Money is flooding into the burgeoning psychedelic medicine industry, as numerous startups vie to lead the way in selling mind-expanding drugs for conditions such as depression and addiction. Despite the federal illegality of psychedelics, companies are scrambling to patent key ingredients from substances like magic mushrooms and ayahuasca, long used by underground communities and indigenous cultures.

Wall Street’s sudden enthusiasm for hallucinogens has sparked concerns among longtime advocates and philanthropists who had envisioned making affordable psychedelics widely accessible. Instead, there is a growing realization that drugs like psilocybin and LSD may become expensive, specialty medications controlled by a handful of biotech companies.

Carey Turnbull, an investor and philanthropist, expressed disappointment, stating, “All the air is getting sucked out of the room by these for-profit companies who say, ‘Wow, this stuff is awesome, if I could patent it I’d make a fortune.'”

Despite significant donations from Turnbull and his wife to fund psychedelic research, the industry is now witnessing a shift towards challenging what advocates consider frivolous patents filed by profit-driven companies entering the field.

Most psychedelic startups are backed by venture capitalists and tech investors seeking the next disruptive industry. Atai Life Sciences, one of the largest companies, is backed by PayPal billionaire Peter Thiel, reflecting the growing enthusiasm for psychedelics in Silicon Valley. Around 50 such companies are now publicly traded, covering psychedelic drugs, retreats, and training programs. Analysts predict the industry could exceed $10 billion within the decade.

However, recent investor pullback highlights the challenges of turning illegal drugs into profitable medicines. Atai, for instance, laid off 30% of its staff after a depression treatment failed in a key study. Stocks across the industry have dropped significantly, with some smaller companies restructuring or declaring bankruptcy.

Chris Yetter of Dumont Global commented, “They’re in this hype cycle, but then the reality of running a biotech company catches up with you.”

The financial strain has also affected the Multidisciplinary Association for Psychedelic Studies (MAPS), a leading nonprofit in the field. While MAPS has operated for over 30 years with funding from wealthy individuals, including billionaires like Steven Cohen and Rebekah Mercer, it recently had to take on private investors for its pharmaceutical arm, now named Lykos Therapeutics.

Rick Doblin, founder of MAPS, acknowledged the challenges, saying, “We’re a victim of our own success. It’s heartbreaking because I had hoped to go the whole way with philanthropy, but I was unable to raise the mega millions to do that.”

Psychedelics don’t fit the traditional blockbuster drug model, lacking exclusive, patent-protected status. The drugs currently under study, whether synthetic like LSD or naturally occurring like psilocybin, can’t be patented on their own.

Additionally, administering these drugs involves extensive therapy sessions under professional supervision, driving up costs. Analysts estimate treatment expenses ranging from $5,000 to $10,000, raising concerns about equitable access.

Psychedelic executives argue that robust intellectual property, achieved through extensive clinical studies and patents, is necessary to ensure broad and equitable access. Companies like Compass Pathways are aggressively pursuing patents, drawing criticism from some researchers who find the efforts excessive.

Dr. Jeffrey Lieberman of Columbia University warned of the rush to innovate, emphasizing the need to answer fundamental questions about psychedelics. He cautioned that rushing the process could lead to a backlash similar to the federal ban in the 1970s, which halted psychedelic research for decades.

“Psychedelics could have tremendous benefit for treating a number of illnesses,” Lieberman said. “But if we mess it up and rush the process, these drugs are going to get banned again, and you lose that opportunity.”