Inside the Growing Psychedelics Market, Its Potential to Revolutionize Behavioral Health Treatment

Psychedelics have long brought to mind magic mushrooms, Woodstock and LSD-induced hallucinations.

But some corners of the health care industry have started exploring psychedelics for the treatment of certain behavioral health conditions. As proponents seek to change the negative perception long tied to psychedelic substances, a cottage industry of startups has emerged in the young market.

The psychedelic wellness industry has been bolstered, in part, by behavioral health clinicians and patients becoming more willing to try new alternative treatments, including microdoses of drugs such as ketamine, LSD, MDMA and psilocybin.


The space is also likely to get a lift from the pandemic, which has caused stress, anxiety and depression to become more prevalent and severe, consequently leading to an uptick in demand for behavioral health services.

Due to those factors, the global psychedelic drug market is expected to grow to over $69 billion by 2026, according to the financial data site Research and Markets. The figure far surpasses a previous estimate from Research and Markets, which in December projected the industry would grow to a value of $10.75 billion by 2026.

But the success of psychedelics in the U.S. depends largely on federal regulations. Currently, psychedelics are federally classified as Schedule I drugs, which are illegal to sell and grow, unless those substances are being used for research purposes — a loophole many American psychedelic companies hope to take advantage of.


“There’s a tremendous amount of interest in the market to be able to introduce these substances,” Kathryn Tucker — a lawyer in Bend, Oregon, for the Emerge Law Group — told Behavioral Health Business. “However, it is not legally permissible to do so at this time.”

Still, for the behavioral health industry, psychedelics present an opportunity to potentially bolster providers’ treatment toolbox and help patients for whom current psychiatric medications have failed. While it’s unclear exactly what the future of psychedelics in the U.S. behavioral health industry will look like, Canadians are looking at a clearer picture.

Canada and psilocybin

When it comes to psychedelic wellness, Canada is leading the way. Regulations were recently relaxed there to make it easier for alternative medicine companies to develop psychedelic behavioral health treatments.

Those newfound flexibilities are similar to right-to-try laws in the US, which allow terminally ill patients to use experimental therapies that have passed Phase I in the U.S. Food and Drug Administration’s approval process.

The difference, however, is that only one state in the US — along with several municipalities — has authorized exemptions for psilocybin; meanwhile, all 13 Canadian provinces and territories currently have exemptions for the psychedelic substance often used as a source for alternative behavioral health treatments.

More commonly called “magic mushrooms,” psilocybin mushrooms are well known for causing hallucinations.

Under the care of a clinician, patients using psilocybin for behavioral health treatment typically receive the psychedelic drug to treat conditions like stress, anxiety and depression, especially for patients who have not had success using other treatments or are facing terminal illnesses.

The practice has gained support from researchers, who have published data in respected journals such as JAMA Psychiatry and the New England Journal of Medicine demonstrating psilocybin to be effective in treating depression, PTSD and other conditions.

As with the US, possession of psilocybin mushrooms in Canada is illegal. However, last August, Health Canada — the country’s regulatory health body — approved the use of psilocybin to treat four terminally ill patients for anxiety, stress and depression.

Several months later, in December, Health Canada also approved exemptions to a group of doctors and therapists to use psilocybin for research purposes, allowing them to study its effects on patients in hopes of developing therapies for future use.

As a result, British Columbia — which is also home to a number of Canadian cannabis companies — has become a hotbed for psychedelic wellness startups. One such company is Optimi Health, a psychedelics company founded last year.

“This is a rapidly evolving field of research and Canada is currently ahead of the pack when it comes to approved methods of treating and researching psychedelic therapies,” Mike Stier, the president and CEO of Optimi Health, told BHB.

Optimi, which completed an initial public offering (IPO) on the Canadian Stock Exchange in February, is making a variety of mushroom-derived supplements for wellness. Its products, which do not contain any psychedelic microdoses, will be sold on a direct-to-consumer (DTC) platform set to launch this August. Additionally, Optimi has plans to make its products available on Amazon, as well as through the Canadian health company Vitasave.

On top of that, Optimi has its eye on psychedelic therapies for stress, anxiety and depression.

It has two 10,000-square-foot facilities slated for completion in early fall in the south central British Columbia town of Princeton. There, the company will grow mushrooms, as well as create and extract mushroom-derived products to integrate into its DTC platform. It will also conduct ongoing pharmaceutical research and development at the facility.

While Optimi has applied to Health Canada for a government-issued dealer’s license to manufacture psilocybin mushrooms, it is prohibited from possessing any psychedelic products at its facilities until then.

However, in January, Optimi reached a lab services agreement with Numinus Wellness, a Vancouver-based psychedelic therapy company. Although prohibited from currently possessing psychedelics at its facilities, Optimi received an exemption by the Canadian government in January to conduct research in psychedelics. Numinus currently has a license from Health Canada to conduct psilocybin research.

“It’s essentially giving us a leg up in the process of moving through some of the initial phases of the clinical studies,” Stier said.

Optimi soon plans to start research at Numinus’ facilities to extract psilocybin compounds from mushrooms for products. The research is an initial phase dosing study in humans that will be conducted, in part, through an accelerator program at the University of Calgary.

Upon receiving its federal license, Optimi will also open its facilities to other companies looking to do research into psilocybin compound extraction, which could lead to the creation of more therapies to treat a variety of health conditions, including those in the behavioral health realm.

“We’ve got many exciting things … that [are] in progress at this point in time,” Stier said. “I personally feel like we have an exponential amount of growth to still come in terms of what Optimi is doing and what we can achieve.”

Psychedelics in America

The American psychedelics market still has work to do to catch up with its Canadian counterpart. However, recent legal developments could be opening the door for the U.S. industry to grow.

Last November, for example, Oregon became the first state to allow psilocybin to be used for mental health treatment in supervised settings. Additionally, legislation has been introduced in the Washington State Senate that would decriminalize possession of psilocybin, and the California State Senate has voted to decriminalize a variety of psychedelics. 

Meanwhile, both Connecticut and Texas have also passed psychedelic wellness legislation, with Connecticut Gov. Ned Lamont having already signed a bill into law to create a working group to study the potential benefits of psilocybin.

At the same time, notable institutions such as Johns Hopkins University, New York University and the University of California-Berkeley have established standalone psychedelic research departments in recent years.

Such research is key in the push to mainstream psychedelic behavioral health treatments, according to Tucker.

“You have a lot of businesses frothing at the bit to somehow find a way to commercially market the substances and/or services related to the ingestion of these substances,” she said.

A leading patient rights lawyer and co-chair of Emerge’s psychedelic practice group, Tucker has been active in efforts to open access to psilocybin. She is currently the lead counsel in a case seeking to compel the DEA to accommodate right-to-try laws, which were established at the federal level by Congress in 2018 and are currently enacted in 41 states. Those laws allow patients with advanced illnesses to use drugs that have passed a Phase I clinical trial and remain under clinical investigation.

The case, which asserts that psilocybin is one such investigational drug, is currently pending before the U.S. Ninth Circuit Court of Appeals.

“The main avenue to reform is to reschedule psilocybin and other psychedelic substances off of Schedule I onto a different schedule where they can be accessed legally,” Tucker said. “That, of course, is the purpose and the intention of all of the many clinical trials that are ongoing.”

Tucker also is aware of the possible trickle-down effects from the gradual legalization of psychedelics to American businesses, including behavioral health providers.

“I do think there’s potentially a huge demand [for psychedelics],” she said. “That, of course, speaks to why all of these players are so interested in coming in to serve that enormous market.”

Ultimately, Tucker believes the U.S. will benefit if the flurry of recent legislation, research and activity around psychedelics leads to more options to treat a variety of behavioral health conditions.

“These drugs have been showing great promise in relieving the suffering that comes from those conditions, and in relieving and mitigating and eradicating those conditions,” she said. “When you have such a high percent of the population burdened with a variety of mental health challenges, this seems like a really effective set of tools to address those challenges.”

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