For some, the wait may be nearly over. Oregon is preparing to license psilocybin for therapeutic use from next year, while Canada has begun allowing doctors to request these substances for treatment-resistant conditions. Having won fast-track status to trial Methyl​enedioxy​methamphetamine (MDMA) to treat post-traumatic stress in 2017, the Multidisciplinary Association for Psychedelic Studies, a nonprofit, could win U.S. Food and Drug Administration approval as soon as 2023.
At the risk of overgeneralizing, it seems psychedelics help quiet the ego, break negative thought patterns and help some patients better deal with trauma. By spurring neuroplasticity — the brain’s ability to change and make new connections — patients may experience a positive shift in perspective. There’s some evidence these antidepressant effects can be quite long lasting.
Though generally not known to be addictive, psychedelic trips can be frightening and impair judgement, which is why therapists emphasize the importance of “set and setting” — creating the right expectations prior to therapy and the right physical and sensory environment for conducting it. Patients may require hours of in-clinic supervision during trips, as well psychological support to prepare for and process what they experience.
Gaining federal approval for psychedelic therapies will thus be only half the battle. Government health programs and private health insurers must also be persuaded to pick up the check. Companies don’t generally disclose psychedelic therapy costs, but Cowen analysts estimate $3,000 per treatment, compared to the roughly $700 annual cost of daily antidepressants.
Reimbursement challenges are one reason some investors doubt whether psychedelics will ever become a lucrative business. Another impediment, somewhat ironically, is the drugs’ potential efficacy. If a couple of psilocybin trips heal a patient, how will a pharma industry accustomed to repeat prescriptions make money?
Yet companies have found ways to convince investors they’ll enjoy a return on their capital. One approach is to acquire a broad portfolio of psychedelic and non-psychedelic compounds, as Atai is doing, to be less exposed to clinical setbacks with one particular drug.
Others like Field Trip Health Ltd and Numinus Wellness Inc. are combining drug development with operating therapeutic clinics, which have a more immediate revenue stream. In the U.S., the club drug and anesthetic ketamine, and a related FDA-approved compound esketamine, developed by Johnson & Johnson as a nasal spray, are already available in such facilities.
Startups also hope to develop shorter-acting psychedelics, such as DMT (the active ingredient in Amazonian drink ayahuasca), that potentially offer a more cost-effective experience with the same therapeutic benefits. (It’s an open question whether the up-to-eight-hour duration of a psilocybin trip, or 12 hours for LSD or acid, is fundamental to the healing process.)
Unlike the cannabis industry, the companies active in this field often aren’t pushing to legalize recreational use of psychedelics. And by synthesizing and modifying existing psychedelic compounds (which are either naturally occurring or have expired patents), they hope to secure stronger IP protection — which gives comfort to investors but rankles purists.
Some of the private capital rushing toward psychedelics will end up being wasted, but much will help further advance our understanding and regulatory acceptance of these molecules and ultimately ease the suffering of those with mental health issues. It wouldn’t be the first time a financial bubble destroyed investor wealth in the short term, only to leave behind a legacy of innovation and societal change.
Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.