The Economics of Psychedelics

Keeping psychedelic medicines illegal is costing the global economy trillions of dollars each year – and that price-tag is rising rapidly

Psychedelic drugs are potent medicines that are badly needed to address the global Mental Health Crisis. Regular readers are familiar with the horrifying numbers:
 

• 2 billion treatable (but generally untreated) mental health disorders
• 8 million preventable deaths per year

These deaths can’t be prevented with conventional drugs and therapies. Only psychedelic drugs and psychedelics-based therapies have shown the potential to successfully treat these disorders.

This is why roughly 1 in 4 people globally currently have a treatable mental health disorder. Because conventional medicine is failing miserably in treating mental health disorders.

People seek treatment hoping for cures for their mental health conditions. All they generally receive are minimally effective crutches.

We’ve covered the human cost of this failure to treat mental health disorders. Now we’re going to put this enormous Crisis in economic terms.

Lost productivity

Looking at the Big Picture, the Mental Health Crisis not only takes a heavy toll in human lives and suffering. It is also having a serious impact on our economies.

Prior to the start of the Covid-19 pandemic, mental health disorders were already costing the global economy over $1 trillion per year in lost productivity alone. The enormous stresses associated with Covid-19 lockdowns have caused mental health issues to spiral higher – both in terms of the numbers of sufferers and severity of symptoms.

One obvious illustration is the explosion in drug overdose deaths due to drug addiction. In the U.S., drug overdoses increased by 30% in 2020.

Clearly, these untreated mental health disorders are now costing the global economy much more than $1 trillion per year in lost productivity.

Treatment costs

In the United States alone, over $300 billion per year is spent on mental health drugs and related services. It’s mostly wasted money.

Conventional treatments for depression are so ineffective that two-thirds of Americans exhibiting symptoms of depression don’t even seek treatment. Two-thirds of U.S. veterans receiving treatment for PTSD from the Department of Veterans Affairs report no benefit from treatment – while an average of 22 veterans per day are committing suicide.

Roughly $35 billion per year is squandered each year on drug rehabilitation in the U.S., in what is effectively a revolving door. Rehab, release, relapse, repeat. Overall, substance abuse is estimated to cost the U.S. economy $740 billion per year.

Lacking effective drugs to control addictive cravings, conventional therapies are inadequate crutches. Psychedelic drugs possess inherent anti-addiction properties.

Over $300 billion (per year) is a lot to spend on mental health. Roughly $1,000 per American per year. It’s not that the U.S. needs to spend a lot more on mental health. Rather, it simply needs to obtain meaningful results from all that spending.

Treatment savings

Psychedelic Stock Watch has devoted considerable time in illustrating how and why psychedelic drugs can revolutionize the treatment of mental health disorders. Mostly this is framed in the potential for saving lives.

However, an economic study from MAPS indicates that psychedelic medicine can also save dollars – lots of them. MAPS estimated that MDMA-assisted therapy to treat PTSD can save roughly $100,000 per patient in total treatment costs.

This shouldn’t come as a big surprise.

Current treatments for PTSD (as noted above) don’t work. Thus, patients generally remain under care permanently. That’s expensive.

Similarly, people suffering from depression or substance abuse issues are rarely cured. These people are generally in and out of treatment on a long-term basis.

Conversely, MAPS’ own Phase III clinical trial on MDMA-assisted therapy for PTSD is effectively curing two-thirds of patients – they “no longer qualify for a diagnosis of PTSD”. And these cures are delivered over a relatively brief treatment horizon. That’s efficient.

If savings for PTSD treatment can be replicated for other mental health disorders (which seems reasonable), psychedelic medicine will be able to treat deliver its cures for far less cost per patient than conventional medicine can provide its crutches.

Enforcement costs

Psychedelic Stock Watch has regularly illustrated the insanity of our drug laws.

Toxic and addictive alcohol and nicotine are legal (and kill millions each year). Safe psychedelic medicines are illegal, and could be saving millions of lives each year.

Worse still, to maintain these criminal prohibitions, vast numbers of additional dollars are wasted each year in enforcing these counterproductive and obsolete laws.

The War on Drugs has already failed. Even the United Nations is calling for the immediate decriminalization of all drugs. In the United States, drug enforcement also has a long and ugly racist component.

How much money is being wasted each year criminalizing safe psychedelic drugs that should be curing people and saving lives? A recent ballot proposal in California seeking to legalize psilocybin attached some numbers to this punitive and futile law enforcement.

Millions in savings annually – from legalizing one drug in one state.

Obviously, California is an especially large state, representing roughly 10% of the overall population. So multiply these savings by ten, and then multiply again for the potential savings in legalizing other (safe) psychedelic drugs.

Tens of billions of dollars in annual savings are on the table, simply from ceasing to enforce laws that never had any legitimate purpose in the first place.

As the article notes, legalizing psychedelics also means new tax revenue streams for the state. The Legislative Analyst’s Office estimates that legalizing psilocybin alone would net the state millions more per year.

We’ve already seen this with the legal cannabis industry. Colorado passed the $1 billion-mark in state cannabis taxes in 2020. Collecting large numbers of dollars in taxes rather than spending (wasting) large numbers of dollars in pointless law enforcement. Win/win.

Even the National Institute on Drug Abuse (NIDA) has now acknowledged that cannabis legalization has reduced drug use among teens.

Spend enormous sums of tax dollars each year on law enforcement to criminalize vital medicines that could be treating (curing?) the mental health disorders of roughly ¼ of the population.

Legalize these medicines and collect vast sums of tax dollars – as people get healthier.

You don’t need to be a rocket scientist to see which one of those equations makes more sense.

Labor shortages

U.S. employers have recently begun complaining about “a labor shortage” in the United States. Unfilled job openings have soared to the highest numbers on record. This comes as the percentage of Americans with jobs hit a 45-year low.

Some uninformed critics have claimed that these unfilled jobs are due to “lazy workers” receiving “overly generous” Covid-19 benefits.
However, this ignores the fact that the percentage of Americans with jobs had been wallowing at a 40-year low for several years before the pandemic struck.

Most of the Covid benefit programs expired at the beginning of July. The unfilled jobs remain.

With roughly 1 in 4 Americans having one or more mental health disorders, giving Americans legal access to the medicines that can (likely) cure these disorders would go a long way in addressing the U.S.’s labor shortage.

Once upon a time, criminalizing psychedelic drugs could be regarded as merely stupid. However, in the 50 years that these drugs have been criminalized, we have seen first a “mental health crisis” and now a mental health pandemic.

This pandemic is almost entirely attributable to one factor: the complete failure of conventional medicine to provide adequate treatment options for mental health disorders.

Today, these treatable (but generally untreated) mental health disorders are taking a heavy toll on the global economy – on multiple fronts.

There is no end is sight to the restrictive laws imposed due to Covid-19 that are causing this dramatic surge in mental health disorders. This means that all of the problems above are going to get much worse – and the price-tags much larger.

Legalizing access to psychedelic medicines isn’t merely of vital importance for overall mental health. It is an economic necessity.

The economics of psychedelics are black-and-white. Governments cannot afford the cost of continuing to fail in treating mental health.