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A Complex Patent & Pricing Picture: Regulating Psychedelics More of a Journey Than a Trip

Pharmaceutical ExecutivePharmaceutical Executive-03-01-2022
Volume 42
Issue 3

Pharma and legal experts weigh in on the rush to secure intellectual property around psychedelic medicines, the value imperative that should govern pricing strategies, and the likely long-haul battle for more widespread decriminalization of these drugs.

Psilocybin, DMT (N, N-dimethyltryptamine), and other psychedelics conjure images of tie-dyes with flamboyant colors, music with an improvisational bent, and other relics of hippie culture. Patent filings, regulations, and pharma pricing strategies may be as far removed from psychedelic counterculture as one can imagine.

However, research about the clinical benefits of psychedelics has set off hundreds of millions of dollars in investments. Companies are building an array of patents and other intellectual property (IP) tied to these potential medicines, which they hope to use to treat a range of unmet mental health needs.

Many psychedelic compounds are Schedule I controlled substances, which are “defined as drugs with no currently accepted medical use and a high potential for abuse.1 Their status has created a regulatory barrier that has stalled research for decades and only resumed in the past 15 years or so, according to industry experts.

LEK Consulting, a global strategy consultancy, reports about $60 million was invested in psychedelic-focused companies in both 2018 and 2019.2 In 2020, the level of investment was almost 10 times this figure as the number of psychedelic-focused businesses and new clinical trials rapidly increased. The firm forecasted the investment figure to exceed $2 billion globally during 2021.

Questions, however, remain about whether compounds can be patented if they are decades old or, in the case of psilocybin (magic mushrooms), naturally occurring. “The patentability of some of these compounds is challenging,” says Adrienne Rivlin, DPhil, a partner at LEK.

Regarding psychedelics, drugmakers are extending patents to the talk therapy programs, patient screening tools, “beyond-the-pill” services, and any clinician training that are often part of what is being developed to accompany the medicines under development. Questions abound about the line between a patented treatment protocol developed by a drug manufacturer and good clinical treatment protocols that entail showing compassion for a patient.

“Though patents can incentivize innovation, their application to psychedelics threatens competition, scientific progress, and public health,” Mason Marks and I. Glenn Cohen said in a 2021 paper titled “Patents on Psychedelics: The Next Legal Battlefront of Drug Development.”3 The authors, from The Project on Psychedelics Law and Regulation at Harvard Law School’s Petrie-Flom Center for Health Law Policy, Biotechnology, and Bioethics, also maintain that the US Patent and Trademark Office could be manipulated into granting dubious patents to “me-too drugs” that discourage innovation or “product hopping,” where patent applicants make subtle changes in existing technology and claim that it is novel.

Graham Pechenik, an IP attorney and founder of Calyx Law, says psychedelics makers are “squaring off to see who can obtain as much value as possible” since that may determine future profits of the products.

“Companies are rushing headlong and filing so many competing claims because it’s unknown what others are doing; there’s the fact that patents are judged based on who’s the first to file them,” adds Pechenik, noting the 18-month review process between applying for a patent and when it is granted. “There’s obviously a great need for speed.”

Pechenik anticipates many challenges to patents in this field, as well as patent trolls, who will try to use the courts to inhibit commercial activity and extract settlements or royalties.

Battle lines, however, are being drawn with deep-pocketed investors that want to take the market for psychedelics out of the parking lots at jam-band concerts and to the pharmacies. According to Pechenik, the organizations with the most cash will be best positioned to navigate costly litigation, while continuing to conduct the necessary research to bring these products to market.

Many compounds are being researched for a multitude of behavioral disorders, including treatment-resistant depression (TRD), post-traumatic stress disorder (PTSD), anxiety, substance abuse, and eating disorders. The FDA designated MDMA and psilocybin as breakthrough therapies, respectively, for PTSD and TRD, and major depressive disorder.

Many psychedelic compounds are Schedule I controlled substances—a regulatory barrier that had stalled research in the field since the 1970s; but increased clinical evidence may show this to be incorrect and some jurisdictions are moving toward decriminalization or reducing penalties for possession of psilocybin, clinicians say.

Ketamine variant opens field

While clinical trials have been conducted assessing the use of psychedelics for TRD, PTSD, substance abuse, and other mental health conditions, Johnson & Johnson’s Janssen Pharmaceuticals unit received FDA marketing approval in March 2019 for Spravato (esketamine), a nasal spray enantiomer that is more potent than ketamine, for adults with TRD in conjunction with an oral antidepressant. Ketamine, a short-acting anesthetic that was abused as a “club drug,” first received approval for human use in 1970.4

Kelsey Buckholtz, senior manager, product communications, at Janssen, notes that esketamine has higher affinity for the NMDA receptor than ketamine; therefore, lower doses (with less volume) can be used, making less-invasive intranasal dosing possible. In August 2020, FDA approved a second indication for Spravato to treat depressive symptoms in adults with major depressive disorder with suicidal thoughts or actions.

Rivlin says esketamine is “probably good for a segment of the population for whom nothing else works.” The benefits may be short-lived for patients, but it offers reprieve for patients that may be suicidal, she adds. It is important to distinguish, however, as Buckholtz explains, that Spravato is not indicated for suicide prevention, but rather to treat depressive symptoms in patients who have suicidal thoughts or actions. Like other currently approved antidepressants in the US, Spravato carries a black box warning regarding the increased risk of suicidal thoughts and behaviors.

In their paper, Marks and Cohen said the FDA’s approval of esketamine was “a major step forward” for patients with depression, but characterizing it as novel is “a stretch.” Perhaps impacting the latter claim, FDA, in a recently issued alert regarding some safety risks with ketamine, stated that though esketamine is derived from racemic ketamine, they are not the same drug.5

According to Marks and Cohen, esketamine’s approval “created something of a quandary” for patients and providers who favor using ketamine, since payers will pay for the approved drug instead of using generic ketamine off-label. Physicians will have less incentive to prescribe or perform research on ketamine, despite its low cost and benign safety profile, the authors contended.

“Spravato and ketamine are distinct in terms of their chemical composition, the level of study and data supporting their use, and the safety measures that are in place,” says Buckholtz. “Spravato has been the subject of 31 separate clinical trials and over a decade of research as part of its development, and Janssen has worked with FDA to ensure the treatment is handled responsibly to ensure the best care and outcomes for patients.”

Industry experts say Compass Pathways Plc is the furthest along after Spravato among the psychedelic treatments. The company was granted patents for COMP3606 and intends to launch Phase III trials7 of the psilocybin polymorph for TRD in the third quarter of 2022. It’s pursuing other indications for the compound as well. The nonprofit Freedom to Operate filed a challenge with the US Patent Office to invalidate Compass’ patent on the compound.8

According to Compass’ general counsel, Matthew Owens, COMP360 is not “just the naturally-occurring drug” and the company is pursuing a medical model and following the stringent regulatory framework to get patients another option to improve mental health when other treatment options are not working.

In the first quarter of this year, biotech company Cybin, which is developing CYB003 (psilocybin) and CYB004 (deuterated DMT), aims to complete preclinical studies on CBY003 and its EMBARK Phase II investigator-initiated trial on its treatment protocols for the use of psilocybin.9

Cybin General Counsel Robert Mino says the company intends to patent its compounds as well as therapy protocols used for specific conditions.

Pricing to vary

With potential entrants emerging, the market is likely to be competitive in terms of the number of psychedelics available to patients, which explains the “land grab” that is occurring with IP.

While noting it’s “impossible to draw conclusions on pricing” at this stage, Compass Pathways Chief Commercial Officer Marco Mohwinckel says, “I want to really stress the fact that pricing is intimately tied to the value that we deliver to patients and to healthcare systems. And that, in turn, is based on the efficacy and the effectiveness that we’re able to demonstrate in rigorous clinical trials.”

Regarding the pricing of Spravato, Buckholtz says, “The cost of treatment with Spravato nasal spray varies by patient, as treatment, frequency of dosing, and duration of therapy is individualized based on the clinical assessment of their symptoms. The average total annual cost of Spravato is generally comparable with other innovative, specialty mental health drugs.”

Cybin’s Mino adds: “There is a significant unmet need in a large market, so I believe any new approved therapeutic providing an advantage over currently available medications will have the opportunity to generate a substantial ROI.”

Legal, regulatory barriers remain

Status as a Schedule I drug for many of these compounds is a significant barrier to distribution, but psilocybin is increasingly facing decriminalization and reduced penalties, and working groups are increasingly studying its medical use in many states or local jurisdictions in the US.10

Kim Stuck, founder and CEO of Allay Consulting, sees some parallels in psilocybin and the cannabis markets in terms of decriminalization. At this point, decriminalization has occurred but licenses for dispensaries in Oregon, where psilocybin is legal for medicinal use, are slower in coming. The state’s regulations are still being written and there will be rules tied to “track and trace” of the products to prevent diversion, says Stuck.

Charlie Kohler, press officer for the FDA’s Center for Drug Evaluation and Research (CDER), notes that many psychedelics have been tested on humans, but each study is assessed under rules to ensure safety for the patients and that the research would be performed with the oversight of an institutional review board (IRB).

The US Drug Enforcement Agency (DEA) has registration requirements for pharma manufacturers and investigators for research on Schedule I drugs with the intention of mitigating the risk of diversion. The DEA has specific security requirements for storage of the drugs and how they are dispensed at the clinical study site.

Despite the DEA scheduling and drug laws, some clinics are performing “underground” therapies using psychedelics or using ketamine off-label in clinics to treat patients with a variety of mental health conditions.

Many experts anticipate black box warnings if and when psychedelics gain approval for the risk of abuse and disassociation. Most of the clinical trials have been conducted with the treatments being administered under the care of a clinician.

Mohwinckel says Compass and other competitors have an opportunity to meet a “huge” unmet medical need. “We believe very firmly that we want to achieve the broadest and safest possible access to psychedelic therapies and in particular to the ones that we will develop to pursue a medical model,” he says.

Oregon and other jurisdictions that have decriminalized psilocybin are going to have licenses for growers with rules tied to distribution and ensuring the products are not adulterated. “It is not going to be quite the same as a GMP (good manufacturing practice) product. But it’s not going to be something that is entirely unknown,” says Pechenik.

Broadening decriminalization could expand the use of psilocybin. Stuck believes regulators will make adaptations to the markets to try to curb abuse, and it is likely to be done on a state-by-state basis.

“I think it’s one of the biggest risks that the pharma companies will need to deal with—the bleeding between medicinal use or recreational use,” says Rivlin. “It is something that they don’t want because it muddies the waters. These are potent molecules that have the ability to dramatically improve somebody’s life and they need to be used under proper medical supervision.”

William Borden is a freelance journalist covering the pharmaceutical industry. He is based in New Jersey.


  1. https://www.dea.gov/drug-information/drug-scheduling
  2. https://www.lek.com/insights/ei/investment-surge-psychedelics-treatment-mental-health-conditions
  3. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3948757
  4. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5126726/
  5. https://www.fda.gov/drugs/human-drug-compounding/fda-alerts-health-care-professionals-potential-risks-associated-compounded-ketamine-nasal-spray
  6. https://compasspathways.com/fifth-us-patent-crystalline-psilocybin/
  7. https://compasspathways.com/comp360-psilocybin-study-89-healthy-participants-journal-of-psychopharmacology/
  8. https://freedomtooperate.org/wp-content/uploads/2021/12/FTO-PGR-Second-Filing.pdf
  9. https://s28.q4cdn.com/259445127/files/doc_presentation/2022/Jan/Cybin-Psychedelics-to-Therapeutics2.0.pdf
  10. https://psilocybinalpha.com/data/psychedelic-laws
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