News and Info for NYS Council members

September 12, 2023

Below please find a link to a September 11 Opinion piece from the Editorial Board at the Albany Times Union regarding an ongoing fight here in Albany County, and in the Village of Menands, in which legislation has been introduced or a proposal has been made to amend existing local laws that (if enacted) would set up an approval process for substance use disorder clinics that we feel is designed to make it more difficult for providers to establish addiction treatment services.    

Commentary: Albany County bill would handicap the fight against opioid addiction
For our NYC members, here’s an article from amNewYork with information from the Fiscal Policy Institute regarding claims by the Mayor that OMB will need to implement 3 budget reductions over the next 8 months (totaling 15% across city agencies) in order to address unanticipated costs associated with the so-called ‘migrant crisis’.
Here’s an article from Becker’s Behavioral Health that summarizes some of the latest information published by the U.S Bureau of Labor Statistics looking at average salaries for many of the practitioners working in our mental health and substance use disorder programs:

Here’s a link to a listing of upcoming (free) Webinars for nonprofit providers, hosted by the The Lawyers Alliance of New York:

Mental health startups face a buyer’s market


Mental health startups could be the next group of companies eyed for mergers and acquisitions.

In 2021, venture capital firms spent nearly $5 billion to fund behavioral health startups, according to an estimate from research firm CB Insights. The funding bonanza helped start hundreds of companies offering remote therapy, medication prescription, wellness and other mental health services. 

A lot has changed in two years. Because of high interest rates, an oversaturated market and potential regulatory changes to remote prescribing, many of those mental health startups may look for an exit ramp, industry insiders said. 

Ryan Drant, founder and managing partner of Questa Capital, a venture capital firm that’s invested in mental health startups, said the increasing number of companies in the space created ways for people to access services at a time when there is a shortage of clinicians. But he expects some consolidation in the next few years. 

“I think there probably will be some rationalizing that has to happen. The market will decide who are the winners and some companies will probably combine,” Drant said. 

Many of the mental health companies that received funding in 2020 and 2021 weren’t focused on cost and quality outcomes, said Brian Smiga, a managing partner at investment firm Alpha Partners. Today, fewer funding opportunities exist for companies that can’t provide hard metrics. Many of the companies provided services that had a minimal effect on cost or outcomes, such as text-based therapy, he said. 

“A lot of the soft therapy deals are crashing and burning,” Smiga said. “They just weren’t delivering results and there was too much phoniness in [their services].” 

Mental health startups that virtually prescribe controlled substances have relied on relaxed COVID-19 flexibilities from the Drug Enforcement Agency. The companies face an uncertain future. 

In May, the DEA extended the flexibilities that allow telehealth companies to remotely prescribe certain controlled substances without an in-person visit until Nov. 11, after which new patients will require an in-person visit before receiving a prescription. The agency, which is conducting listening sessions on Tuesday and Wednesday about the future of remote prescribing, may issue revised guidance. 

“The market is largely focused on how the DEA rules impact their business model,” said Nathaniel Weiner, behavioral health law co-chair at law firm Polsinelli. “Are they going to be on the right side or wrong side? If their business model is optimized for the regulatory requirements, they can just continue merrily on their way. Or is it going to be an issue where they’ve built their whole model on something that can’t be done anymore?” 

Who could be the buyers? 

High interest rates have hindered deals, but private equity firms and brick-and-mortar mental health companies remain interested in behavioral health players and there’s also a potential for consolidation of virtual health companies, said Deb Daccord, a healthcare M&A lawyer at Mintz. 

“I am foreseeing a steady increase with these deals picking back up in the third and fourth quarter of 2023 and then into 2024,” Daccord said.

Weiner said LifeStance Health, a brick-and-mortar mental health company, is one potential acquirer of virtual mental health companies. The publicly held company has grown by acquiring nearly 100 in-person practices since its founding in 2017. LifeStance declined an interview request.

By either getting acquired or partnering with an in-person provider, startups that remotely prescribe controlled substances could satisfy potential DEA regulations. In August, opioid medication provider Bicycle Health said it is partnering with grocery chain Albertsons to allow its patients with an opioid addiction to receive a buprenorphine injection from pharmacists at more than 700 of the grocery and pharmacy chain’s locations. Bicycle Health CEO Ankit Gupta said a lot of the actions by the companies take into account what the DEA might or might not do. 

Experts say private equity firms that invest in brick-and-mortar mental health companies could add additional virtual health capabilities to expand services and serve more patients. But the market still isn’t ready for the companies to make acquisitions, said Polsinelli’s Weiner.

“There are headwinds that have made deals harder to complete on the private equity bricks-and-mortar side,” Weiner said. “This includes higher interest rates and ability to access financing in ways that make acquisitions financially attractive. Buyers in 2023 have not been offering the kinds of multiples they have in previous years, making it harder to get some deals done.”

Beyond brick-and-mortar acquisitions, mental health startups could consolidate to build up mega companies in the space, experts say. Sondermind CEO Mark Frank said he sees the company as a potential acquirer but not in the near term. The company acquired Mindshare’s tech assets in March, neuroscience company Total Brain in November and data company Qntfy in October 2021. 

Frank said he expects consolidation between virtual health companies to pick up in two to three years.  He said the sector was overfunded and too many companies were created, which meant many were tackling mental health from only one angle rather than taking a well-rounded approach.

“The proliferation and stratification of all these companies I think actually moves in the wrong direction,” Frank said. “In order to make the appropriate change, we must have some sort of consolidation.”