The Business of Psychedelics


With increasing evidence that psychedelics such as psilocybin can be of tremendous benefit to those suffering with mental health conditions, discovering a sustainable business model for psychedelic companies is the key to the industry’s expansion and integration with existing treatments for mental health. An effective business model will also encourage investment from pharmaceutical competitors and the capital markets.


While definitive business models for medical uses of psychedelic medicines are yet to be clearly defined, the potential could be revolutionary in how the current mental health crisis is addressed. Alleviating persistent depression with an inexpensive compound is a huge threat to the formidable antidepressant and anxiolytic industries. This may lead the pharmaceutical to actively oppose legalisation and supervised use of these psychedelic treatments. Pharmaceutical industry lobbying may complicate the regulatory process that must be complied with to ensure these ground-breaking treatments are legal and accessible. This existential threat to the industry can be overcome with undisputable evidence proving the efficacy of psychedelic treatments, substantial investment into clinical trials is required to gather credible evidence.


One route the industry could take is to encompass the cost of the medication within the professional fees paid to a clinic for assisted therapy. This business model would align the therapeutic need for trained counsellors to supervise the control set and ambience of the psychedelic treatment settings. These counsellors need to be capable of preventing and managing any negative or adverse reactions to therapy, which is a very delicate skill.


The ability to patent effective psychedelic formulations is integral to companies providing long-term value. Compass Pathways broke ground in January 2020 by being granted a US patent in relation to treating drug-resistant depression with a psilocybin formulation. Owning a patent on a medication that has been proven to be effective in clinical trials adds tangible value to the company. Upon a successful clinical trial, how the medication can be most effectively administered in both a medical and commercial manner can be properly determined.


With Compass Pathways looking to go public at a $100m valuation to enable the company to continue its development of a depression treatment that has psilocybin at its core. Compass have developed a crystalline formulation of psilocybin with the purpose to treat patients who have not responded to traditional therapies prescribed to treat depression. The new crystalline formulation will be offered in conjunction with psychological companionship with trained physicians.


The hope is that psychedelic treatment is not cumulative, meaning that after just a few sessions the patient’s symptoms will have ceased or dramatically improved. The long-term value of a patient is then ultimately significantly less than in many other treatment areas. This could be mitigated by charging a substantial premium to the patient for the treatment or a belief that there is massive market for hopelessly depressed people who are at their wit’s end, this is likely to be affirmed as the world descends deeper into chaos. If there is clinical evidence to support micro-dosing, a long-term prescription could also become a treatment option.


Psychedelic medications and treatments have a duty to help those in nonphysical pain and inescapable misery. These potentially life preserving treatments provide hope to all those who feel their life has lost meaning. An effective business model of the leading companies in the industry is crucial to enable those who need the treatment most to gain access to the medication and treatments.