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Horizons talk shifts from investors to insurance

The business day at the conference centered on the realities of commercializing a drug and convincing insurers to pay.
The post Horizons talk shifts from…



The 16th Horizons: Perspectives on Psychedelics conference is being held in New York this week at the Academy of Medicine and the tone on the business day was decidedly different. At past Horizons conferences, the business day was usually filled with investors and talk of which companies were hot and who would generate the most funds raised. This year the chatter turned to the nuts and bolts of insurance and commercialization.

Investors are spent

Dr. Dan Grossman, Head of Field Building at the Psychedelic Science Funders Collaborative and board member at Lycos Therapeutics noted that $4 billion was invested in the psychedelic industry with most of that money steered toward drug development. He said that was divided by $1.6 billion from venture capital firms and $2.4 billion in public financings. Roughly $3.5 billion of that was spent on drug development or roughly 80%. 

However, since the first quarter of 2023, that has shifted with only 23% of the capital coming from venture funds and 77% coming from public monies like private placements. The investments have also shifted to 96% for drug development and only 3% for items like clinics and therapeutic training. Dr. Grossman cited Psychedelic Alpha for providing the data points.

This shift was notable as many of the investor groups that had spoken in the past were largely absent. Still, Dr. Grossman stated that the pipeline is $2-3 billion underfunded and competing for capital with non-psychedelic approaches to mental illness drugs. Plus, there is a great deal of opportunity in the pipeline with an enormous 60 compounds in the exploratory stage. However, Dr. Grossman said the reality is that mainstream pharmaceutical companies aren’t necessarily looking at specific drugs but at overall compounds. 

Michael Jiang Senior Managing Director in Equity Capital Markets at Guggenheim Securities said investors want more positive data. He thinks that positive phase three data from Compass Pathways (NASDAQ: CMPS) by the end of the year will shift investor interest.


Since this was the business day for the conference, there was little talk of study trials or hopeful treatment protocols, instead, it dealt with the future of psychedelic drugs and that ultimately companies developing these drugs had sights set on commercialization. That means getting the FDA (Food and Drug Administration) on board. Ritu Baral, Managing Director at Cowen and Senior Biotechnology Research Analyst was encouraged that the FDA announced an advisory committee meeting on June 4 to discuss “Psychopharmacologic Drugs.” Baral expressed optimism because she said the FDA has had staffing issues and is so late on so many other items that highlighting these drugs was a surprise.

Commercialization also means administering these drugs and how they look in a real-world setting. Baral noted that the J&J (NYSE: JNJ) drug Spravato was initially a problem because hospitals were being asked for beds for the treatments. Those beds were needed for more profitable oncology patients creating a conflict over bed demands. She said once infusion centers were created separately for Spravato treatments it has reduced the conflict and improved the profits for the hospital around Spravato.

The conversation also tackled the road that these drugs have to take to even get to the point of being prescribed. Suprotik Basu, Managing Partner at Helena Special Investments said that there were only so many pools of capital that exist to take drugs to commercialization. He believes that Lycos Therapeutics will set the pace and that many companies are just drafting off that company’s advances. Basu said, “It’s going to be a pain point as some companies start rolling out drugs and need to meet patient demand. The delivery infrastructure will look more consolidated in the future.” He thinks ultimately most of today’s psychedelic drug companies will end up partnering with Lycos to get their drugs to patients as they won’t have the resources needed to accomplish this last mile.

Jiang agreed saying, “In reality, not many biotech companies get to commercialization on their own.”

Insurance puzzles

Getting drugs to patients is one thing, but getting them paid for is another. Even the experts on the panel confessed that even though they consider themselves experts, U.S. insurance is complicated and confusing.

Columbia University Professor Heidi Allen is an expert on Medicaid and she explained that high-priced treatments are hard to get approved for the program. Medicaid has to be balanced every year by states so if they agree to an expensive treatment, it means the money comes from somewhere else in the budget like education or infrastructure. Plus, Medicaid pays providers less and even if Medicaid approved a psychedelic drug treatment, low-income patients would likely have a hard time finding a provider in the network.

She also noted that few people in the Medicaid community even discuss or know of psychedelic drug treatments for mental illness, so the education curve is steep.

Then she mentioned states like Oregon where treatments are already happening without insurance. “Why would I, as an insurance company, agree to pay for something that people are already doing on their own,” she mused.

Dr. Charles Gross, a former Vice President at Elevance (Anthem) where he was responsible for Commercial, Medicare & Medicaid behavioral health sciences outlined the current state of healthcare where insurance companies are now running medical offices. For example, Optum handles outpatient care for Aetna insurance. He said it isn’t about convincing the doctors to prescribe the drugs but getting pharmacy committees to agree.

“Decision makers are not chief medical officers. These drug companies have to impress underwriters and account managers,” said Dr. Gross.

While there is still a great deal of enthusiasm for these drugs and the issues they can solve, the reality of what it will take to get them to the finish line is sobering.


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