Telehealth Startup That Halted Prescription Of Controlled Substances After Federal Probe To Cut 15% Of Staff

Telehealth startup Cerebral is laying off another 15% of its workforce after it cut staff in October last year. The company is under a federal investigation over how it prescribed several controlled substances.

The latest layoff round will affect 285 employees, Business Insider reported Monday.

"Affected employees will be fully supported with extended severance pay and benefits, as well as outplacement services," the company said. It, however, did not provide further details on the exact number of employees who will be affected, Reuters reported.

The startup also said in a statement to Forbes that the latest layoff round was part of a restructuring plan. The recent staff cuts are the third in less than a year, after the company cut 20% of its workforce in October and let go of 350 employees in June.

During its October round of layoffs, about 400 people were reportedly affected, especially care counselors and clinical staff.

"Today's changes are part of Cerebral's ongoing transformation program, which drives to create more sustainable growth and stability, while further delivering our mission to democratize access to high-quality mental health care for all," a spokesperson told TechCrunch at the time.

About a month before its first round of layoffs in June, Cerebral came under scrutiny following media reports that the startup had received a grand jury subpoena from the U.S. Attorney for the Eastern District of New York. On the same day, Cerebral announced it was halting prescriptions of controlled substances for new patients, reported The Verge.

Aside from the subpoena asking for documents, Cerebral was also facing a Drug Enforcement Administration (DEA) probe, Insider reported, citing sources that revealed former Cerebral employees were interviewed by DEA agents about alleged discrepancies in its prescribing practices. There were allegations that some patients had set up multiple accounts to get more drugs.

The Federal Trade Commission (FTC) has also launched an investigation into the startup's business practices. The probe is centered on whether the company practiced unfair dealings in the advertising or marketing of its services.

Cerebral founder and former CEO, Kyle Robertson, said in a letter that he was "pressured" by investors to market more stimulants. Robertson was ousted from his CEO position in May last year.

Aside from Robertson's revelations, documents obtained by CBS News revealed that Cerebral leaders already knew about issues within the company such as some staff "practicing with expired (or) suspended license(s)" and risks such as "multiple controlled substances (could) be overprescribed to the same individual" due to duplicate accounts.

Cerebral was dragged back into the limelight after the DEA served a show cause order on retail pharmacy Truepill, Cerebral's former pharmacy partner, in December.

"Truepill was the pharmacy for telehealth companies, including Cerebral, that marketed ADHD (attention-deficit/hyperactivity disorder) treatments, including Adderall ®," the DEA said in a press release at the time.

The federal agency said Truepill was "alleged to have wrongfully filled thousands of prescriptions for stimulants used in the treatment" of ADHD.