A new academic study suggests the commercial future of psychedelic medicine may be far shakier than resurgent investor optimism implies. Despite renewed interest from pharmaceutical companies and growing political momentum, the economics of these drugs may not fit a profit-driven model. In a paper published in Finance and Society, political economist Dr Sandy Brian Hager of City, St George’s, University of London argues that psychedelics are too unpredictable to satisfy the commercial demands of modern drug development, raising the possibility that the industry’s revival could be short-lived.
Psychedelic therapy has been celebrated as a potential breakthrough for depression, PTSD, addiction and other mental health conditions, igniting a flood of investment between 2016 and 2021. Dr Hager traces how hundreds of startups emerged during this period, buoyed by glowing trial results and widespread claims that psychedelics might transform psychiatric care. Investors treated the sector as the next great frontier in biotechnology, driving stock valuations to extraordinary heights. Yet the excitement came to an abrupt halt. Clinical outcomes failed to match the scale of the hype, interest rates rose, and the US Food and Drug Administration delivered a significant blow by rejecting MDMA-assisted therapy for PTSD. Once soaring companies saw their share prices collapse.
Although this downturn was severe, the mood has since shifted again. By 2025, stronger trial data, regulatory reform and new interest from Big Pharma have revived expectations of a second “shroom boom”. This time, the optimism rests more on corporate strategy than countercultural enthusiasm. Major pharmaceutical firms, previously cautious about drugs long associated with underground movements, now appear ready to pursue psychedelic products in earnest. Yet Dr Hager’s research warns that hopes for a profitable market overlook structural problems that have not disappeared.
Chief among these are intellectual property limitations. Drug development typically costs billions, and investors accept these risks only if companies can secure dominant patents. Psychedelics make that problematic. Substances like psilocybin occur naturally and are therefore unpatentable in their basic forms. Others, such as LSD, have long-expired patents, while compounds with Indigenous histories of use cannot easily be claimed as proprietary inventions. Without strong patent protection, companies struggle to guarantee future profits, undermining the commercial logic required to fund research.
Alongside these legal obstacles lies a more fundamental scientific challenge. Traditional psychiatric drugs operate independently of therapy; psychedelic medicines do not. Their effects depend heavily on context, patient expectations and therapeutic support, making outcomes highly variable. Standard clinical trials demand replicability and control, yet psychedelic experiences are, by design, subjective and inconsistent. This interferes with the standardisation required to scale treatment and attract stable investment.
In response, some companies are attempting to change the drugs themselves. One strategy involves developing ultra-short-acting compounds that induce intense experiences lasting only minutes, making therapy quicker and cheaper. Another is the creation of “neuroplastogens”: drugs designed to produce similar brain effects as classic psychedelics without hallucinations. Such innovations aim to make psychedelics more commercially viable.
Dr Hager suggests this transformation reveals a more profound irony. Psychedelics were championed as radical alternatives to conventional psychiatric medicine, promising not merely symptom management but profound psychological change. Yet in bending them to fit the pharmaceutical business model, corporations may eliminate the very qualities that made them revolutionary. Instead of a mental health breakthrough, he warns, the industry could produce nothing more than familiar pills dressed up in new rhetoric.
More information: Sandy Brian Hager, The shifting fortunes of corporate psychedelia, Finance and Society. DOI: 10.1017/fas.2025.10014
Journal information: Finance and Society Provided by City St George’s, University of London