Thanks to our Life Sciences Transactions + Licensing Group, including Matthew Karlyn, Mai Zymaris, and Hannah Koo, for contributing to this post.
Earlier this month, Senators Brian Schatz (D-HI) and Cory Booker (D-NJ) sent a letter to the National Institutes of Health (NIH) and the Food and Drug Administration (FDA) urging both agencies to advance research on the therapeutic effects of psychedelic drugs. This letter comes at a time when psychedelics are garnering increased attention for their potential medical and therapeutic benefits, and shedding some of the stigma that has dogged them since the 1960s. Widespread approval for psychedelic treatments remains unlikely, but the tide is slowly turning. For the regulated community, this is a trend worth watching.
Psychedelics are “powerful psychoactive substances that alter perception and mood and affect numerous cognitive processes.” Psychedelics include natural substances such as psilocybin (the active compound in mushrooms) and peyote, as well as synthetic substances like LSD and MDMA. Generally speaking, psychedelics are considered to be physiologically safe and non-addictive.
While psychedelics are not new, medical research around psychedelics has exploded in recent years. In May 2021, a Nature Medicine study showed the benefits of MDMA in relieving post-traumatic stress disorder. In April 2021, a separate study from the New England Journal of Medicine demonstrated the efficacy of psilocybin in reducing symptoms of depression. The Journal of the American Medical Association published similar findings in May 2021.
Around the same time, psychedelics have become increasingly socially acceptable for medicinal purposes. Celebrated author Michael Pollan has published two bestselling books on the topic: How to Change Your Mind and This is Your Mind on Plants. Silicon Valley and Wall Street have begun investing money into psychedelics research and development. And cities around the country are beginning to decriminalize some psychedelics, with advocates for decriminalization citing the potential medical benefits. In May 2019, Denver became the first city to decriminalize psilocybin, followed by Oakland, CA, Washington, D.C., and Seattle, among other municipalities. In 2020, Oregon became the first locale to decriminalize psilocybin and legalize it for therapeutic use on a statewide basis. But despite all of these developments, FDA approval for psychedelics faces an uphill battle.
Recent Regulatory Developments
Although the path to FDA approval for psychedelics is steep, it is not impossible. In 2019, FDA approved Spravato (esketamine) nasal spray for treatment of depression in adults. Spravato is derived from ketamine and categorized by DEA as a Schedule III controlled substance. FDA granted Breakthrough Therapy designation for Spravato in 2013 and ultimately approved it for adults who have not responded to treatment after trying other antidepressant medications. To mitigate safety risks, FDA implemented a Risk Evaluation and Mitigation Strategy (REMS) with elements to assure safe use (ETASU) whereby patients self-administer the spray in their healthcare provider’s office under medical supervision.
More recently, MDMA therapy has inched closer to FDA approval. In 2017, FDA granted a request for Breakthrough Therapy designation for MDMA to treat PTSD. As previously mentioned, clinical studies are promising, including a Phase 3 trial (the last step before submitting an NDA) completed last November. Experts predict that this therapy could receive full FDA approval as soon as 2023. In the meantime, FDA has approved some requests for compassionate use.
Research institutions or other investigators wanting to explore psychedelics for potential medical uses have numerous regulatory and legal challenges to consider. Here are the top five considerations:
1. Clinical Trials and Human Subject Protections
Before the drug approval process even begins, sponsors must initiate clinical investigations by first filing an Investigational New Drug Application (IND) with FDA. An IND will require a clinical trial protocol in which an Institutional Review Board (IRB) must review and monitor the welfare, rights, and privacy of human subjects in the clinical trial. FDA’s approval of an IND will also require sufficient evidence that the trial will be safe for human subjects. These will likely be significant hurdles to overcome, given the high risks involved in research with controlled substances.
2. DEA and the Controlled Substances Act
In addition to the arduous FDA approval process, potential psychedelic therapies would also require complying with requirements from the Drug Enforcement Administration (DEA). Under the Controlled Substances Act of 1970, DEA classifies drugs into one of five schedules. Schedule I drugs are those that DEA considers to have no medical value and a high potential for abuse. This category includes the psychedelics LSD, ecstasy, and mushrooms. Schedule I controlled substances are the most restricted in terms of research, supply, and access, and possession is criminalized. To perform clinical studies with Schedule I substances, researchers have to apply for a special DEA license. These licenses are hard to get and narrowly proscribe permissible research. These hurdles make it hard to conduct clinical research around psychedelics.
The complex regulatory challenges around researching controlled substances have been a hot topic in recent years because of interest around medical marijuana. DEA classifies marijuana as a Schedule I substance, while at the same time researchers have long touted its potential medical benefits. While FDA has not approved cannabis per se for any treatment, FDA has approved four cannabis-derived or -related drug products to date. This underscores that regulatory approval for drugs derived from controlled substances is feasible.
3. Approval Pathways
FDA has developed four approaches for expediting the approval process. Fast Track review is for drugs that treat serious conditions and fill an unmet medical need. Breakthrough Therapy is for drugs that may represent a significant improvement over existing therapies. Accelerated Approval is similar to Fast Track review, but used a surrogate endpoint rather than a measure of a clinical benefit. Finally, Priority Review is a designation that means FDA intends to respond to an application within six months. Researchers developing psychedelics should consider which of these pathways to pursue, as applicable, since they all confer significant advantages in the approval process.
4. REMS Requirements
FDA sometimes requires a REMS to ensure that the benefits of an approved drug outweigh its risks. A REMS with ETASU may be appropriate for a controlled substance, such as strict restrictions on the distribution of the drug product and certifications for prescribers and pharmacists. These requirements are relatively rare, but FDA would almost certainly impose them for approved psychedelics, as it did with Spravato. Sponsors should be aware that REMS with ETASU may increase compliance risk and limit commercial options.
Researching and developing a drug product that is a controlled substance also poses unique challenges outside of the regulatory context. Ensuring that contracts that govern the supply of the research substance comply with applicable laws is critical. Furthermore, contracts with research organizations must be properly tailored to ensure appropriate human subject protection and data integrity. Despite the surge in the number of research institutes and universities interested in conducting psychedelics research, many transactional challenges continue to impede the negotiation of research and development agreements in the field. Key challenges include: (i) the necessity of researcher compliance with strict and extensive institutional policies and regulation of controlled substances, separate from, and in addition to, any relevant state and federal licensing and regulatory requirements; (ii) the logistics of legally procuring, storing, securing, and disposing of controlled substances; (iii) the difficulty of obtaining federal or other funding for research and development in this field; (iv) heightened concerns about institutional reputation when researching and developing drugs that are also controlled substances; and (v) the costs of compliance with privacy and data protection laws as well as the consequences of non-compliance with respect to research subjects’ personally identifiable information. From an investor perspective, researching a controlled substance will mean a particularly thorough due diligence, so a rigorous legal and compliance infrastructure should be built at an early stage.
Recent regulatory and scientific developments—along with the push from Senators Schatz and Booker—signal that FDA approval for psychedelics may be on the horizon. Drug sponsors and investors alike should carefully consider the legal challenges in developing strategic plans in this exciting area of drug development.
 Letter from Sens. Brian Schatz & Cory Booker to Acting Director Tabak and Commissioner Califf (May 11, 2022), https://www.schatz.senate.gov/imo/media/doc/nih__fda_psychedelic_research_letter.pdf.
 David E. Nichols, Psychedelics, 68 Pharmacological Rev. 264, 266 (Apr. 2016).
 Id. at 275.
 Jennifer M. Mitchell et al., MDMA-assisted therapy for severe PTSD: a randomized, double-blind, placebo-controlled phase 3 study, 27 Nature Med. 1025, 1025 (2021)
 Robin Carhart-Harris et al., Trial of Psilocybin Versus Escitalopram for Depression, 384 New England J. Med. 1402, 1402 (2021).
 Alan K. Davis et al., Effects of Psilocybin-Assisted Therapy on Major Depressive Disorder, 78 JAMA Psychiatry 1, 1 (2021).
 Shalini Ramachandran, Silicon Valley and Wall Street Elites Pour Money into Psychedelic Research, Wall St. J. (Aug. 20, 2020), https://www.wsj.com/articles/silicon-valley-and-wall-street-elites-pour-money-into-psychedelic-research-11597941470.
 FDA approves new nasal spray medication for treatment-resistant depression; available only at a certified doctor’s office or clinic, FDA (Mar. 5, 2019), https://www.fda.gov/news-events/press-announcements/fda-approves-new-nasal-spray-medication-treatment-resistant-depression-available-only-certified.
 Rachel Nuwer, A Psychedelic Drug Passes a Big Test for PTSD Treatment, N.Y. Times (Nov. 11, 2021), https://www.nytimes.com/2021/05/03/health/mdma-approval.html.
 See id.
 A Multi-site Expanded Access Program for MDMA-assisted Psychotherapy for Patients with Treatment-resistant PTSD (EAMP1), NIH, https://clinicaltrials.gov/ct2/show/NCT04438512 (last visited May 16, 2022).
 DEA, Drug Scheduling, https://www.dea.gov/drug-information/drug-scheduling (last visited May 13, 2022).
 See Jennifer M. Mitchell, A Psychedelic May Soon Go to the FDA for Approval to Treat Trauma, Sci. Am. (Feb. 1, 2022), https://www.scientificamerican.com/article/a-psychedelic-may-soon-go-to-the-fda-for-approval-to-treat-trauma/.
 Matt Lamkin, Prescription Psychedelics: The Road from FDA Approval to Clinical Practice, 135 Am. J. Med. 15, 15-16 (Jan. 2022).
 Douglas C. Throckmorton, Dep. Dir. for Reg. Programs, CDER, Researching the Potential Medical Benefits and Risks of Marijuana (July 12, 2016), https://www.fda.gov/news-events/congressional-testimony/researching-potential-medical-benefits-and-risks-marijuana-07122016-07122016.
 FDA, Assessment of Abuse Potential of Drugs: Guidance for Industry (Jan. 2017), https://www.fda.gov/media/116739/download; see also 21 U.S.C. § 811(b)–(c).
 See generally Nat’l Acad. of Sci., Eng’g, and Med., The Health Effects of Cannabis and Cannabinoids: The Current State of Evidence and Recommendations for Research (2017).
 Throckmorton, supra note 16.
 FDA Regulation of Cannabis and Cannabis-Derived Products, Including Cannabidiol (CBD), FDA, https://www.fda.gov/news-events/public-health-focus/fda-regulation-cannabis-and-cannabis-derived-products-including-cannabidiol-cbd#whatare (last visited May 16, 2022).