to a health care system that sees payers shelling out cash for specific services at rates that incentivize scale and volume. This is a classic critique of American health care. If patients genuinely get well, they don’t need services, and providers can’t file claims with payers for revenue. The economic incentive is to provide as much care as possible or to make pains to keep the patient in care.
Done Global found patients more than willing to engage in the system. The increased acceptance of ADHD treatment, the increased rate of diagnosis and the historic level of access to both via telehealth made a venture capital scale play a good one.
At some level, the play worked. Since its founding in 2020, Done Global prescribed about 40 million pills and generated $100 million in revenue. The combination of venture capital’s thirst for scale, an eager population and the fundamental incentives of the payer system spurred practices to maximize all aspects of the system. The company is backed by the firms Offline Ventures, Craft Ventures and F7 Ventures, according to its profile on PitchBook.
The success of the company so far also seems to give an incentive to keep going. Done Global vows to soldier on and “do everything in our power to ensure that tens of thousands of Americans that rely on us do not lose access to their mental health care,” according to a statement from the company after the arrests.
Like other originally digital-only behavioral health organizations, Done has invested in establishing clinics across the U.S. In December, it announced it had opened 31 clinics in 30 states during 2023. However, the company does not list its clinic locations on its website (New Jersey locations being the exception), a common practice in the behavioral health industry.
Just like Done Global, the fundamental forces behind much of what is seen as wrong in health care remain. So long as they do, we can expect more to come.
Companies featured in this article:
