Late last week, the psychedelics industry received its latest blow when the FDA shot down Lykos Therapeutics’ application for MDMA-assisted therapy for treating PTSD.
Many in the psychedelics industry had hailed Lykos Therapeutics’ treatment as the pioneer for regulatory clearance. However, the FDA sent the pharma company back to the drawing board for more testing, requesting additional Phase 3 trial research to prove the therapy’s safety and efficacy.
This setback has raised some questions about the use and feasibility of psychedelics and other experimental treatments in traditional mental health settings.
It has also put a pin in the idea that psychedelics and other experimental treatments could be the silver bullet for mental health treatments in the future.
In recent years, we’ve seen investors and providers take bets on the space. The potential use case for psychedelics includes everything from treating substance use disorders (SUDs) to curbing eating disorders.
Given this rise in interest over the past decade, I think it’s unlikely we’ll see movers and shakers in the psychedelics industry give up just yet. There could still be a chance for them to make their mark on behavioral health care.
“In the big picture, this decision is a bump in the road but not something that will drastically alter the course of psychedelic medicine,” Michael Petegorsky, chief strategy officer at Mindbloom, told me earlier this week. “The FDA is providing guidance to the industry about what needs to be true for a psychedelic medicine to be approved, and other organizations with drugs in the pipeline will use that guidance to achieve approval of MDMA, psilocybin, LSD, and other drugs in the pipeline. This is a difficult learning process that will ultimately lead to the approval of a number of psychedelic medicines.”
We’ve already seen the rise of traditional clinics, such as LifeStance (Nasdaq: LFST) and Mindpath, integrating ketamine for “off-label” use in behavioral health treatment. With regulatory clearance, the next step could be other psychedelics like MDMA or psilocybin.
But, psychedelics, such as Lykos Therapeutics’ MDMA treatment, have their own specific hurdles, not only the stigma that comes with the psychedelics umbrella, but also logistical barriers. The medication requires therapy alongside a drug, a novelty to the FDA.
Among the topics in this BHB+ Update, I explore:
– Why psychedelics FDA clearance could be harder to obtain than a traditional drug
– What can be learned from ketamine companies’ financial struggles
– The hope for experimental mental health treatments in the future
Is medication-assisted therapy too trippy?
It wasn’t exactly a surprise that the FDA rejected Lykos’ treatment last week. In June, the agency’s advisory committee recommended that the therapy be rejected.
After the recommendation, industry insiders were quick to point out that one of the main challenges with the proposed treatment was the fact it involved three medication sessions combined with psychotherapy before dosing and integration sessions afterward.
“The Committee unfortunately could not seem to grasp the research nor post-approval regulation of a drug plus therapy combination,” advocacy group Reason for Hope said in a statement responding to the committee decision. “Members of the Committee seemed confused about what they were even voting on.”
Although not necessarily required in the same way, many medications for mental health and SUDs are recommended to be used in conjunction with therapy. For example, medications for opioid use disorder (MOUDs) are typically recommended to be used alongside SUD treatment, including therapy.
However, there are no strict requirements around what that therapy looks like, as there were with the MDMA treatment.
“This new class of treatment is incredibly promising, as evidenced by the data collected so far, but it also presents challenges for an agency such as the FDA to evaluate because of the acute subjective experience and combination with psychotherapy, which we believe is an important component of safe, supported, and effective treatment,” Dan Love, the CEO of psychedelics startup Nue Life Health, previously told BHB reporter Morgan Gonzales.
If psychedelics like MDMA are able to get through the FDA process eventually, then they could set a precedent for more medications – beyond even psychedelics – that require therapy alongside a drug.
Growing pains
The psychedelics industry’s hurdles aren’t just around regulatory clearance. While we’ve seen several funding rounds in the psychedelics space, including COMPASS Pathway’s massive $285 million funding round in 2023, there have also been some major stumbles.
For example, in 2023, Field Trip Health & Wellness, a virtual ketamine and psychedelics provider, announced it was for sale after revealing it was not able to pay debts. The company had previously raised two private equity rounds and an IPO worth roughly $96 million. Mental health provider Stella eventually purchased the provider.
Additionally, Ketamine Wellness Centers, which once claimed to be the latest ketamine therapy provider in the country, abruptly closed in 2023.
While Field Trip and Ketamine Wellness Centers focused on ketamine, which can be used for off-label behavioral health use, both struggled with payment models.
Getting payers on board to fund some of these more experimental treatments was always going to be a challenge. But stigma and regulatory hurdles just add an extra layer of red tape.
Take digital therapeutics, for example. Digital therapeutics company Pear Therapeutics landed FDA clearance (medical devices need clearance and drugs require approval) in 2017 for its SUD-focused digital therapeutic medication.
But that clearance wasn’t a one-way ticket to profitability, as some would have imagined. Instead, the company made deals with Medicaid and several private insurance companies. Even so, it struggled to figure out a clear reimbursement pathway and eventually declared bankruptcy.
If the psychedelic industry were to have a true boom, it would likely take getting payers on board. And although ketamine is the only mind-altering substance approved by the FDA, many patients who access the medication end up paying out-of-pocket.
A new hope
I don’t think Lykos’ FDA rejection and the financial stumbles of some psychedelic companies mean it’s over for the psychedelic industry.
There are a few bright spots for the industry going forward. First, I think the fact that providers like LifeStance and Mindpath offer ketamine is a sign that traditional operators are open to more experimental treatments in the future. While we haven’t seen any major companies dip their toes into psilocybin or MDMA, if regulatory clearance comes through, then never say never.
Secondly, the federal government does appear to have some interest in advancing the psychedelics industry. In 2023, a bipartisan group of lawmakers introduced an updated version of the Breakthrough Therapies Act to Congress. The act would make it easier to use Schedule 1 drugs with breakthrough therapy designations, including MDMA and psilocybin, which have a breakthrough designation, to be transferred from Schedule I to Schedule II drugs, enabling more patient access and more clinical investigation.
And while there may be some ways to go before psychedelics land widespread payer coverage, there have been some glimmers of hope in that department, too. In 2022, a report by a division of Magellan Health called for “fair and balanced” reviews of psychedelics to come to market.
Lastly, regulatory clearance for psychedelics beyond ketamine isn’t off the table. Lykos has the chance to continue research and reapply. COMPASS is also making headways. The company has launched a phase 3 trial of its synthetic psilocybin formulations to treat treatment-resistant depression.
While the latest news is an upset for the psychedelic world, it’s unlikely that this will put a stop to psychedelic research. Still, it may give pause that psychedelics are the magic wand the mental health industry was looking for.
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