Interest in the potential for psilocybin to be developed as a mental health treatment has continued to grow in recent months, due in part to recent activity by the U.S. Food and Drug Administration (FDA) and Drug Enforcement Administration (DEA).
Present FDA and DEA Positions
As discussed in McGuireWoods’ July 6, 2023, alert, growing evidence of psilocybin’s significant mental health benefits has spurred states to push for and enact legislation that decriminalizes or legalizes recreational psychedelic mushroom usage. At the federal level, the FDA announced its draft guidance on June 23, 2023, indicating that it will approve clinical trials that investigate psilocybin’s potential to treat anxiety, depression, post-traumatic stress disorder and other health issues, while the DEA has confirmed that mushroom spores themselves, which do not contain psilocybin, psilocin or any other controlled substance, are not considered controlled under the Controlled Substances Act (CSA). “If the mushroom spores (or any other material) do not contain psilocybin or psilocin (or any other controlled substance or listed chemical), the material is considered not controlled” under the CSA, wrote the DEA’s drug and chemical evaluation section chief. If the material at any time contains a controlled substance such as psilocybin or psilocin (for example, upon germination), the material would be considered a controlled substance. What this means for the burgeoning psilocybin industry is still unclear.
FDA Support for Clinical Trials Involving Psychedelics
Clinical trials are a preliminary step for pharmaceutical manufacturers to gain FDA approval for a new drug therapy. On June 23, 2023, the FDA issued draft guidance for researchers investigating psychedelic substances as potential treatments for certain medical conditions. Tiffany Farchione, M.D., director of the Division of Psychiatry in the FDA’s Center for Drug Evaluation and Research, recognized that these drugs are “still investigational products,” but agreed they show “promise as potential treatments for mood, anxiety and substance use disorders.” The guidance acknowledged that psychedelic drugs may produce psychoactive effects such as mood and cognitive changes, as well as hallucinations, creating a potential for abuse of these drugs. To counteract this safety issue, the guidance implored careful consideration and sufficient measures to prevent misuse through clinical development.
The guidance further addressed the importance of psychotherapy in psychedelic drug development, considerations for safety monitoring and understanding dose-response in treatment. Particularly, the FDA recognized that many psychedelic drug development programs involve administering the investigational drug and engaging in psychological support or psychotherapy while the patient experiences acute effects of the drug. The guidance also acknowledged that unlike traditional investigational drug studies, use of a placebo as a control could be problematic in assessing efficacy of the psychedelic substance, and warned that the variable of psychotherapeutic interventions has the potential to skew data by increasing expectancy and performance bias. Although psychedelic clinical trials should be no more onerous than the development and trial process for traditional drug products, the guidance emphasized there may be unique challenges posed by studying psychedelic drugs.
Further evidencing the FDA’s interest in the potential medical benefit of psychedelics, on Jan. 31 and Feb. 1, 2024, the Reagan-Udall Foundation for the FDA hosted “Advancing Psychedelic Clinical Study Design,” a two-part virtual public meeting that explored empiric approaches to address key issues in psychedelic drug development and research. Industry and agency interest continue to indicate that this may be a burgeoning market with ample opportunity for growth and development.
DEA: Research Support and the State of Spores
As part of the DEA’s overall shift to support growing research in this area, in 2018, the DEA stated it would speed up the application process for researchers who study or wish to study Schedule I drugs not approved for medical use. The DEA shifted the application process to an online portal to streamline the application process, permitting existing and new researchers to submit their applications and supporting documents. In 2022, the DEA approved Experic LLC’s license to operate as a bulk manufacturer of psilocybin and psilocyn by germinating mushrooms to be harvested and freeze-dried in powder form, and to be filled in capsules for use in clinical studies. A second manufacturer applied for a bulk license to manufacture psilocybin and psilocyn in late 2023; that license is pending. In January 2024, the DEA increased its aggregate production quota for psilocybin production for research to 20,000 grams and 24,000 grams for psilocyn, further indicating increased interest in the substance’s medical potential.
In its Jan. 2, 2024, written response to an industry inquiry, the DEA confirmed that mushroom spores that do not contain psilocybin, psilocin or any other controlled substance are not considered controlled substances under the CSA. However, if any part of the mushroom and/or mushroom spore, at any time, contains a controlled substance such as psilocybin or psilocin (for example, upon germination), the material would be considered a controlled substance. If a mushroom spore germinates and thereafter contains psilocybin or psilocin, it would be considered a controlled substance subject to the CSA. Despite proliferation of psilocybin mushroom spore kits, manufacturing, marketing, selling, buying and using spore kits still bears legal risk. Local and state police continue to arrest people for selling or utilizing spore kits, claiming the kits are considered “drug paraphernalia” based on their marketing and usage. While the spores are technically legal under federal law, states such as California, Georgia and Idaho prohibit the spores themselves, which contributes to confusion in the marketplace.
Moves at State Level (Oregon and Colorado)
Oregon
In 2020, Oregon became the first state to decriminalize and legalize psilocybin for therapeutic use for persons 21 and older through Ballot Measure 109, now codified as ORS 475A. On Jan. 2, 2023, Oregon began accepting applications for licensure to dispense and administer psilocybin in a controlled medical environment through the Oregon Health Authority. The Oregon Psilocybin Services (OPS) License Directory contains information on OPS licensees. To access psilocybin services in Oregon, a person must be 21 years of age or older and participate in a preparation session with a licensed facilitator. After participating in a session, users may participate in an “administration session” where psilocybin is consumed at a licensed service center. These services are not confined to residents of Oregon. Since the federal government lists psilocybin as a Schedule I substance with “no currently accepted medical use” it will not be covered by insurance, even in states that decriminalize its use. Administration service centers may offer opportunities for investors comfortable with high-risk, high-reward strategies, with sessions costing as much as $2,500 out of pocket.
As part of Oregon’s recent “about face” on decriminalization, however, HB4002 makes it illegal to possess psilocybin or psilocin for recreational use (i.e. use outside the controlled treatment setting). ORS 475.900 now limits the manufacture or distribution of 60 grams or more of a mixture or substance containing a detectable amount of psilocybin or psilocin. ORS 475.900 otherwise criminalizes delivery of psilocybin or psilocin “for consideration,” (i.e., in exchange for money or thing of value). ORS 475.752 precludes possession of 12 grams or more of a mixture or substance containing a detectable amount of psilocybin or psilocin.
Colorado
In 2022, Colorado decriminalized the possession of psychedelic mushrooms and their use, but not sale, for persons 21 years of age and older through Senate Bill 290, enacted May 23, 2023 (the Natural Medicine Health Act or NMHA). Pursuant to the NMHA, the Colorado Department of Regulatory Agencies released an implementation time frame. In 2023, the governor appointed a Colorado Natural Medicine Advisory Board, which is responsible for drafting, proposing, and making rules governing the licensure of facilitators and approving required training programs. The board has drafted proposed new rules seeking to cover the process to become licensed as a facilitator, to identify the requirements for approval of training programs for facilitators and to identify the course content for training programs for facilitators. The proposed rules will require facilitators to complete 150 hours of education, 40 hours of hands-on practicum, a basic life-support certification and a six-month consultation period before they are fully licensed to practice independently. To implement the NMHA, the board and its subcommittees have conducted more than 75 meetings lasting more than 300 hours to date. The board will begin reviewing applications in late 2024 after the rules are finalized.
On March 8, 2024, the board hosted a stakeholder meeting to receive feedback on these proposed rules, which lasted approximately 90 minutes. Stakeholders submitted written feedback and others called in to discuss the rules. Examples of feedback include multiple requests for further definition of “psychotropic medication”; indications of relevant peer-reviewed studies on psilocybin and anti-depressant use; requests to include registered nurses, art therapists and naturopathy doctors in the definition of “facilitators”; and costs associated with training and licensure for facilitators. After the board finishes receiving feedback, it will file a notice of permanent rulemaking with the Colorado secretary of state. The permanent rulemaking hearing will take place May 3, 2024. It is not clear at this time which proposals will be adopted as drafted and which may be modified based on public comments.
The psilocybin and psilocyn landscape continues to change at a rapid pace. Interest from investors and market players continues to mushroom, with one industry report predicting an anticipated compound annual growth rate of 10.3% by 2027, with another report predicting over $4 billion in revenue by 2030.
McGuireWoods attorneys are experienced in representing and advising key players across the spectrum of the pharmaceutical, psychedelics and pharma services industries. Please contact one of the authors if you have questions about the decriminalization and legalization of psychedelics, the use of psychedelics in medicine and treatment, or navigating investments in psychedelics.