The regulatory environment for psychedelics is getting friendlier but significant legal hurdles remain, according to analysts at Water Tower Research.
In its inaugural monthly report on the burgeoning psychedelics sector, analysts noted that the mainstream deployment of psychedelic therapies in the United States and Canada would require the rescheduling of these drugs.
They wrote that the resurgence of research interest in psychedelics seen in recent years remained severely restricted for most psychedelic substances.
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Psychedelics LSD, MDMA, psilocybin, and mescaline are considered Schedule 1 drugs with no accepted medical use, while ketamine is considered a Schedule 3 substance with limited medical use.
The analysts added that cultural stigma dating back to the 1960s was a secondary factor holding back psychedelics from mainstream therapeutic use.
However, they noted that "the increased coverage that psychedelics are getting these days appears to indicate that the destigmatization of and a growing social acceptance of psychedelics as a bona fide tool to address mental illness is happening faster than the evolution in the regulatory environment".
The analysts highlighted three potential regulatory pathways for the legalization of psychedelics: conventional Food and Drug Administration (FDA) approval; the magic bullet pathway; and the magic bullet route through legalization by edict, legislative, administrative, or judicial, and creeping legalization via state or regional regulatory reforms.
Conventional FDA approval
FDA approval of psychedelics following a three-phase clinical trial process is the most rigorous and expensive route to legalization, the analysts noted.
But they added that, while most of the current pipeline of investigational psychedelic-based therapeutic candidates were still in the relatively early stages of their clinical trial processes, a regulatory event for psychedelics was now not too far away.
Water Tower noted the Multidisciplinary Association for Psychedelic Studies (MAPS) Public Benefit Corporation’s investigation into the use of MDMA-assisted therapy for the treatment of post-traumatic stress disorder (PTSD) as the first regulatory test case and candidate for securing FDA approval for the drug.
MAPS completed its second Phase 3 trial in November 2022, following a successful first Phase 3 trial, with the results from the latest trial to be collated and analyzed over the coming months.
“Once the FDA has granted MDMA its stamp of approval, the Drug Enforcement Administration (DEA) can be expected to reschedule MDMA for PTSD shortly afterwards,” the analysts wrote. “Once this therapy secures approval, the pathway to broaden its target indications should be easier.”
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Water Tower’s analysts also pointed to Compass Pathways (NASDAQ:CMPS)’ COMP360 psilocybin therapy being investigated in combination with psychological support for the treatment of patients with treatment-resistant depression.
“If all goes well with the Phase 3 trials, we will probably see a submission for FDA approval in late 2025, with the potential timeline for FDA approval and DEA rescheduling in 2026,” the analysts wrote.
However, Water Tower’s analysts noted that while the approval of MAPS’ MDMA candidate for PTSD will represent a significant regulatory milestone for the medical use of psychedelics, it would not mean that the floodgates will immediately open for psychedelics across the board.
“Each psychedelic therapeutic candidate that follows will be judged by the regulators on its own merit for the specific indication(s) it is targeted to treat,” they wrote.
Magic bullet pathways
There are a number of alternative pathways to the legalization of psychedelics aside from FDA approval, coined "magic bullet" pathways by the analysts.
Options include the legislative route whereby Congress amends the Controlled Substances Act to reschedule these drugs, the judicial route involving lawsuits against the DEA after it denies a scheduling petition, or an administrative pathway whereby the President could pursue the appointment of agency officials who favor rescheduling or use executive orders to direct the DEA, Health and Human Services (HHS), and the FDA to consider administrative rescheduling for controlled substances.
“Of the three ‘magic bullet’ pathways, the administrative path might be considered the most viable option for the wholesale legalization of at least MDMA and psilocybin,” the analysts wrote, noting President Joe Biden’s October 2022 request to his HHS Secretary and Attorney General to review how marijuana is scheduled under federal law.
The regional pathway of creeping legislation
A third potential route to the mainstream deployment of psychedelic therapies cited by the analysts is via the jurisdictions that have chosen to decriminalize or legalize some or all psychedelic drugs within their state or city.
“The regional pathway is effectively a creeping legalization of psychedelics for therapeutic use which is underway in Oregon and Colorado, US, and Alberta, Canada,” they wrote.
In November 2020, Oregon became the first American state to legalize psilocybin-assisted therapy and decriminalize the personal possession of drugs, with Colorado making a similar move last month.
On the Canadian side, Alberta is set to become the first province to regulate psychedelic therapy for mental health conditions starting in January 2023.
“This should allow greater patient access to psychedelic-assisted therapies sooner than would the case by waiting for rescheduling,” the analysts wrote.
“Additionally, the more states/provinces that decriminalize/legalize psychedelics adds more pressure for federal governments to toe the line” they concluded.
Contact the author at emily.jarvie@proactiveinvestors.com
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