Psychedelic 'Procedures' & Regulatory Leakage

Part II of the Unbundling Psychedelic Therapy series

Welcome to Part II of Unbundbling of Psychedelic Therapy, a series of essays on how we should expect Psychedelic Assisted Therapy (PAT) to evolve over the next several years and the political, economic, and technological forces driving this evolution.

In Part I, we covered the the “V1” of PAT in the context of the MAPS Phase III protocol for MDMA-assisted PTSD. We then looked at Journey Clinical’s Direct-to-Consumer/Decentralized Clinic Model that provides non-prescribing therapists access to ketamine without referring their patients to other providers. Importantly, and more interestingly, this kind of technological infrastructure will enable naturalistic & real-world research on all varieties of psychedelic experiences, contexts, and settings.

Today in Part II, we’ll explore two closely related ideas and the implications they could have—not only for would-be psychedelic therapists but for all stakeholders.

  • Psychedelic Procedures will be the preferred method for integrating psychedelics into healthcare systems.

  • Regulatory Leakage: The emerging regulatory landscape will make decriminalized/gray markets a more hospitable environment for trained therapists compared to the conventional insurance-based healthcare systems, at least in the US in the near term because of trends already in motion (lack of mental health parity & above mentioned ‘proceduralization' of psychedelic medicine)

Next time, in Part III, we’ll explore the role of Virtual Reality & Immersive Technology in Psychedelic Medicine.

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Psychedelic Procedures

There will be friction in the healthcare system’s adoption of Psychedelic Assisted Therapy (PAT)—a time, labor, and cost-intensive treatment, at a time when two notable trends are playing out in mental healthcare:

  1. Therapists are increasingly working outside of the insurance/payer systems and

  2. The psychiatric toolbox is expanding via interventional procedures.

I can’t help but think that in third-party-payer-based healthcare systems, such as in the United States, the psychotherapy component of PAT will not survive, and psychedelic medicine in conventional healthcare settings will morph into Psychedelic Procedures.

From an April 2021 article in Psychiatric News:

“Psychiatric interventionists utilize neurotechnologies to modulate and apply brain stimulation techniques to modulate dysfunctional brain circuitry that underlies psychiatric disorders. Interventionists utilize a number of therapeutics that are administered according to a structured protocol and require monitoring in a clinical setting. In the last 10 years, the number of treatments that interventionists use has vastly expanded, and more and more general psychiatrists are adopting these therapies into their regular practice.

While therapists have carried the torch through clinical trials over the last 20 years, I sense that the emerging subspecialty of interventional psychiatry is who we can expect to adopt psychedelics as FDA approvals and commercialization happens in the next few years.

In fact, we’ve already seen psychedelics companies indicating their intent to move in this direction.

Only a few months ago, we looked at Cybin’s announced partnership with Greenbrook TMS:

“Cybin today announced that it has entered into an exclusive research and development collaboration agreement with TMS NeuroHealth Centers Inc., a wholly-owned subsidiary of Greenbrook TMS Inc. Greenbrook operates 129 outpatient mental health service centers in the United States…”

And I postulated:

…Cybin appears to be asking the question, “If psychedelics make neural networks more malleable, and TMS creates targetted neuroplastic adaptations, can the two be combined to improve outcomes?”

Upon reflection, I think the better question is, “what is the optimal vehicle for integrating psychedelic medicine into the existing healthcare system: procedure or therapy?

More recently, prominent investors in the psychedelic space, Apeiron, Palo Santo, and re.Mind announced they had invested in neuroCare, an international mental health services clinic group focused on interventional psychiatry.

From a recent press release from Palo Santo (emphasis added):

“Palo Santo, a U.S.-based psychedelic investment fund, announced its recent investment in neurocare Group AG ("neurocare"), a leading provider of specialized and integrated mental healthcare through its Digital Therapy ("DTP") Platform…Palo Santo's investment comes on the heels of neurocare's planned expansion into offering psychedelic-based therapies as part of its clinical suite…

I stumbled upon neuroCare a few months ago as my unbundling thesis was forming.

I had begun to think the clinical workflow of psychedelic experiences within healthcare settings would increasingly look like surgical workflows (standardized, long duration, altered consciousness, recovery period, etc.) while psychotherapy, which has been a central feature of the research protocols that have gotten us to this point, will become an add-on option if the patient can afford it or insurance will reimburse it.

Thus centers already offering “procedurelized” mental health services, such as Neurocare and Greenbrook, have an advantage to scaling psychedelic medicine over psychotherapy-based formats.

There is an obvious advantage to building businesses around procedures and not psychotherapy.

From an operational perspective, procedures are favorable since they have minimal marginal costs and negligible variation from patient to patient. While psychotherapy with the need for a therapeutic alliance, trust, and human connection is not exactly scalable and reproducible and definitely not objective, and most importantly, requires skilled, trained, and empathetic human therapists.

Therapists have a further uphill battle in that their services are not adequately covered by insurance, and an increasing number are choosing to work outside of the insurance system:

“Mental health providers are pitted against “the inherent advantage that the insurance companies have,” said Katie J. Spielman, a San Francisco-based attorney with DL Law Group. “It’s just a huge administrative burden for both patients and providers alike to try to fight the insurance company and get paid either the fair rate … or in the patient’s case to get their claims approved and paid…

Though the number of therapists who accept insurance isn’t tracked by a single organization, one estimate suggests 42 percent of therapists in California don’t accept insurance at all.”

I can’t help but think that what we consider “the mental health field” is bifurcated into two categories:

  1. One is procedural based1, administered under an MD license which will enjoy a greater reimbursement compared to the other

  2. The increasingly independent, cash-based non-prescribing therapists (Ph.D., Psy.D LMSW, LMFT, etc.) who are choosing to leave the insurance system because accepting insurance is such a headache.

This is why I think therapists trained in the “V1” PAT framework will ultimately find greater autonomy and opportunity in the gray markets in the increasing number of decriminalized jurisdictions.

Regulatory Leakage

In Canada, the black market captures 50% of cannabis sales even though cannabis has been legalized.

The Canadian cannabis market highlights a paradoxical phenomenon— government-regulated legalization of an until-now-illegal substance (cannabis) can paradoxically drive demand in the illicit market because of regulations imposed on legal operators. Such laws theoretically ensure consumer safety but add costs and complexity to an otherwise straightforward business (i.e., grow product & sell product), making legal operators less competitive than their illicit counterparts.

I asked Twitter if this phenomenon has a name, and I am awarding Joe Welker with the best response: Regulatory Leakage

So, the obvious question is, “what does Regulatory Leakage look like in psychedelics?”

Psychedelics differ from cannabis in a few critical ways:

  1. Use Patterns: Use patterns (multiple/day, daily, weekly) make cannabis a commodity compared to psychedelics (even microdosing routines are 2-4 doses/week).

  2. Pharma Focus: To date, the majority of capital invested into psychedelics has backed pharmaceutical development projects rather than grow-operations, retail, or consumer brands. The next tier of investment has been in clinical infrastructure and ancillary technology.

  3. Personnel: Sitters, shamans, guides, therapists, and clinicians are common features of psychedelic experiences; this is not the case with cannabis.

Regulatory Leakage from psychedelics will, of course, include the black market sale and production of the substances, but I don’t think that this is the main thing. Rather,

Regulatory Leakage captured by unregulated psychedelic markets will be the humans who work with people who work with psychedelics—the therapists, guides, shamans and clinicians.

Here’s what I mean.

Imagine it is the year 2026, MDMA from MAPS has been FDA approved, Psilocybin from Compass Pathways, and possibly Usona has been approved, and several more decriminalization efforts have been successful.

As we discussed above, the healthcare system will adopt psychedelics as procedures and interventions for efficiency’s sake, while psychedelic therapists who have undergone training for PAT will increasingly operate outside of the insurance system, just like therapists are forced to today.

Thus, for a period after approval people who want to use psychedelics as an adjunct to psychotherapy—with a human, not an app, and not in ‘procedurelized’ formats— will continue to find the best options in gray markets created by decriminalization, not in conventional healthcare settings.

And therapists who want to work with psychedelics and authentic, fulfilling, and service-oriented practices will find it in decriminalized/gray market settings rather than regulated medical settings.


Michael Porter describes a Value Chain2 as:

a collection of activities that are performed by a company to create value for its customers.

As noted in Part I, the value chain for PAT consists of:

  1. Specially trained therapists

  2. Clinical settings specifically outfitted for PAT

  3. Therapist-mediated preparation that includes trust-building, education, intention setting, etc.

  4. A psychoactive drug that creates a consciousness-altering experience that is monitored/supported by a therapist

  5. Post-experience integration via psychotherapy

The paradox/challenge that I keep coming back to is that the psychedelic substance—often naturally occurring or easily synthesized off-patent compounds administered 1-3 times (not daily for months/years)—is simultaneously the most important/necessary component of the entire value chain and the most insignificant cost compared to the therapists’ time (including training), the clinical infrastructure, and appropriate preparation and integration.

And so, as we discussed above, I can’t wrap my head around how the delivery of the V1 format of PAT survives within the modern healthcare system in which the incentives for all parties (patients, payers, manufacturers, providers), in both fee-for-service and value-based settings3, are to reduce costs at the point of care4.

As it has been used in trials to date, PAT doesn’t really fit into this schema. In fact, it is almost the complete opposite—periodic dosing (not daily), long-duration procedures in the clinic (not merely prescription refills), that requires unhurried, empathetic, mindful, and present personnel.

In other words, in the short term, and perhaps longer, decriminalized gray markets will offer greater consumer—and therapist—choice over the healthcare system-mediated opportunities.

Of course, this prediction runs counter to the logic that FDA approval begets insurance coverage which allows PAT to scale. However, my analysis is informed by having been both a consumer and a provider in the insurance-based system in the United States, which makes me less confident that we can see meaningful insurance coverage that makes it affordable for patients and for therapists to earn a decent living.

Therefore we should expect that psychedelic procedures will replace psychedelic-assisted therapy—thus making the decriminalized and gray markets the more hospitable environment for therapists who have undertaken extensive training to conduct psychedelic-assisted therapy, not administer procedures.

In Part III, we’ll look at the role of Virtual Reality & Immersive Technology in Psychedelic Medicine.

Buckle up.


My sense is the techniques of Interventional Psychiatry are currently reserved for refractory conditions after the more conventional approaches have failed, but we should expect that such procedures will be subject to diagnostic creep as is common in medicine and increasingly become first and second-line treatment options.


Again, like ‘bundling/unbundling,’ I am adopting a term from the business world and modifying its use to illustrate an idea—to the MBA’s, if there is a better framing, I am all ears.


I am interested in hearing from you if you think this characterization is off.


TTR reader Keith Tabin recently brought the concept of practicing to the top of one’s license to reduce such costs. The other principal means of reducing POC costs is that the almost-zero-marginal cost of pills has made prescription drugs the primary medical intervention in the Post-War era (I think this characterization is accurate, but I can’t find my source. The point is that pharmaceuticals, easily delivered, cheap, scalable have become the de facto treatment for many conditions) and the new frontier of costs savings in healthcare is leveraging the zero marginal costs of software.

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