Using psychedelics as medicine is hardly a new idea — Indigenous cultures have used sacred plants as therapy for millennia, and Western medicine has studied therapeutic uses for psychedelics since the 1950s. With the rise of legal cannabis, psychedelic medicinal treatments are finally in the public eye as effective treatments for PTSD and major depression. The Biden Administration recently announced plans to grant FDA approval to psychedelic therapies for mental health.

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Psychedelic treatments fulfill an obvious and growing need in the current medical landscape. The National Institute of Mental Health reports that 8.4% of U.S. adults had a major depressive episode in the past year, and most of those adults were between the ages of 18 and 25. Depression and suicide rates in adolescents are climbing as well. A PTSD epidemic among veterans has led even conservative states such as Texas to research psychedelic therapies.  

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What Are the Risks of a Psychedelic Medicinal Business?

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Psychedelic medicine is important for the future of U.S. mental health, but manufacturing psychedelic products comes with unique risks. These risks don't necessarily come from the substances, themselves, however.

In reputable practices, a trained psychologist monitors the patient for the duration of the psychedelic's effects. This drastically cuts down on the risk to the patient. A 2022 study in the Journal of Psychopharmacology found that actual scientific evidence of harm from psychedelic treatment was minimal, and most of the perceived risks were influenced by stigma and anecdotes.

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What does that mean for insurance? The risks aren't as high as many people believe, but because of the misconceptions around psychedelics, you're going to need more than general liability and professional liability (E&O) coverage to shield your business from potential lawsuits.

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Psychedelic medicine startups are a hot topic in the world of insurance law. There are more options by the day for insuring these businesses, and strategies are ever-changing. Fullsteam Insurance is can advise businesses on the risks and help these businesses grow as psychedelic medicine makes headlines nationwide.

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What Insurance Does a Psychedelic Medicinal Business Need?

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Laws around psychedelic medicines are changing every day. Any legal strategy for psilocybin therapy insurance has to be comprehensive and flexible enough to keep up. It's always better to have more coverage than you need than not enough, especially in an emerging market. Here are a few insurance options worth serious consideration.

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^{Product Liability and Recall Insurance}

This protects a business against claims that the product they manufactured and sold caused someone injury or harm. It also protects you against claims of inadequate or confusing warning labels. Recall insurance is a separate policy that protects the business in the case of a recall.

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Obviously, you don't want to skimp on product liability and recall insurance when manufacturing psychedelic medicines. Even responsible and monitored use in responsible practices carries some risk of harm. $1 million per occurrence and $2 million aggregate per year are the standard limits on product liability insurance.

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^{General Liability Insurance}

This covers injuries on the premises of your psychedelic medicinal business, including accidents such as slips and falls that result in bodily injury or damaged property. It has standard limits of $1 million per occurrence and $2 million aggregate.  

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^{Worker's Compensation}

This pays your employees' medical bills if they're injured on the job. Worker's compensation is required by law in many states and is important for any manufacturing operation. Standard limits are $1 million for disease, injuries and death.

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^{Insurance for Clinical Trials}

If you're running clinical trials on your medicines, you'll need separate insurance coverage for the trials than for the manufacturing itself. Clinical trial insurance covers any injuries or harm to participants in the trial. There are no regulations on limits for this insurance, but it can range from $1 million to $20 million for domestic clinical trials.

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^{Management Liability Package}

A complete management liability insurance package offers maximum security for your growing business. It includes:

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• Employment practices liability to protect against lawsuits from employees, such as sexual harassment or wrongful termination.
• Directors & Officers liability protects the business from lawsuits from investors and shareholders if they disagree with the way the business is being run. Investors are eyeing psychedelic medicinal businesses after the legal cannabis boom, so D&O liability insurance is a must-have.
• Commercial crime insurance protects the business from crime by employees or outside parties, such as theft.
• Fiduciary liability insurance protects from claims of mismanaging investors' money.

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The minimum limit for this coverage is $1 million per occurrence.

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^{Professional Liability or Errors & Omissions Insurance}

This is another option you won't want to neglect, as it protects against errors and omissions in manufacturing on the company's behalf. Since the psychedelic medicinal industry is prone to stigma, there's a risk of getting sued by clients or customers who believe your medicines were manufactured incorrectly. Standard limits are $1 million per occurrence and $2 million aggregate.

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How Much Does Psilocybin Therapy Insurance Cost?

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Insurers are still navigating the needs of this important emerging field, so it's hard to give a blanket estimate as to how much insuring a psychedelic medicine business will cost. Product liability insurance is traditionally one of the less expensive insurance plans at an average of $1,200 per year, but the nature of these medicines and their public perception may require more expensive and comprehensive policies. Costs will also vary by state as laws around psilocybin therapy continue to evolve.

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The best way to estimate your costs is to speak to an expert who can give you a customized quote. Insurance advisors can provide an insurance plan for the needs of your specific business.

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Where Can You Find Insurance for a Psychedelic Medicinal Business?

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At Fullsteam, we specialize in emerging and high-growth industries. We take pride in being at the forefront of business insurance needs. Insuring a psychedelic medicinal business is challenging, but these therapies present a huge opportunity to improve people's lives across America and the world. Contact us for a quote, and we'll help you choose and provide you the best possible coverage for your psilocybin therapy business.

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