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Is it Possible to Create an Ethical Psychedelics Company?

The debate around psychedelic patents reflects a deeper question about how to create a business model that puts values before profits.
April 6, 2021, 2:30pm

At a virtual investment conference last week called Psychedelic Capital, the moderator of a session on ethical intellectual property opened the panel by asking, “To patent or not patent? That is the question.”

That certainly is the question that's been hotly debated lately in the psychedelic community through open letters, blog posts, and Youtube videos. And it’s a discussion that’s not going anywhere soon, as the explosion of for-profit psychedelic companies and patent applications raises concerns about ethical and legitimate ways to bring psychedelic drugs and therapy to the masses. 

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The alarm around patents was first sounded, in part, in response to patent applications from mental health company Compass Pathways. Its international patent applications include claims for rudimentary aspects of psilocybin psychotherapy and broad claims for treating a litany of conditions unrelated to mental health. It currently also has three granted patents regarding its synthetic formulation of psilocybin, the active ingredient in magic mushrooms—patents which have been, and will likely continue to be, controversial

But since the outcry around Compass’ patents, the conversation has broadened. The psychedelic community is grappling with what it means to be a successful psychedelic company that is also an ethical one, and how to ensure ethical behavior in others. What started out as debate about what can and can't be patented has morphed into larger exchanges about capitalism, shared ownership, and the ways in which the systems we live in can hinder fair, equitable access to all. On some level, psychedelic companies are having it out over whether it is possible in the United States for a company to have a better world, rather than growth, as its primary goal—and if so, how.

Boiling this endeavor down to “to patent or not to patent” can miss out on the myriad of strategies in between those two options, including the use of an IP commons, creative uses of IP that give back to communities, and making nonprofits more financially self-sufficient through the use of in-house pharmaceutical branches and government-granted data exclusivity periods. We also shouldn't ignore the fact that there are ways a company can behave monopolistically outside of just filing for patents: Exclusionary contracts with researchers, nondisclosure agreements, and attempts to influence legislation around decriminalization and legalization can do the same thing.

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No matter what, advocates, investors, and donors for psychedelics are no longer on the fringes of society, skirting these complex issues. They have to come face to face with how to become part of a mainstream market, and answer the question of whether it's possible to do so according to a set of values many want to maintain. 

When discussing the need for psychedelic patents, Christian Angermayer, a funder of Compass and co-founder of ATAI Life Sciences, wrote in an open letter to psychedelic investor and podcaster Tim Ferriss that patents were necessary because they help deal with the exorbitant costs of putting a drug through clinical trials.

“Given those timelines and amounts needed, it should come as no surprise that investors want to eventually see a substantial return on their initial investment,” Angermayer wrote.

This, according to Angermayer, is the way the game is played, and it's usually done without the ensuing uproar. “Indeed, many drugs based upon natural products have been developed over the last few decades without outrage over commercialization,” Angermayer wrote.


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But the argument that this is the way biotech has always operated and that there's no reason why psychedelics should be any different has started to receive substantial pushback, partly because it rests on false premises.

There has, first, been plenty of outrage over the commercialization of natural products in the past. The most salient example might be The Association for Molecular Pathology v. Myriad Genetics, a 2013 Supreme Court case that ruled that patenting genes was not valid, thereby invalidating hundreds of already-granted patents. 

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Comparing patents today to the past doesn't always track, in any event; patents have had different implications at different points in history, and the concern around aggressive IP strategy today has a lot to do with the fact that there used to be more government policies that encouraged competition—like forcing drug companies to license their patents when they had too large a share of the market. 

After World War II, companies competed to sell penicillin, which helped to drive down its price from $3,995 a pound in 1945 to $282 a pound in 1950. But in 1958 a Federal Trade Commission (FTC) report on antibiotics found that because a handful of companies had a monopoly over tetracycline, its prices had remained higher. The FTC then forced those companies to license tetracycline at lower prices—one example of how government regulators intervened if costs got too high.

In the 1980s, the U.S. began to abandon these policies. “One change was a retreat from antitrust enforcement, which eventually led to a much more concentrated industry,” according to a report from the independent organization Open Markets. “Between 1995 and 2015, 60 pharmaceutical companies merged into just 10.” 

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“Monopolistic companies have a greater ability to raise prices because they don’t face the full pressure of a competitive market,” according to the Open Markets report. “And this applies to all kinds of drugs, branded and generic alike. Between 2010 and 2015, for instance, nearly a quarter of all generic drugs saw at least one price increase of 100 percent or more, and some saw increases of 1,000 percent or more.”

The worry is that these same patterns could, along with other IP-retention practices, trickle into psychedelics. We’re already seeing many patent applications filed for different manufacturing methods of psychedelic compounds. Pharmaceutical companies often do something called “evergreening," which involves making small modifications to a drug, or the process of making a drug, to preserve their patents beyond a 20 year period. It’s not hard to imagine similar behavior with psychedelics. A study from 2018 found that 78% of new drug patents awarded in the past 10 years were for drugs that already existed, but had been altered slightly. Another well-trodden strategy is called “thicketing,” which is when a company floods the patent office with applications, and makes it hard for smaller companies to compete. 

Another common explanation for the necessity for psychedelic patents is that “Patients need to get these substances within their existing healthcare framework, at the place where they live, from a doctor/therapist they trust, paid by a healthcare insurance,” as Angermayer wrote. “The only way to achieve this is by approving them as said as medical drugs.”

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In an email, Compass Pathways' chief communications officer, Tracy Cheung agreed, saying, "Clinical evidence and regulatory approval are also prerequisites for any reimbursement consideration. This means we believe the medical route is the safest and most effective way to get psilocybin therapy (if approved) into the health system, reimbursed, and made available to all who might benefit from it."

But this is a bit of a red herring, especially in the U.S. Insurers are notoriously bad at covering psychotherapy in-network, and so the medical route does not inherently ensure coverage. Nor does it ensure that people have health insurance in the first place, or insurance with low enough deductibles to access coverage. 

Rick Doblin, the founder and executive director of the Multidisciplinary Association for Psychedelic Studies (MAPS), pushed back against the notion that this is how biotech is always done. The first drug developed by a nonprofit organization was an abortion pill approved in 1999, developed by The Population Council with primary funding from the Buffett Foundation. Large sums of money have been raised to develop drugs for parasites in India and hormonal IUDs using nonprofit pharmaceutical companies. 

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And Doblin said that the very existence of both MAPS and the Usona Institute are proof that nonprofits are capable of doing this work without patents. MAPS and Usona are the two major nonprofit organizations in the psychedelic field doing both research and manufacturing. MAPS was founded in 1986, and Usona in 2014—they've moved into phase 3 and phase 2 clinical trials, respectively, and have been able to produce commercial-grade MDMA and psilocybin products at scale.

“MAPS is nonprofit drug development,” Doblin said. “Though we started in 1986 as the first nonprofit pharma, by the time we succeed, we will be following in the footsteps of other nonprofit drug development companies.”

“In so far as commercializing a drug product that is FDA approved through the medical system, it's absolutely true that it requires a tremendous amount of money,” said Ismail Ali, MAPS' policy and advocacy counsel. “The fact that organizations like MAPS and Usona exist, both of which are quite successful, and are well on their way to commercializing these drug products within kind of the mainstream medical system, does show that there's at least some other way. I'm not saying that MAPS is the perfect way or Usona is the perfect way, but there's another way.” 

It is true that nonprofit pharmaceutical companies are't the norm. Outside of philanthropic research organizations, there are just a handful of examples, such as Civica Rx, which partnered with large US hospital systems to provide more affordable generic drugs and essential medications. Another, Harm Reduction Therapeutics, was funded by Purdue Pharma to develop a generic, cheaper form of Narcan. (Purdue’s actions are largely seen as an attempt to compensate for its unethical and illegal behavior around the marketing and selling of opioid drugs.) 

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There are legislative ways to bolster the power of nonprofit pharmaceuticals, like providing breaks on user fees that drug manufacturers have to pay to the FDA, and helping the expensive costs of the supply chain from preventing a nonprofit route from being possible. 

But the only options aren’t just for-profit or nonprofit, and the for-profit versus nonprofit narrative doesn't fully capture the problems some are having with companies like Compass. 

The issues around Compass' applications involve the question of whether their inventions are actually novel or non-obvious, and whether the patent office can adequately assess that given potential inexperience with what knowledge already exists around psychedelics.This is the primary source of concern around Compass’ patent applications, which include claims that others say can be easily found in prior studies. A secondary issue is broad patent claims like those found in Compass’ other international patent applications, which include claims for a wide diversity of conditions outside of mental health, from pyromania to HIV infections, as Psymposia reported.

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Carey Turnbull, a board member of Usona Institute and the nonprofit Heffter Research Institute, has experience with challenging Compass' patents on these grounds, not based on an ideological opposition to patents. Turnbull disputed Compass' first patent application for their synthetic formulation of psilocybin through a company he started called Freedom to Operate (FTO). 

Regarding Compass' recent patent applications, Turnbull said he asked FTO's patent attorneys if it was typical to include so many additional conditions in the language of the application. "I said, ‘What about when esketamine was made into prescription medicine by Johnson and Johnson?'" Turnbull said. "'Did they basically Xerox the entire DSM and say now all of that, too?' And he said, 'No, this is definitely not what you would call standard operating procedure.'”

Compass has previously ruffled feathers by transitioning to a for-profit from a nonprofit and by having scientists sign non-disclosure agreements and contracts that keep them on a tight leash, as reported by Olivia Goldhill in Quartz. Behaviors of Compass and its co-founders have continued to be documented through investigations from Lucid News and Psymposia. As Goldhill noted, “Compass’s alleged tactics are fairly standard for the pharmaceutical industry, but unusual for the psychedelic world.”

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Bennet Zelner, an associate professor of logistics, business and public policy at the University of Maryland’s Robert H. Smith School of Business who is also on the clinical advisory board for the Usona Institute, said that in the end, Compass' behaviors aren’t just aggressive because they’re filing for patents. 

“Compass has attempted to make enormously broad claims and they're doing that in an attempt to monopolize the type of treatment that's rooted in thousands of years of wisdom traditions, as well as an ample amount of research by scientists who allegedly shared knowledge with Compass in the spirit of open science when Compass was still a nonprofit,” Zelner said. “And then they turned around and said that the only way that they can bring this to market is now by pursuing this aggressive strategy.”

In March, David Bronner, the "Cosmic Engagement Officer" of Dr. Bronner’s soap, published another allegation against Compass. “It’s time to publicly call out the for-profit psychedelic pharma company Compass Pathways, for their monopolistic and shady behavior," he wrote. He wasn't referring to patents exclusively, but to information that he said was provided to the Healing Advocacy Fund, the group overseeing Measure 109, Oregon’s psilocybin therapy bill.

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“According to this information, George Goldsmith, CEO and co-founder of Compass, recently started reaching out to several psychedelic researchers at OHSU (Oregon Health & Science University) in an attempt to drum up concern and mobilize opposition to implementing 109 in Oregon,” Bronner wrote. “Compass makes no bones about their opposition to Measure 109 and their intent to keep psilocybin therapy within the FDA medical pharma frame only.”

In response to this allegation, Compass' Cheung wrote, "As we have said to Dr. Bronner and others, we are not attempting to mobilize opposition to implementation of 109. The people of Oregon voted in favor of the measure, reflecting the huge unmet need in mental health care. We respect and understand that, and it is not our intent to do anything to change it. Our mission at Compass is to accelerate patient access to evidence-based innovation in mental health. Measure 109 offers a radically new approach to access to psilocybin therapy. This has the potential to help millions of people but also brings challenges and questions about how it will be implemented to ensure safety and equitable access to those in need." 

In a statement that Turnbull provided exclusively to Motherboard, he outlined his views on Compass’ patents and behavior, and how FTO isn't done trying to challenge their patents—they're just getting started. 

Turnbull wrote that he doesn’t object to Compass manufacturing and distributing psilocybin for medical uses, but that that’s not the full story. “Compass has used their resources to try to prevent anyone but themselves from manufacturing and distributing psilocybin. That’s the rub.” 

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You can read his full statement below. 

Turnbull said that FTO will be doing research to “establish what I know to be true: there can be no patent on psilocybin as a substance, nor on the known methods for making it or using it medically ...There are an almost infinite number of novel contributions to be made to the future of psychedelic science. That there is a molecule named psilocybin and that it can be useful in treating depression is not one of them.”

In response, Cheung wrote that, "Our goal is not to be the exclusive provider of psilocybin. We seek patents so we can protect the investment we make when inventing new products or processes. Our patents do not cover naturally occurring mushrooms, they do not prevent others from creating different solutions for their own psilocybin synthesis, nor do they restrict research in this field...To be clear, we are not attempting to patent room décor, soft furniture, listening to music, or any of the individual items pulled out of context from our patent applications. We seek patents that protect our investment in our innovation, which includes our drug substances and how they are used." 

Like Turnbull, many of the major figures in the psychedelic community say they’re not against patents for truly novel inventions regarding psychedelics. Doblin, during the Ethical IP panel, said that though MAPS has had an anti-patent strategy, it is still deciding whether or not it is “ideologically opposed” to patenting.

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Doblin said MAPS will not patent its treatment manual, where they outline their therapeutic methods—that’s all freely available online. But will it someday decide to patent its own ways of manufacturing and encapsulating MDMA if it comes up with a actually novel way to do it? He doesn’t yet know. It's not off the table. 

Even without aggressive behavior and contentious patents, there’s still the issue of how much any IP will influence cost and accessibility. These concerns aren’t just the byproduct of a new-agey psychedelic mindset. The U.S. in particular has a problem with drug affordability, especially since health insurance is so expensive and tied to employment, with no universal healthcare option. Americans spent $535 billion on prescription drugs in 2018—a 50% jump from 2010. 

How to balance the desire for access and the reality that psychedelic research and production costs money is difficult; this will be the tightrope that many organizations will be walking in the next few years. Doblin said that while MAPS has raised over 100 million dollars through philanthropy, the rise of for-profit companies challenges that. 

“Now it’s even harder to raise philanthropic funds because so many people want to invest,” Doblin said. “Our challenge is to demonstrate how nonprofits operate more for the public benefit than for profits—and are still strategically worthy of support.”

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One way MAPS is looking to be more self-sustainable is that it currently owns the MAPS Public Benefit Corporation (MAPS PBC). If it gets FDA approval for MDMA, this entity will market the prescription use of MDMA-assisted therapy for PTSD, and all profits will be cycled back to research and MAPS' other missions. 

MAPS will also take advantage of a period of data exclusivity granted by the FDA. Data exclusivity means that no one can use MAPS’ data to market a generic in the US for five years—but unlike a patent, this mechanism doesn’t stop others from generating their own data. 

While speaking on the panel, Doblin said that another main strategy going forward is to make prior research and knowledge about psychedelics more available to prevent bad patents from being granted. But he floated the idea that in the long term, it might make sense to extend the period of data exclusivity in the U.S., perhaps through new legislation. 

“It is true that getting patents are necessary to receive venture capital funding,” Ali said. “That's true because of the way venture capital works. But I don't necessarily think it's true that a venture capital-backed health care model is the only way to treat people or the only way to help people. I think that that's not true.”

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There are other ways of finding a middle ground between a nonprofit and anti-patent strategy on the one hand, and a for-profit one that aggressively claims IP on the other. One is an IP commons, usually created when it’s beneficial for those working in a field to be able to share technology; in this model, companies create a patent pool where they contribute their IP to other members of the commons. 

There are different ways an IP commons can be structured, explained Graham Pechenik, a patent attorney at Calyx psLaw, a firm newly dedicated to psychedelic patents. But at heart, an IP commons is still different from having something purely in the public domain, and would help patent holders retain shared control over licensing.

An IP commons could license its IP to other companies that are aligned with its values, using something called a morals clause. For example, before joining an IP commons or before getting a license for psychedelic treatments, parties could be asked to agree to the North Star Ethics Pledge, a statement created to try and establish a set of core values that the psychedelic field would follow. 

A side effect would be that it would be harder for a single company to lock up licenses. “For instance, one company couldn't get an exclusive arrangement with every clinic because they're the first ones to license those clinics,” Pechenik said. 

There are also creative ways that patents can be use, so that their only function isn’t to be exclusionary. For example, patents could be securitized and used as collateral for microloans to give to therapists to start businesses, Pechenik said, or to further other goals in the community. 

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An IP commons could also help companies remain competitive in the face of other companies still pursuing more aggressive strategies. “Part of why I think an IP commons would be beneficial is it can bring together a sufficient number of companies to really create a critical mass that's capable of changing the broader system,” Pechenik said. “If it’s just a number of isolated companies, it may be harder because there is, for better or worse, a competitive advantage in the broader capitalist system to be operating under a purely profit-driven motive. It's helpful to think of a commons also as being sort of a mutual defense organization.”

Another way for for-profit companies to gain trust while they file for patents would be to create open source prior art repositories, like the one that patent lawyer David Casimir is working on called Porta Sofia. Pechenik said that psychedelic companies could do this work on their own by agreeing to an open source "Information Disclosure Statement. (This is a document companies give the patent office that contains all the prior research on psychedelics that they’re aware of.) 

“Basically it would be doing the work that Casimir is doing in an adversarial sense, affirmatively—to say, ‘We don't want to have patents that are granted that cover anything in the prior art. So we're going to actually tell the patent office everything that everybody knows about,'"  Pechenik said. 

Ali said that additionally, companies could find ways to support decriminalization efforts, rather than trying to block every route of access beside the one that gives their patents power. “Christan [Angermayer] said in his blog recently that these big companies won't knock on your door and prevent you from growing your mushrooms,” Ali said. “Sure, that might be true. But I’m not worried about the companies knocking on my door. I'm worried about these companies creating coalitions that they change policy that leverages policy in a way that benefits them and not the other people."

Ali said that MAPS is working with FDA and the DEA to show that MDMA is efficacious for treatment for PTSD, but that it also supports efforts to fully decriminalize and remove criminal penalties for home growing and personal-use psychedelics. 

“Some might argue that our policy strategy is antithetical to a commercial domination strategy because we're actually undermining our own market by saying, 'No we actually shouldn't be the only way that you can get MDMA in the future,'” Ali said. “But we would actually love to see other kinds of legally regulated systems that provide for harm reduction and education.”

Some companies are trying to walk this middle path. Journey Colab, a company that is developing a synthetic version of mescaline, recently published a statement on its take on IP. “Journey Colab’s approach is not business as usual, and requires the courage to chart a new course—a ‘third way’ to develop psychedelics that is neither not-for-profit nor traditional capitalism,” it wrote. 

The company wrote that it doesn't believe patenting novel inventions is “inherently wrong,” nor is taking advantage of a data exclusivity period. When it patents any new inventions, it wrote, the goal is both to return money to investors, and to “share that wealth with  Indigenous communities, groups working to conserve psychedelic ecology, and other stakeholders who will be benefitted via the Journey Reciprocity Trust.”

These kinds of statements and business models reflect how the debate around the commercialization of psychedelics is, on a deeper level, a debate around capitalism—and how to create companies where financial profit is not the core objective. 

Time will tell if that kind of execution is possible, especially competing in a market where profit usually is the number one priority. But Zelner said it's worth trying. The side effects of living in a capitalistic, profit-driven, society ridden by wealth disparities contribute to the mental health issues psychedelics treatments are trying to address, Zelner said. “If you just step back for a second, it seems paradoxical to employ these types of practices in an effort to alleviate mental suffering that these types of practices are arguably contributing to it.” 

But Turnbull thinks it's not necessary to take on the whole foundation of capitalism in order to find an ethical and legitimate way to develop psychedelic therapy. “I think that to be virulently anticapitalist is a little naive. I’m not one of those people who's down on capitalism or its mechanisms," he said. 

No matter what your feelings on capitalism, at the very least, there should be an acknowledgment that a future of endlessly challenging patents and fighting over licensing will be expensive, time consuming, and, ultimately a hindrance to bringing psychedelic therapies to consumers in a safe and effective way. To avoid that will take some innovative thinking. 

"The line of demarcation [in my opinion] is not profit vs non-profit," Turnbull wrote. " It’s never compromising the mission for personal gain. I know Compass says, 'we have to do it this way' or 'this is the way it is done in this industry.' But that’s not true."

Follow Shayla Love on Twitter.