Navigating the Maze of Psychedelics Therapeutics

Growing Disparities Between Federal and State Laws

The legal landscape surrounding psilocybin and MDMA regulation, however, can be somewhat of a minefield for health lawyers and healthcare providers alike. First, there is already an ever-growing disparity between federal and state regulations, not too different from the disparities in marijuana regulation. On the federal front, psilocybin and MDMA are still classified under Schedule I of the CSA, the statute’s most restrictive schedule, which is reserved for “the most dangerous substances [that possess] no redeeming value as medicines.” Indeed, as far as the federal government is concerned, “doctors may never prescribe” substances classified in Schedule I. Paradoxically, however, the Food and Drug Administration (FDA) granted “breakthrough therapy” status for MDMA-assisted psychotherapy in 2017, and twice in 2019 granted the same status for psilocybin use for treatment-resistant depression.

Federal Law: The CSA

Classification under the CSA is a complex administrative process. Under the statute, the U.S. Attorney General is empowered to reschedule substances based on eight factors, and the Attorney General has historically delegated this authority to the Drug Enforcement Administration (DEA). Although reclassifications from Schedule I have historically been sparse, the statute’s controlling test is whether a drug or substance has no “currently accepted medical use.” Put differently, if a drug or substance has a “currently accepted medical use,” it cannot legally remain in Schedule I, and the DEA must initiate rulemaking proceedings to reclassify it under a less restrictive schedule. Although the DEA’s present interpretation of “currently accepted medical use” is an ominous five-part conjunctive test, federal courts have held that FDA interstate marketing approval of a drug meets this test’s requirements per se. This point is significant because the Multidisciplinary Association for Psychedelics Studies (MAPS) completed a Phase 3 clinical trial for MDMA in 2022, and Compass Pathways released Phase 2b trial results for psilocybin in 2021, with a Phase 3 trial expected to begin in late 2022. This means that if the companies involved gain FDA approval for these treatments, it is plausible, even likely, that the DEA may reschedule MDMA and psilocybin to Schedule II or Schedule III (albeit under certain conditions).

State Action Not Uniform

On the state front, developments are unfolding rapidly but in markedly different ways. The first approach, chosen by Denver, Colo., Oakland, and Santa Cruz, Calif., and Washington, D.C., is to completely decriminalize possession of psilocybin. The second, adopted by Oregon, is to legalize psilocybin in therapeutic settings only. Yet another approach, Texas’s and Connecticut’s, is the commissioning of state health departments to evaluate the therapeutic efficacy of psilocybin and MDMA in the treatment of PTSD, depression, anxiety, migraines, and other mental and physical health conditions. Eleven other states are considering adopting one or some combination of these approaches.

Legal Issues in Practice

Health law attorneys may encounter psychedelics regulation issues in various contexts. These include patent law issues, preemption questions, health insurance concerns, and federal enforcement under the CSA. Additional issues may arise as the legal landscape evolves.

Patents

Investors are clamoring to get a piece of the pie by seeking patents on psilocybin formulations. In fact, the promising medical research fueled four companies — MindMed, Compass Pathways, Atai Life Sciences, and Field Trip Health — “to monetize psychedelic therapy” and list their stocks on NASDAQ; in Canada, more than two dozen such companies are already publicly listed, with an estimated collective value of more than $4.5 billion. Generally, these companies reason that patents are necessary to protect their innovations and cover their commercialization costs. Although legal commentators question the ethical and social implications of the patent race, legal counsel should nevertheless be aware of this trend because it is expected to both continue and grow.

Preemption Issues

Potential conflicts between state and federal regulation are all but sure to collide, raising preemption questions. Although the U.S. Supreme Court has held that the CSA is a valid exercise of federal power, it has not squarely addressed whether it preempts state law when a state law conflicts with the CSA’s provisions. In this aspect, the problems that these conflicts present that may be familiar to some attorneys with experience in cannabis law — such as banking, interstate transportation, and commercial issues — may make it, in jurisdictions where psilocybin (and possibly in the future, MDMA) is now legal, “physically impossible to comply with both state and federal law.”

Additionally, preemption questions are not always cut and dry. The U.S. Supreme Court’s current test does not permit federal preemption of the states’ “historic police powers” unless “that [is] the clear and manifest purpose of Congress.” Thus, Congressional purpose is the “ultimate touchstone” in any preemption analysis. In cases where Congress permits a private activity that a state had banned, the preemption analysis is generally straightforward. However, in the opposite situation, where Congress bans a private activity that a state permits, the analysis is more difficult because “both the legal status and practical import of state law are far less obvious.” Moreover,  the subject matter of such preemption questions can be very broad, spanning “the full range of criminal and civil contexts where federal and state jurisdiction overlaps, including public health and safety, civil rights protections, and products liability.” Even though the Supreme Court has not addressed the question of the CSA preemption directly, lower federal courts have typically found that the CSA does preempt state laws, most notably in the employment law context under the “implied preemption” theory.

Oregon’s psilocybin law may skirt the preemption question if it does not include language promoting psilocybin sale or use because the CSA expressly prohibits the sale and distribution of psilocybin. That approach would mirror many other state laws that legalized marijuana but avoided statutory verbiage that could potentially conflict directly with the CSA’s blanket prohibition on marijuana. The language is yet to be adopted, however, because Oregon voters approved the ballot measure in 2021, and the adoption of final rules is not expected until the end of 2022. The final adopted language is significant because, according to Mason Marks, a member of Oregon’s Psilocybin Advisory Board, “[f]or better or worse, what inevitably happens is these rules will be cop[ied] and pasted to states around the country . . . . It’s already happening.”

Health Insurance

Attorneys, healthcare providers, and patients will have to grapple with the question of health insurance coverage for psychedelic therapies. Widespread insurance coverage is not currently on the horizon, and insurance coverage is a particularly acute problem because the expensive costs associated with psychedelic treatment may render the psychedelic treatment option cost-prohibitive for most patients. According to Rosalind Watts, a psychologist who was formerly clinical lead on the psilocybin for depression study at Imperial College London, psilocybin treatment, unlike traditional antidepressants, is more than just selling a “box of pills.” Rather, it is most effective in combination with psychotherapy, which easily causes costs to rise to thousands of dollars for a single patient. Insurers are unlikely to embrace these therapies soon because they are not yet FDA-approved.

Federal Enforcement of the CSA 

The enforcement approach the Department of Justice (DOJ) ultimately chooses vis-à-vis perceived violations of the CSA’s blanket prohibition on MDMA and psilocybin is also of particular importance. The Biden-Harris Administration’s White House Office of National Drug Control Policy (ONDCP) announced in 2021 that it intends to promulgate rules simplifying the registration process for scientists to access Schedule I drugs to the same level as the current process for Schedule II drugs. The DEA and the National Institute on Drug Abuse (NIDA) both expressed their support for the proposal. These steps suggest that the DOJ may adopt a “hands-off” approach to enforcement of state-sanctioned violations of the CSA relating to the use of psilocybin by individuals and organizations.

Future administrations, however, may chart a different path, and the pendulum might swing the other way. For example, federal enforcement of marijuana-related violations has been “wildly inconsistent” across administrations. Under the Clinton Administration, the DOJ’s position was that “the CSA did not apply to Schedule I drugs such as marijuana in states with medical use laws.” The George H. W. Bush Administration, however, reversed course, adopting the position that any personal possession of marijuana constituted a criminal violation of the CSA, permissive state law notwithstanding. The pendulum then swung back towards nonenforcement under the Obama Administration, where the DOJ decided not to allocate any resources towards enforcement of marijuana violations, and again towards enforcement under the Trump Administration, under which the Obama policy was rescinded. Attorneys should thus be wary that the current administration’s apparent acceptance and support of psychedelics therapeutics research may not continue for the foreseeable future, depending on who occupies the White House in 2024 and beyond.

Ultimately, Congress has the power to reschedule psilocybin and MDMA. Such legislation would moot many of the problems described in this article. However, efforts to change the law at the federal level are reminiscent of strained efforts to reschedule marijuana over the last decade. For example, the U.S. House of Representatives overwhelmingly in 2021 rejected by a margin of 91-331 an amendment by Representative Alexandria Ocasio-Cortez (D-NY) designed to stimulate research into the therapeutic potential of psychedelics. On the marijuana front, the House twice passed legislation legalizing marijuana, but the bills have yet to pass the Senate and become law. The strained history of marijuana legalization suggests that psychedelics will remain in Schedule I for the foreseeable future, leaving healthcare providers and their counsel to navigate the growing web of conflicts that are already arising between state-sanctioned psychedelics use and the CSA’s proscription of them.

Relationship to Cannabis Law

On the positive side, health law attorneys can draw on the lessons and experience of cannabis lawyers instead of reinventing the wheel. For example, the American Bar Association (ABA) recently published Cannabis Law: A Primer on Federal and State Law Regarding Marijuana, Hemp, and CBD, the first treatise “to guide cannabis lawyers along the full continuum of potential legal needs challenging the industry.” Because psilocybin and MDMA are, like marijuana, on Schedule I of the CSA, the legal dimensions of the former are likely to run parallel to the latter in many, if not most, aspects. Thus, health lawyers facing novel psychedelic legal questions should consult cannabis law references in circumstances where the underlying legal questions are substantially similar or even identical.

Advice to Legal Counsel

The legal landscape surrounding psilocybin regulation is evolving quickly. Although the state and local jurisdictions that have loosened restrictions on psilocybin have not enacted similar reforms for MDMA, that may also change quickly if the FDA grants approval for MDMA-assisted psychotherapy. Legal counsel whose clients’ interests are affected by psychedelics regulation would be well advised to monitor the legal developments in this area. Interested counsel can get ahead of the curve by keeping a close eye on the final adopted language of Oregon’s regime because other jurisdictions may adopt similar, even identical, language in their own jurisdictions. Finally, counsel should be mindful that federal enforcement can be subject to the shifting sands and predilections of executive branch officials and policies.