Psychedelics & Drug Development — Key Considerations for Healthcare Industry and Life Sciences Companies as Congress Seeks to Tap Into Psychedelics’ Therapeutic Potential

On March 8, 2023, US Sens. Cory Booker (D-NJ) and Rand Paul (R-KY) introduced an updated version of the Breakthrough Therapies Act, and US Reps. Nancy Mace (R-SC) and Madeleine Dean (D-PA) introduced companion legislation in the House. On May 25, 2023, US Reps Earl Blumenauer (D-OR) and Bill Johnson (R-OH) cosponsored the companion legislation in the House. If passed, the bipartisan bill would amend the federal Controlled Substances Act (CSA) to enable the Drug Enforcement Administration (DEA) to reclassify from Schedule I to Schedule II drugs and biologics, including therapeutic psychedelics, that receive breakthrough therapy designation or are authorized for expanded access by the US Food and Drug Administration (FDA).

Therapeutic psychedelics are Schedule I substances and include LSD, MDMA, and psilocybin. According to the bill’s sponsors, the “legislation [would] remove regulatory hurdles that inhibit research and compassionate use access to potentially lifesaving treatments that are heavily restricted by Schedule I of the [CSA].”

The bipartisan effort behind the Breakthrough Therapies Act signals the federal government’s evolving position on psychedelic substances, their therapeutic potential, and access. This evolution, discussed in greater detail below, presents an important opportunity for investors, clinical trial sponsors, life sciences companies, and investigators. As such, we have identified several key questions that stakeholders should consider as they develop and innovate in the psychedelic space.

What Is the Difference Between a Schedule I and a Schedule II Drug?

A Schedule I drug is a drug with “a high potential for abuse . . . no currently accepted medical use [and] a lack of accepted safety for use . . . under medical supervision.” CSA § 202(b). Schedule II drugs are drugs with “currently accepted medical use with severe restrictions.” Id. Given their “accepted medical use,” it is far easier to develop a Schedule II drug compared to a Schedule I drug.

What Diseases and Conditions Can Potentially Benefit From Therapeutic Psychedelics?

A growing body of clinical evidence supports therapeutic psychedelics’ potential in the treatment of addiction, depression, post-traumatic stress disorder (PTSD), and other neurologic diseases. Healthcare and life sciences companies are increasingly conducting, or seeking to conduct, clinical research on Schedule I psychedelics. For example, the National Academies of Sciences, Engineering, and Medicine held a deep-dive March 2022 workshop, “Exploring Psychedelics and Entactogens as Treatments for Psychiatric Disorders.” In addition, Sens. Booker and Paul and Reps. Mace and Dean pointed out in their respective press releases that therapeutic psychedelics have shown “exceptional promise in treating an array of mental health conditions.”

In response to the increased demand for Schedule I psychedelics to conduct research and development, DEA significantly increased 2023 aggregate production quotas for the manufacturing of 2-CB, DMT, MDMA, LSD, psilocybin, psilocin, 5-MeO-DMT, and other Schedule I psychedelics. Generally, the aggregate production quota established in the final rule reflects DEA’s estimates of the medical, scientific, research, and industrial needs for the upcoming year. However, DEA has the authority to adjust the aggregate production quota values if those needs change (e.g., additional research protocols from DEA-registered researchers or additional quota applications from DEA-registered manufacturers may warrant increased aggregate production quotas).

What Are the Key Provisions of the Proposed Breakthrough Therapies Act?

The current version of the Breakthrough Therapies Act:

• Proposes amending Sections 102 and 201 of the CSA to establish an administrative process by which a current Schedule I drug that receives a breakthrough therapy designation by FDA or is authorized for expanded access by FDA can be reclassified as a Schedule II drug.
• Proposes that such drugs could be rescheduled to Schedule I pursuant to an expedited process if the drug’s breakthrough therapy designation is rescinded or the drug is no longer authorized for expanded access and FDA recommends such rescheduling.

The original version of the Breakthrough Therapies Act introduced on November 17, 2022, also:

• Proposes amending Section 303 of the CSA to establish an alternative registration process for Schedule I research. Researchers with existing Schedule I or II research registrations with DEA could commence research activities involving Schedule I drugs 30 days after sending a notice to DEA with the requisite information, including but not limited to the chemical name of the substance; the quantity of the substance to be used in the research; and demonstration that the research is pursuant to an Investigational New Drug Application (IND) or is conducted by the US Department of Health and Human Services (HHS) or the US Department of Veterans Affairs (VA), or is funded by HHS, the VA, or a state health department, and that the researcher is authorized to conduct research on the substance under applicable state law. Researchers without Schedule I or II research registrations with DEA could send a notice to DEA with the requisite research information (above), and DEA would treat such notice as an application for a research registration. In these cases, DEA would have to render a decision within 45 days. 
• Proposes streamlining DEA registration and inspection requirements. Namely, it would amend Section 302 of the CSA to remove the requirement for separate DEA registrations for additional researchers at the same institution; allow a single registration for related research sites; remove inspection requirements in certain situations; allow in some cases continued research on substances newly added to Schedule I; and treat as coincident to research (and not requiring a manufacturing registration) certain manufacturing activities, such as processing a substance into extracts, tinctures, or other forms of the substance or dosage form development studies to support an IND.
• Proposes amending Section 303 of the CSA to require transparency in cases where DEA determines that an application to conduct research with a controlled substance should be considered under a different process or subject to different criteria compared to other controlled substances in the same schedule. Specifically, the bill proposes requiring DEA to make public, including by posting on its website, (i) the identities of all controlled substances for which such determinations have been made, (ii) the process and criteria that should be applied to applications to conduct research with such controlled substances, and (iii) how such processes and criteria differ from those applicable to applications to conduct research with other controlled substances in the same schedule.

How Does a Drug or Biologic Obtain Breakthrough Therapy Designation From FDA?

As a part of FDA’s expedited drug development programs, breakthrough therapy designation affords a sponsor the opportunity to expedite the development and review of a drug or biologic that is intended to treat a serious condition and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over available therapy on a clinically significant endpoint or endpoints. Importantly, breakthrough therapy designation requires at least some clinical evidence. To date, FDA has issued breakthrough therapy designations for two Schedule I psychedelic therapies—psilocybin-assisted therapy to treat severe treatment-resistant depression (2018), and MDMA-assisted therapy to treat moderate to severe PTSD (2017).

What Is Expanded Access?

As discussed in our earlier Client Alert, expanded access is the use of an investigational new drug to treat a patient outside of a clinical trial. Expanded access is also often referred to as “compassionate use,” “preapproval access,” or “early access.” Critically, sponsors are not required to provide expanded access, but many choose to do so voluntarily. FDA views expanded access as an “option of last resort” and advises patients seeking access to investigational therapies to enroll in clinical trials whenever practicable. There are three categories of expanded access: individual patients, intermediate-size patient populations, and treatment IND or treatment protocols.

FDA generally will grant a request for expanded access if, in addition to the specific requirements for each type of expanded access, the following criteria, set forth at 21 CFR § 312.305, are met:

• Expanded access is being sought for a serious or immediately life-threatening illness or condition;
• There is no comparable or satisfactory alternative therapy;
• The potential benefit justifies the potential risks of the treatment, and those risks are not unreasonable in the context of the disease or condition being treated; and
• Providing the drug will not interfere with or compromise development for the expanded access use.

What Are Some Key Limitations in the Proposed Breakthrough Therapies Act?

First, the bill’s reliance on breakthrough therapy designation as a trigger means that early clinical trials will continue to be subject to the burdensome two-step regulatory process required for the clinical development of a Schedule I drug. All Schedule I drug candidates, including therapeutic psychedelics, are subject to the dual oversight of FDA and DEA. This means a sponsor seeking to develop a therapeutic psychedelic must first design a clinical study and seek FDA agreement. Only when FDA has signed off on a clinical study can the sponsor seek clearance from DEA to conduct such study. Accordingly, clinical research on therapeutic psychedelics is subject to unique and lengthy delays. The current bill generally would not address the delays for early clinical trials. This is because the bill’s benefits accrue to drug candidates with breakthrough therapy designation, but clinical evidence is required for such a designation. As such, sponsors would continue to be subject to dual oversight delay in their earliest clinical trials, when the risks are often greatest.

Second, expanded access is not intended to significantly increase access to investigational drugs. Instead, FDA’s expanded access authority is seen as a limited means to provide early access to investigational drugs where the potential benefit justifies the potential risks of treatment. Practically speaking, expanded access also follows initial clinical evidence — so this aspect of the proposed legislation would not generally be expected to create an earlier trigger for seeking reclassification to Schedule II. In addition, developers may be reluctant to support the supply of investigational candidates for expanded access due to liability exposure as well as the risk of adverse safety or benefit findings that could skew the view of those candidates by the medical community or investors.

Finally, FDA requires drugs and biologics to be approved before they are made widely available to patients. Therefore, even if an investigational drug is offered through expanded access, a drug sponsor must nonetheless complete clinical trials and obtain approval from FDA before these potentially lifesaving options are widely available.

What Is the Status of Therapeutic Psychedelics at the State and Local Level?

In November 2020, Oregon became the first state to move to legalize and regulate therapeutic psilocybin sessions for adults 21 years old and older through the Oregon Psilocybin Services Act. In December 2022, Colorado voters passed Proposition 122, or the Natural Medicine Health Act of 2022, which decriminalizes the personal possession and use of psilocybin in Colorado and allows residents to legally grow psilocybin mushrooms. Proposition 122 also creates a framework for psilocybin and potentially other “natural medicines” to be used in mental healthcare and therapeutic settings; however, Colorado will not begin accepting applications for necessary licensure until late 2024.

At the city level, in September 2022, San Francisco joined a growing list of cities, including Ann Arbor, Denver, Detroit, Oakland, Seattle, and Washington, DC, that have decriminalized the personal adult use of plant-derived psychedelics. Despite these changes at the state and city level, therapeutic psychedelics remain classified as Schedule I drugs under the federal Controlled Substances Act, and thus the use of such substances (with the exception of therapeutic psychedelics administered in an FDA-authorized clinical trial) remains illegal under federal law.

What Regulatory Changes Are on the Horizon for Therapeutic Psychedelics?

With the reintroduction of the Breakthrough Therapies Act in March 2023, there appears to be momentum to develop a legal-regulatory framework for therapeutic psychedelics. Congress also announced on November 17, 2022, the bipartisan Congressional Psychedelics Advancing Clinical Treatments Caucus (the PACT Caucus). The PACT Caucus will focus on exploring psychedelic research to alleviate the US mental health crisis.

Social equity and sustainability are also increasingly being considered in the context of therapeutic psychedelics. This is in part because commercialization of therapeutic psychedelics could pose a threat to the sustainability of plant-derived psychedelics and those Indigenous communities that are the keepers and utilizers of those plants. DEA’s final rule on 2023 production quotas noted that these Indigenous communities have used certain entheogen plants for therapeutic purposes for centuries and welcomed further engagement between DEA and Indigenous communities. Many regulators and stakeholders recognize that a failure to include the Indigenous communities in the development of regulatory frameworks would be a missed opportunity and could have important negative consequences. For example, Colorado’s Natural Medicine Health Act of 2022 requires that the state’s Natural Medicine Advisory Board, on an ongoing basis, review and evaluate sustainability issues related to natural medicine and impact on Indigenous cultures.

On the international front, Australia recently became the first country to legalize the prescription of psilocybin and MDMA to treat treatment-resistant depression and PTSD, respectively, in a controlled medical setting. The Therapeutic Goods Administration made the decision to down-schedule psilocybin and MDMA for those two specific conditions following the review of public comments, a report from an independent expert panel on the two drugs, and advice from the Advisory Committee on Medicines Scheduling. For all other uses, the two drugs remain scheduled as prohibited substances, which restricts their use to clinical trials. In addition, the European Medicines Agency recently discussed its efforts to engage with researchers and companies developing psychedelic therapies for medical use, including by holding a workshop on the topic in Q3 or Q4 of this year. These developments indicate the growing acceptance of therapeutic psychedelics internationally.

Based on the recent regulatory changes at the state and local level and the efforts by the federal government and foreign agencies noted above, investors, clinical trial sponsors, life sciences companies, and investigators operating in the psychedelics industry may have reason to be optimistic about the future regulatory landscape for therapeutic psychedelic product candidate development, approval, and commercialization. The proposed Breakthrough Therapies Act is one such reason. Currently, however, stakeholders must still comply with significant regulatory requirements in order to carry out research and development on therapeutic psychedelics. We will continue to monitor the bill’s progress and other federal government activity on this topic.