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The Battle for Your Mental Health


state legal psychedelics vs the Federal government

Researching and selling psychedelic medications is becoming more popular. Treatments for disorders like depression and posttraumatic stress disorder may benefit from the use of substances like psilocybin and 3,4-methylenedioxymethamphetamine. To treat these and other medical ailments, the Food and Drug Administration (FDA) may soon approve the use of psychedelics.


Simultaneously, as enthusiasm for psychedelic research increases, states are revising drug laws to enhance access to these contentious substances. In 2020, Oregon voters passed Measure 109, establishing a program for supervised nontherapeutic use of psilocybin, a psychedelic compound derived from fungi. This program became available to clients during the summer. Colorado also joined the bandwagon, with voters passing Proposition 122 the previous November, allowing psychedelic enterprises to operate in 2025. Colorado’s program might include not just psilocybin but also mescaline, ibogaine, and dimethyltryptamine.


Several other states, including New York, Massachusetts, Vermont, Illinois, and California, are contemplating similar legislation in 2024. However, the drawbacks of this approach are often overlooked by state lawmakers. Apart from being costly, redundant, and potentially misleading, many state-regulated psychedelic programs are on a collision course with FDA regulations.


Violation of FDA Law by State-Regulated Psychedelic Therapies


Psychedelics, classified as Schedule I controlled substances, face strict federal laws prohibiting their production, possession, and sale, with limited exceptions for research. State-licensed psychedelic businesses, including those dealing with substances like psilocybin, run afoul of federal law, mirroring the uneasy coexistence marijuana producers have had with federal agencies.


While state-regulated marijuana businesses have experienced some leniency, state psychedelic programs pose a heightened risk of federal intervention due to their apparent blending of psychedelics and healthcare services. In contrast, conservative states like Texas, Connecticut, and Washington fund federally sanctioned clinical trials of psychedelics, aligning with DEA and FDA regulations.


Oregon’s psychedelic program, despite its nontherapeutic focus on providing psilocybin, challenges federal law. However, the state establishes clear boundaries, barring psilocybin businesses from making medical claims or operating within healthcare facilities. This safeguards consumers and healthcare professionals by clarifying that Oregon’s psilocybin businesses do not treat health conditions. Yet, some businesses defy these restrictions, potentially triggering FDA intervention given the violation of federal laws and the commitment to prevent health misinformation.


Potential FDA Involvement


Marijuana companies have faced FDA warnings in 2022, receiving over two dozen letters for marketing products with Δ9-tetrahydrocannabinol (Δ9-THC), cannabidiol, or Δ8-THC as therapeutic. The FDA accuses them of illegal marketing, emphasising “unapproved treatments for various medical conditions or therapeutic uses.” Similar warnings apply to kratom and unapproved stem cell therapies. A cautionary note is sounded for psychedelic businesses in Oregon, Colorado, and similar states, as FDA warnings for legal products suggest potential objection to medical marketing of Schedule I substances like psilocybin. The DEA’s intervention, evident in recent warnings to Georgia pharmacies on medical marijuana, is also a looming concern.


Even with anticipated FDA approval of psychedelic formulations, state-manufactured psychedelics like fungal-derived psilocybin will remain federally illegal. Only FDA-approved formulations, such as synthetic psilocybin products from companies like Compass Pathways, will shift to a lower schedule for marketing and prescription. A parallel is drawn with Δ9-THC (dronabinol), with different formulations placed in three schedules. In Oregon and Colorado, where fungal-derived psilocybin might coexist with FDA-approved synthetics, the risk of consumer confusion may prompt FDA intervention, echoing concerns raised in its recent ketamine warning. The FTC may also act, having filed over 120 cases in the past decade challenging medical claims made by supplement manufacturers.



Challenging the Boundaries of Federal Law


In the eyes of the FDA and FTC, producers and dispensers of state-regulated psilocybin who make medical claims are treated no differently than companies in the supplement or marijuana industries. However, state regulators overseeing psychedelic initiatives have largely downplayed the associated risks. Despite the Oregon Health Authority recognizing the nonmedical nature of its psilocybin program, it has chosen not to enforce its restrictions on making medical claims. This failure not only has the potential to mislead clients and healthcare professionals but also jeopardizes the integrity of the entire program.


Colorado regulators have taken a more permissive stance. Unlike Oregon, Colorado’s psychedelic laws lack legal barriers separating healthcare services from psychedelic services. The Natural Medicine Advisory Board, instrumental in formulating rules for Colorado’s program, may exploit this absence of boundaries to foster a medical psychedelic industry that clashes with FDA regulations.


Moreover, the board interprets Colorado’s law to mandate state health insurance, funded by federal Medicaid, to cover health services associated with unapproved psychedelic medicines. However, Medicaid prohibits the use of its funds to support Schedule I drugs like marijuana and psychedelics. Mandating state insurance to cover related services could violate this prohibition and involve the state breaking federal law.


Introducing psilocybin into healthcare facilities may lead to the loss of federal funding for these facilities. Some Colorado board members have suggested that clinicians could provide psychotherapy alongside psilocybin products and bill Medicaid solely for psychotherapy using existing billing codes. However, billing Medicaid for these services under therapy codes while intentionally omitting the use of psychedelics could potentially violate the federal False Claims Act or constitute healthcare fraud, a criminal offence.


Beyond the impact on patients’ lives and healthcare professionals’ livelihoods, millions of taxpayer dollars are at risk. Oregon’s program recently exceeded its budget, necessitating a $3 million public bailout. Due to high operating costs and financial risks, some businesses either went bankrupt or chose not to enter Oregon’s market. As the program relies on license fees, their exit exacerbated the budget shortfall and may contribute to higher fees and operating costs. Despite these challenges, political strategists advocate for similar laws in other states without acknowledging or learning from the mistakes made in Oregon and Colorado.


Preventing Patient Confusion and Mitigating Practitioner Liability


There is still an opportunity for states to alter their trajectory. Oregon regulators have the option to actively enforce their ban on making medical claims, safeguarding consumers and healthcare practitioners while preventing potential intervention from the FDA and FTC.


Similarly, Colorado regulators can reconsider their medical-oriented approach to psychedelic regulation and instead align with what voters approved—an integration into the healthcare system rather than a replication of it. Following Oregon’s lead in imposing restrictions on medical use and healthcare claims could be prudent. Acknowledging that mandated state Medicaid coverage is unattainable without federal reform is a crucial step.


States contemplating comparable legislation should take a pause and carefully assess how to sidestep these issues rather than rushing into copycat bills. One viable approach involves embracing conservative legislation akin to that of Texas, Connecticut, or Washington, which works within the framework of existing federal regulations.


Unless state-regulated psychedelic programs alter their course, they run the risk of surpassing the acceptable threshold of conflict with federal drug law. In such a scenario, patients and healthcare professionals could find themselves among the casualties.


Bottom Line


The burgeoning interest in state-regulated psychedelic therapies, driven by the potential benefits for treating various medical conditions, stands at a critical juncture with federal law and FDA regulations. The evolving landscape, marked by initiatives in states like Oregon and Colorado, reflects a need for careful navigation to avoid conflicts and ensure compliance. As the FDA signals concerns about illegal marketing and potential intervention, the bottom line underscores the importance of a nuanced regulatory approach and proactive enforcement to safeguard patients, healthcare practitioners, and the integrity of emerging psychedelic programs.






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