Cerebral, the digital mental health startup that has attracted both praise and criticism for its online therapy and prescription services, has reached a major legal resolution with the U.S. Attorney’s Office for the Eastern District of New York. This resolution, part of the ongoing Cerebral mental health settlement, addresses the company’s prescribing practices, particularly regarding the use of controlled substances like stimulants to treat Attention Deficit Hyperactivity Disorder (ADHD). As part of this agreement, Cerebral will pay a hefty sum in fines totaling $6.57 million, as disclosed in a copy of the nonprosecution agreement released by the district attorney’s office.
For context, a nonprosecution agreement (NPA) is a legal contract in which investigating authorities—such as the U.S. Department of Justice—agree not to file criminal charges against the company, provided the company agrees to take corrective measures and demonstrates good behavior. In this case, the Cerebral mental health settlement allows the company to avoid criminal charges in exchange for a commitment to improve its business practices and ensure regulatory compliance going forward. This resolution not only includes financial penalties but also outlines clear expectations for Cerebral’s future conduct.
The Financial Penalties and Structure of the Agreement
As part of the agreement, Cerebral will forfeit $3.65 million in revenue linked to the prescription of ADHD medications in violation of federal law. This amount represents the proceeds Cerebral earned from its controversial prescribing practices, which included pushing clinicians to prescribe ADHD stimulants more frequently to boost profits. The second portion of the fine, totaling $2.92 million, will be deferred—meaning it will only be paid if the company’s financial situation changes in such a way that would warrant the payment. The district attorney’s office has agreed to waive this portion of the fine as long as Cerebral adheres to the terms outlined in the Cerebral mental health settlement and shows financial responsibility.
In total, the nonprosecution agreement will remain in effect for 30 months, giving Cerebral a defined time frame to demonstrate compliance with the established regulations and the company’s commitment to correcting its previous practices. This time period also provides an opportunity for the company to work towards regaining public trust and aligning its business practices with industry standards. The Cerebral mental health settlement aims to be a stepping stone for the company to move beyond its past mistakes and demonstrate its dedication to ethical healthcare practices.
Breon Peace’s Remarks on the Case
Breon Peace, the U.S. Attorney for the Eastern District of New York, was critical of Cerebral’s previous actions. In a public statement, he said the company sought to maximize profits by encouraging clinicians to prescribe ADHD medications and other controlled substances, a practice that significantly compromised patient safety and ethical standards. However, Peace acknowledged that Cerebral has taken substantial steps to address these issues. He emphasized that the resolution ensures the company will be held financially accountable for its past conduct, while also signaling that the healthcare industry must be vigilant in maintaining patient safety.
“The resolution ensures that Cerebral will be financially accountable for its unacceptable conduct and serves as a reminder to the healthcare industry that my office is committed to ensuring patient safety and protecting the public from business practices like those of Cerebral,” Peace remarked.
While this Cerebral mental health settlement may help restore some trust, the company’s reputation in the digital mental health space has taken a hit, and much work remains for the company to regain its footing in the highly competitive market.
Cerebral’s Efforts to Correct Course
Following the settlement, Cerebral issued a statement reiterating its commitment to providing “the highest quality, affordable, and accessible mental healthcare” while placing greater emphasis on adhering to regulatory standards. The company expressed its hope that this agreement will allow it to focus more intently on its mission, which is to offer accessible mental health care through telehealth services.
While the financial penalties and legal scrutiny are significant, Cerebral has made efforts to address the underlying issues that led to the investigation. After facing considerable pressure from regulators and the media, Cerebral stopped prescribing controlled substances altogether. The company has also taken steps to revise its internal policies and improve clinician training in an effort to prevent future violations. The Cerebral mental health settlement marks a turning point in the company’s operations, as it moves to ensure that its business practices reflect a higher standard of care and regulatory compliance.
Despite these efforts, Cerebral’s meteoric rise to fame was followed by a series of public relations disasters and scandals that have left their mark on the company. At one point, Cerebral was the darling of the venture capital-backed mental health startup world, with its user-friendly platform and widespread appeal. The company even secured high-profile partnerships with celebrities, including Olympic gymnast Simone Biles, which helped propel its rapid growth. However, the company’s fast-paced expansion came with significant challenges, culminating in legal investigations and the eventual resignation of its founder and former CEO, Kyle Robertson.
A Financial Giant with Legal Setbacks
Founded in 2019, Cerebral raised $462 million in funding over the course of its early years and reached an impressive $4.8 billion valuation in its last funding round. Despite these financial successes, the company’s trajectory has been marred by controversies, including a legal battle with its ex-CEO and a series of layoffs. In addition to this most recent nonprosecution agreement, earlier in 2023, Cerebral settled with the Federal Trade Commission (FTC) over privacy and cancellation practices, agreeing to pay $15 million in penalties. Some of the FTC penalties could potentially be waived based on the company’s future conduct, much like the deferred portion of the district attorney’s office fine. This Cerebral mental health settlement is just one of many hurdles the company has faced, but it represents a critical moment in its ongoing efforts to clean up its operations.
The public scrutiny and the string of legal issues may have severely impacted the company’s reputation, but compared to some of its competitors, Cerebral’s situation seems to be less dire. For example, Done Global, another digital mental health provider, saw top executives arrested in June 2023 over similar charges related to the management of controlled substances. In comparison, Cerebral has managed to reach an agreement without facing criminal charges or arrests of its leadership team, making the Cerebral mental health settlement a relatively favorable outcome for the company.
Looking Ahead: Can Cerebral Rebuild?
The next few years will be crucial for Cerebral. With the nonprosecution agreement in place, the company must now focus on rebuilding trust with its patients, clinicians, and investors. The mental health industry is experiencing a surge in demand for accessible care, especially through digital platforms, and Cerebral has the opportunity to capitalize on this trend, provided it can successfully demonstrate a commitment to ethical practices and patient safety.
The company’s future success will likely depend on its ability to comply with the terms of the agreement, continue improving its internal policies, and deliver high-quality services that prioritize patient care over profit-driven motives. As the digital mental health landscape evolves, Cerebral must focus on not just maintaining its market position, but also restoring its reputation in a competitive and often scrutinized field.
The company’s actions in the coming months and years will ultimately determine its ability to recover from this troubled chapter. The Cerebral mental health settlement marks the beginning of a new chapter, but much work remains for the company to prove its commitment to patient care and regulatory compliance.
