In November 2022, less than 12 months ago, we explored breakthroughs in the controlled use of psychedelic drugs in advanced medical therapies. We noted in that piece the legal hurdles that clinical researchers and businesses faced in advancing research into the use of psychedelic substances in the treatment of mental health disorders .
Less than 3 months later, the Australian Therapeutic Goods Administration (TGA) surprised the world when it announced that Australia would become the first country to approve the use of two psychedelic substances — 3,4‑methylenedioxy‑methamphetamine (MDMA) and psilocybin — in medical treatment. The rescheduling of these medicines into Schedule 8 of the Poisons Schedule (as controlled drugs) means that, from 1 July 2023, they can be prescribed by approved psychiatrists for use in treating patients with particular mental health conditions.
This major shift in the regulation of psychedelic substances is now in effect.
This Insight will explain what you need to know about this new regulatory framework, reactions to the TGA’s move and developments in the regulation of psychedelic substances around the world since the TGA’s announcement.
The new Australian regulatory framework for MDMA and psilocybin
As we previously outlined here, from 1 July 2023, MDMA and psilocybin will be included in Schedule 8 of the Poisons Standard (Controlled Drugs), meaning that they will be able to be supplied on prescription by psychiatrists approved by the TGA (Authorised Prescribers) for use in treating patients with particular mental health conditions.
Authorised Prescribers will be permitted to prescribe:
- MDMA for post-traumatic stress disorder (PTSD) and
- psilocybin for treatment-resistant depression (TRD).
To become an Authorised Prescriber, registered psychiatrists must have completed a Fellowship with the Royal Australian and New Zealand College of Psychiatrists (RANZCP). Because neither MDMA nor psilocybin are on the list of medicines with an established history of use, Human Research Ethics Committee (HREC) approval is also required.
Authorised Prescribers who access MDMA and psilocybin for therapeutic purposes must:
- provide six-monthly supply reports to the TGA that include the number of new and total patients treated in the reporting period
- report adverse events or product defects
- supply the products directly to patients under their immediate care and not to other practitioners
- comply with State and Territory regulations and requirements relating to possession and supply of Schedule 8 products
- comply with treatment protocols that have been established in conjunction with the HREC, and
- comply with the import requirements, specifically:
- importers require an exemption, approval or authority under the Therapeutic Goods Act 1989 (Cth) and a licence and/or permit to import from the Office of Drug Control under the Customs (Prohibited Imports) Regulations 1956 (Cth) and
- if the Authorise Prescriber is not the importer, they must provide a copy of their TGA approval letter to the importer.
MDMA and psilocybin are not listed on the Pharmaceutical Benefits Scheme (PBS) and so are not eligible for public reimbursement. They are also not currently funded by any private health insurers. However, businesses are currently engaging with health insurers to generate health economic data to inform future private insurance cover.
Like other prescription medicines (and unapproved therapeutic goods), products containing MDMA and psilocybin must not be advertised to the public. Criminal and civil penalties apply for breaching this prohibition.
Reactions to the regulatory shift and developments around the world
The TGA’s decision to change approach to the regulation of MDMA and psilocybin has prompted serious discussion about the therapeutic potential of psychedelic substances around the world.
The TGA’s announcement in February was a huge surprise to those in the medical and biotechnology communities – it had rejected calls to reschedule MDMA and psilocybin for medical use as recently as December 2021. While some health professionals have expressed caution about the relative infancy of the research into the therapeutic use of psychedelics, most have acknowledged the enormous potential of these compounds.
Investors in this space point to the numbers. The Australian market for psychedelic-assisted psychotherapy has been estimated to be worth more than $2 billion per annum, and globally, closer to $60 billion.  There is also data suggesting that more than half a million Australians suffer from PTSD or treatment-resistant depression.  One consulting company points to the fact that nearly 9 per cent of Australians suffer from a chronic mental health condition and suggests that psychedelic therapies could be a major disrupter to the global $25 billion market in conventional drug therapy (and R&D into traditional molecule treatments), which are often ineffective for many patients. 
New and existing life sciences companies, including those already working in the cannabis space, are now focusing on the practical challenges associated with turning these new medicines into a medical and commercial reality. These challenges include:
- Supply: Local medical-grade manufacturing facilities are not yet operational, so deals have had to be made with overseas suppliers to secure supply in advance of the commencement of the reforms on 1 July. These sources have largely been Canadian-based given the head-start the Canadian industry has had. The complexities of the import process will inevitably have an impact on the availability of these drugs in the Australian market (and slow down supply to patients), at least initially. However, Australian businesses are leading the way by establishing manufacturing capability for psilocybin and MDMA in highly regulated facilities, in some cases under licence from existing overseas suppliers or from local producers.
- Availability of health care professionals: While businesses in this space are setting up the infrastructure (including clinics) that will be necessary to provide psychedelic assisted treatment, one key issue is staffing. Most clinical trials involving psychedelic therapy require two psychologists to supervise at least three eight-hour sessions when the drugs are administered, with additional therapy sessions in between. And this is all commencing during a time when there is already a shortage of health workers and a particular shortage of psychological and psychiatric services. There is also some concern that there will be a very small number of psychiatrists who will be approved by the TGA to provide access to psychedelic medicines.
- Cost: Experts believe this form of therapy will likely cost between $25,000 and $35,000.  Neither MDMA or psilocybin are listed on the PBS (and similarly, psychedelic assisted therapy is not publicly funded by Medicare). As noted above they are not currently funded by any private health insurers.
However, risk-conscious businesses are meeting these challenges and moving forward. For example:
- One ASX-listed company has started collaborating with a trauma-focused psychiatric services centre to develop a scalable program to provide MDMA-assisted therapy in the community for patients with treatment resistant PTSD. While the centre will provide specialist psychiatrists, trained therapists, and facilities, the company will manage the clinical trial design, Real-World Data generation, data monitoring, and the supply of MDMA tablets (which it has already secured). 
- One company is looking to establish multiple (up to 80) psychedelic-assisted psychotherapy clinics in Australia, and eventually, overseas, and has already signed a lease on its first Melbourne clinic in collaboration with three psychiatrists who have been involved with clinical trials at Monash University. 
- Another Australian business has now received HREC approval to conduct a clinical trial into the efficacy and safety of psilocybin-assisted psychotherapy (PAP) involving family members compared to standard PAP for adults with treatment resistant major depressive disorder. It also recently completed construction of a special purpose mushroom cultivation facility with final site commissioning underway. 
- Australia’s first psychedelic therapy clinic opened in South Yarra, Melbourne in anticipation for this new era of mental health treatment. 
On 14 March 2023, the House of Commons debated the issue of the regulation of psychedelic substances. The UK Government confirmed it had been reviewing advice on reducing barriers to research into the use of controlled drugs, particularly synthetic cannabinoids, and was commissioning further research into a wider range of medicines.
On 20 March 2023, the UK’s HM Treasury announced £10 million in funding for the Medicines and Healthcare Products Regulatory Agency (MHRA), a new drug authorisation agency, to accelerate the roll-out of innovative medical treatments, including potentially, psychedelics.
Different approaches to drug prohibition across Europe are permitted under the UN Convention on Psychotropic Drugs. For example, the relaxed attitude towards cannabis in the Netherlands is well-known and Portugal decriminalised the possession and consumption of all illicit substances in 2001.
Prior to the TGA’s announcement, the European Parliament held a conference in Brussels on psychedelic-assisted therapies on 6 December 2022. Then, following Australia’s decision to down-schedule psilocybin and MDMA, a cross-party group of Members of the European Parliament (MEPs) called for the European Medicines Agency (EMA) to catch up, expressing ‘concern about the lack of similar progress happening in the EU which is creating a disadvantage for millions of Europeans affected by mental health conditions and substance use disorders.’ The MEPs asked the EMA to ‘play a more active role’ in the matter, suggesting they prepare a report, organise a workshop with stakeholders, and work more closely with Europe’s drugs agency, the European Monitoring Centre for Drugs and Drug Addiction (EMCDDA). 
As of February 2023, there were 11 ongoing clinical trials involving psilocybin in the EU (relating to a range of central nervous system conditions), four ongoing trials involving MDMA and one LSD. 
In March 2023, the Dutch government established a State Commission on MDMA to provide advice on the advantages and disadvantages of using the drug for medicinal purposes. The Commission aims to provide its advice on the status of MDMA to the Dutch Cabinet by 31 January 2024. 
On 24 May 2023, an MEP Action Group for the Medical Use of Psychedelics was also launched in combination with the not for profit Psychedelic Access and Research European Alliance (PAREA) and PsychedelicsEUROPE (an association of medical professionals, academia and private sector stakeholders). The Action Group aims to promote the development of EU policies and regulations for psychedelic-assisted treatments in the EU. 
Canada and its provinces have been ahead of the curve when it comes to regulatory reform.
The Province of British Columbia submitted a request to Health Canada in November 2021 for a province-wide Section 56 Exemption to remove criminal penalties for possession of small amounts of illicit drugs for personal use. But it was only on 31 May 31 2022 that the Section 56 Exemption was granted, permitting adults in the province to possess prescribed amounts of opioids, methamphetamine, cocaine, and MDMA, without exposure to criminal penality. This was the first province-wide class exemption granted by Health Canada.
This change followed amendments to Health Canada’s Special Access Program (SAP) in January 2022 that enabled health care professionals to access psychedelic substances to treat patients with serious or life-threatening conditions where conventional therapies failed, or were unsuitable or unavailable.
One day prior, the City of Toronto had submitted a similar application to the Minister of Health for a Section 56 Exemption to decriminalise personal possession of a list of illicit substances. We understand that Health Canada has not yet responded to the application.
In July 2022, eight Canadians filed a challenge under the Canadian Charter of Rights and Freedoms (Charter) against the Canadian Government and the Minister of Health to increase access to psilocybin and psilocybin therapy. In the suit, the plaintiffs argue they have a constitutional right to access psilocybin for medicinal purposes that has been interfered with by the prohibitions in the Controlled Drugs and Substances Act, S.C. 1996, the Food and Drugs Act, R.S.C. 1985, and the Food and Drug Regulations, C.R.C. We will continue to monitor the progress of this challenge.
On 5 October 2022, the Government of Alberta announced that it would become the first Canadian jurisdiction to approve psychedelic-assisted therapy for the treatment of psychiatric disorders. On 4 March 2023, Alberta’s Mental Health Services Protection Regulation was amended to implement a new framework to regulate and license health care providers to administer psychedelics in the treatment of mental health conditions.
And then came public funding …. In December 2022, two medical doctors in Québec successfully billed the Province of Québec for the cost of psilocybin-assisted psychotherapy. The two doctors worked with the governing body for general practitioners in Québec which negotiated to approve psilocybin-assisted psychotherapy as a publicly reimbursed service.
Federal US law currently prohibits supply of most psychedelic substances for medical use. Reform has largely been a patchwork of state and local initiatives that depend on the federal government not prosecuting instances of supply, possession and use of these substances.
There have been numerous efforts to remove barriers to the use of psychedelics in research and compassionate use cases in the US, including:
- Senators Cory Booker and Rand Paul’s Breakthrough Therapies Act (S.689) that aims to remove the regulatory hurdles that inhibit research and compassionate of substances that are restricted by Schedule I of the Controlled Substances Act (21 U.S.C. 13) and
- Dan Crenshaw’s Douglas ‘Mike’ Day Psychedelic Therapy to Save Lives Act of 2023 (H.R.3684), that if passed would direct the Secretary of Defense to provide grants for further research into the use of psychedelics to treat PTSD and traumatic brain injury in active-duty service members.
These bills and others like them have yet to be passed and implemented.
For more details on the current complex web of regulation of psychedelic substances in the United States clickhere.
The eyes of the world will be on Australia over the coming months and years – in particular the success of the newly approved uses of MDMA and psilocybin and the social and economic implications of potential patient outcomes. Extensive clinical data will also be generated from Australian clinical trials that are now, or will soon be underway.
The clinical demand for these treatments in Australia after 1 July and the different approaches and avenues to supply medicinal products to meet that demand will be watched closely. We will continue to monitor developments in this space both in Australia and around the world, as well as the appetite of investors to back the industry.
RANZCP has established a steering group to help psychiatrists and the public with clinical guidance on new psychedelics treatments.
Phoebe Shields, ‘Incannex Healthcare subsidiary inks lease for Australia-first dedicated psychedelic-assisted psychotherapy clinic’, Proactive Investors, 5 May 2023, accessed 28 June 2023.
Kate Ashton, ‘Australian health insurers and pharmaceutical companies reckon with new psychedelic mental health treatments’, 17 June 2023, accessed 28 June 2023.
Julie Hare, ‘Biotechs scramble as Australia leads world in psychedelics’, Australian Financial Review, 6 February 2023, accessed 28 June 2023.
Natassia Chrysanthos, ‘“It’s going to be for people with money”: Psychedelic treatments tipped to cost at least $25,000’, 21 March 2023, accessed 28 June 2023.