Legal Aspects of Setting Up a Ketamine Clinic in Florida

Over the past several years, we have seen an explosion of investors and entrepreneurs forming ketamine clinics in Florida. As of December 2023, the Neuly Practitioner Database shows that there are 66 ketamine clinics operating in Florida. With an expected FDA-approval date of MDMA in early 2024, we should expect these clinics to continue to grow exponentially over the next several years. In fact, the first psychedelic REIT – the Healing REIT – was recently formed to assist these investors and entrepreneurs with rapid expansion. Thus, it is imperative for these investors and entrepreneurs to have a strong understanding of the various legal aspects surrounding ketamine clinics in Florida.

Scheduling & Off-Label Use

In the 1970s, ketamine was approved by the Food & Drug Administration (the “FDA”) as an anesthetic. In 1999, the Drug Enforcement Administration (the “DEA”) listed ketamine as a Schedule III controlled substance under the Controlled Substances Act.  While ketamine has been approved by the FDA as an anesthetic, most (if not all) ketamine clinics are using ketamine “off-label,” which means it is being prescribed for an indication for which it was not approved. “Off-label” use is very common and generally legal, except when it violates certain ethical or safety standards. In fact, nearly 20% of all prescriptions are prescribed off-label. Since ketamine is being prescribed off-label at these ketamine clinics, there is no clear legal guidance on protocols, standards, administration, dosing, and other methods of use. However, it is imperative that the healthcare provider ensures that the prescribing of ketamine off-label does not violate any ethical or safety standards.

In 2019, the FDA approved Spravato (a rapid, acting nasal spray formulation) for Treatment-Resistant Depression. Like generic ketamine, Spravato is listed as a Schedule III controlled substance under the Controlled Substance Act. However, unlike generic ketamine, there are very specific protocols, standards, dosing, and other administration requirements around prescribing Spravato.

DEA Registration

Since ketamine is a controlled substance and healthcare providers at the ketamine clinics are dispensing ketamine to the ultimate user, such healthcare providers must hold a DEA registration pursuant to 21 CFR 1301.11(a). However, it may not be necessary for the actual ketamine clinic itself to hold a DEA registration. As long as the healthcare provider at the ketamine clinic holds a DEA registration and provides certain information to the DEA including registering the ketamine clinic location with the DEA, the ketamine clinic itself may not need to hold a DEA registration.

Corporate Formation and Ownership

When forming your company, the first thing to determine is the corporate structure. When making this decision, there are various factors that must be considered, such as ownership structure, tax implications, limiting liability, and future capital-raising strategy. 

If you are a licensed healthcare professional, Florida law allows you to form the entity as a P.A. or PLC; however, Florida law also restricts who can be owners of a P.A. or PLC: the owners/members of the P.A. or PLC must be in the same profession (ie can’t mix DO’s and MD’s). Thus, if your ketamine clinic has owners (or plans in the future to have owners) that are of a different profession or are not healthcare professionals, then a P.A. or PLC is likely not the right corporate structure.

If your ketamine clinic is going to be owned by individuals who are not licensed healthcare professionals or the owners will be healthcare professionals of a different profession, then Florida law allows you to form the entity as a regular business entity (ie Corp or LLC). In most instances, a Corp or an LLC will be the preferred business structure for a ketamine clinic business. There are various items to consider when determining whether to form as a Corp v. an LLC, such as tax implications, limitation of liability, and future capital raising strategy, which are outside the scope of this article.

Another issue to consider in corporate structuring is whether you plan to open ketamine clinics in other states that have laws restricting the Corporate Practice of Medicine. The Corporate Practice of Medicine refers to non-physicians influencing or interfering with a physician’s professional judgment. Some states have very strict restrictions around the Corporate Practice of Medicine. For example, California law requires “that business or management decisions and activities resulting in control over a physician’s practice of medicine, be made by a licensed California physician and not by an unlicensed person or entity.” In other words, non-physicians cannot own or control a California ketamine clinic.

In contrast, Florida has no restrictions on the Corporate Practice of Medicine. So, if the business will only operate ketamine clinics in Florida, then the Corporate Practice of Medicine is not an issue. However, if the business plans to operate ketamine clinics in states restricting the Corporate Practice of Medicine, then the business should consider forming a friendly professional corporation model (also referred to as the “friendly PC model”). The friendly PC model involves: setting up an entity solely owned by a physician; setting up a separate entity owned by non-physicians that functions as a management service organization; and then entering into various contracts between the two entities, including a Management Service Agreement. My firm has set up several friendly PC models and it tends to be very complex; so, if you plan to structure under the friendly PC model, you should make sure you are working with an attorney very familiar with this type of structuring.

State Licenses & Permits

There are various licenses and permits a Florida ketamine clinic will likely need to obtain, including Agency for Health Care Administration Dispensing License; Health Care Clinic Establishment Permit through DBPR; and Florida Health Biomedical Waste Permit. This article will not go through all the different issues around licensing and permitting but I encourage anyone opening a ketamine clinic to seek legal counsel regarding which licensing and permitting may apply to your ketamine clinic.

Staffing & Administration of Ketamine

Every Florida ketamine clinic must have a Medical Director. A Medical Director has various responsibilities including having signs identifying the medical director or clinic director posted in a conspicuous location within the clinic readily visible to all patients; ensuring that all practitioners providing health care services or supplies to patients maintain a current active and unencumbered Florida license; reviewing any patient referral contracts or agreements executed by the clinic; ensuring that all healthcare practitioners at the clinic have active appropriate certification or licensure for the level of care being provided; serving as the clinic records owner; ensuring compliance with the record-keeping, office surgery, and adverse incident reporting requirements; conducting systematic reviews of clinic billings to ensure that the billings are not fraudulent or unlawful; and much more. 

§ 893.05, Fla. Stat., states that practitioners in Florida can administer controlled substances to patients. Additionally, practitioners in Florida can have a licensed nurse or an intern practitioner administer controlled substances following the practitioner’s direction and supervision. The definition of practitioner includes a physician licensed under chapter 458 (“MD”); an osteopathic physician licensed under chapter 459 (“DO”); an advanced practice registered nurse (“APRN”) licensed under chapter 464; and a physician assistant (“PA”) licensed under chapter 458 or chapter 459 if the practitioner holds a DEA controlled substance registry number. The definition of practitioner does not include a registered nurse (“RN”).

While there is no clear legal guidance relating to whether RNs have the authority to administer ketamine to patients, there have been several petitions for declaratory statements submitted by registered nurses to determine this issue (see chart below). Throughout the several requests, Florida’s Department of Health (“DOH”) has routinely approved registered nurses with Advanced Cardiovascular Life Support (“ACLS”) training to administer low doses of ketamine (up to 0.5mg/kg) which do not rise to the level of sedation or analgesia. By contrast, the DOH consistently held that treatments requiring sedation or analgesia were outside the scope of registered nurses. As a result, registered nurses cannot administer ketamine if the administration will result in sedation or analgesia. According to MedScape, the dosing guidelines for procedural sedation and analgesia in adults is 1-2mg/kg for IV treatments and 3-5mg/kg for IM treatments. Thus, administrations of ketamine that are greater than 1mg/kg for an IV treatment of 3mg/kg for IM treatments require medical professionals with anesthesia training. Hence, the amount of ketamine a ketamine clinic administers per session will determine which type of staffing is required to comply with Florida law. This is a complex area of law with little legal guidance in Florida, so it is imperative to seek legal counsel on this issue.

Since ketamine clinics mainly prescribe ketamine off-label and this is a relatively nascent industry, there is currently very little guidance in federal or state law that is specific to ketamine. However, it is important that ketamine clinics are still aware of the general healthcare laws that pertain to their business. With the pace at which ketamine clinics are opening and with MDMA-FDA approval on the horizon, I expect that we’re going to see a lot more regulations from a federal and state perspective that will provide psychedelic practitioners much more clarity. For now, ketamine clinics need to make sure they have a compliant business model that is scalable for the future of psychedelic medicine.

About the Author: The author of this article is Dustin Robinson, who is the Managing Principal of Mr. Cannabis Law – a full-service law firm for the cannabis and psychedelic industries. Dustin, through his law firm, has represented various ketamine clinics and other psychedelic businesses. Dustin is also the founder of Iter Investments – a venture capital firm investing in early-stage psychedelic companies, including ketamine clinics; and Mr. Psychedelic Law – a non-profit advocating for legal reform around psychedelics.

Disclaimer: The purpose of this article is to provide general information only and not a solicitation to provide legal services. The information in this article does not constitute or contain formal legal advice or solicitation of legal services. As such, the posting of this article and your reading of this article does not create an attorney-client relationship. This article is also not meant to be a fully exhaustive list of all legal issues relating to ketamine clinics. We highly encourage you to seek legal advice from an attorney if looking to start your own ketamine clinic or otherwise operate in the ketamine space.