California Initiative To Fund Psychedelics Research Would Cost $6.6 Billion But Could Earn Money Through Discoveries, Analysis Says

The same day California lawmakers signed off on a bill to legalize psychedelics last week, staffers at the state’s Legislative Analyst’s Office (LAO) released their review of a proposed ballot initiative that would funnel $5 billion generated from bonds toward psychedelic therapies for mental health.

While the proposal would cost California nearly $6.6 billion over 30 years, the new report says, it could also earn the state revenue from new scientific discoveries.

Known as the TREAT California Act, the would-be measure would not itself change the legal status of any substances. Rather, it would establish a state agency called the Treatment, Research, Education, Access and Therapies (TREAT) Institute, which would identify opportunities for advancing scientific research and development into the therapeutic potential of psychedelics.

The initiative’s text says it’s meant to create a funding agency to “build out all the pieces of the psychedelic ecosystem necessary for this paradigm shift in mental healthcare,” with the ultimate goal of gaining federal Food and Drug Administration (FDA) approval and “making these valuable therapeutics accessible to all.”

As the new LAO report says, the initiative would create “a state constitutional right to conduct research in California using all psychedelic substances (natural and synthetic), except peyote.”

“Substances that could be studied include psilocybin (magic mushrooms), ibogaine, LSD, MDMA (molly or ecstasy), ketamine, and cannabis,” it says.

Funding from the institute would support “research, clinical trials, training, and education relating to the use of these substances for the treatment of mental health issues,” LAO noted.

The agency would also facilitate the creational of “care programs” in California for psilocybin and MDMA once the psychedelics are approved for therapeutic use by FDA.

Grants would need to support research into the risks and benefits of psychedelic-assisted therapy for addiction, anxiety, depression, suicidality, post-traumatic stress disorder (PTSD), chronic and acute pain and other disorders such as obsessive compulsive disorder (OCD) and anorexia.

We have reviewed the proposed measure (A.G. File No. 23-0013, Amendment #1) that would authorize $5 billion in state general obligation bonds for mental health-related research and therapies involving certain psychedelic substances. https://t.co/aizEbSOha5

— Legislative Analyst (@LAO_CA) September 7, 2023

Including interest on the loans, the $5 billion in bond money to fund the institute would end up costing the state about $6.6 billion, LAO said. “Given the inflationary effects over the 30-year period, the total cost of the bonds is projected to be 10 percent more expensive than if the state paid in cash.”

But because all businesses, universities and other entities that receive funding from the TREAT Institute would be subject to intellectual property agreements, California could also recoup some of that money by bringing new scientific discoveries to market.

“If TREAT award recipients discover new drugs,” the LAO report says, “the state would receive some associated revenue.”

How much revenue—and when it could be generated—are still open questions.

“Because the R&D process can be lengthy, the state likely would not derive such revenue in the initial few years after TREAT-funded R&D commenced,” the report says. “Moreover, the amount of revenue derived in this way is uncertain. Many times, R&D does not lead to new discoveries, but, in a few cases, new discoveries (such as a new drug) are very lucrative.”

The amount the state receives would also vary based on the specific terms of a given intellectual property agreement.

In order to qualify the prospective constitutional amendment for next year’s ballot, the campaign will need at least 874,641 valid signatures from registered voters.

Deb Hubers, COO of TREAT, told Marijuana Moment in July that she was confident Californians would support the measure if it makes it to the ballot, pointing to recent national polling showing that a majority of Americans back legalizing psychedelic-assisted therapy.

A separate psychedelics campaign trying to qualify a measure for next year’s ballot is Decriminalize California, which recently got approval from state officials to begin collecting signatures for its initiative to legalize psilocybin, including adult-use sales. Activists with the group have tried twice to put the reform on the ballot in prior cycles, but they’ve come up short, due in no small part to signature gathering complications during the pandemic.

A fiscal analysis from LAO on that measure said implementing the legalization component of the policy, which would also involve sealing records of prior psilocybin-related convictions, would likely result in a “net reduction in costs” to the state.

Last week in Sacramento, lawmakers sent a separate bill to the governor’s desk that would legalize the possession and personal cultivation of certain entheogenic plants and fungi beginning in 2025. A workgroup would be established under the California Health and Human Services Agency (CHHSA) to study and make recommendations on establishing a regulatory framework to access the substances for therapeutic and facilitated use.

Advocates are hopeful but not sure that Gov. Gavin Newsom (D) will sign the measure. Sponsor Sen. Scott Wiener (D) told Marijuana Moment in July that it’s “unclear” to him whether Newsom will support the change, adding that the governor was “not expressing any opinion, pro or con.”

Officials at various levels of government are increasingly calling on federal regulators to study the benefits of—and broaden access to—psychedelics for mental health. In Michigan last week, lawmakers passed a resolution urging the U.S. Congress, Department of Defense and Department of Veterans Affairs (VA) to prioritize research and investment in “non-technology treatment options”—including psychedelics—to treat psychological trauma from military service.

Earlier this year, House lawmakers passed a spending bill with a number of veteran-focused marijuana and psychedelics amendments. One would allow VA doctors to issue medical cannabis recommendations to former servicemembers, and the other would encourage research into the therapeutic potential of psychedelics.

Three bipartisan House members also recently sent a letter to VA Secretary Denis McDonough expressing “deep concern” over a recently updated VA marijuana directive that continues to prohibit its doctors from making medical cannabis recommendations to veterans living in states where it’s legal.

The letter also points out that, prior to VA releasing the directive last month, they successfully championed an amendment to a House appropriations bill that would allow the department’s doctors to recommend medical cannabis to veterans. The Senate Appropriations Committee also passed a similar reform as part of its version of the appropriations legislation.

Legislation to enact the policy change also previously advanced through both chambers but has not been enacted into law. In 2016, the House and Senate both adopted different versions of the reform in their spending bills—but neither made it into the final conference report following negotiations.

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Photo courtesy of Wikimedia/Mädi.