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Welcome to Tricycle Day. We’re the psychedelics newsletter that ran the numbers and triple-checked the math. The results are in. You’re 100% loved. (Margin of error: 0.001%) 🥰

Elliot Marseille wants the most bang for his buck. (Who doesn’t?) But instead of clipping coupons, he's spent 40 years hunting for healthcare bargains. Now, as founding director of UC Berkeley's Collaborative for the Economics of Psychedelics, he’s building the case that psychedelic therapies aren’t just effective; they’re economically smart.

We asked Elliot how an expensive therapy can actually save money, what needs to happen for insurers to cover psychedelics, and why measuring positive well-being could change the future of mental healthcare.

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What drew you to health economics in the first place, and then specifically to studying psychedelic therapies?

I lived in Nepal from 1982 to '89, where I ran a national blindness prevention program for the Seva Foundation. When I came back to Berkeley and did my doctoral work, I realized I had access to a treasure trove of outcome information from Seva-sponsored cataract surgery in Nepal—about 21,000 cases in this database. One of my dissertation chapters focused on the cost-effectiveness of cataract surgery in Nepal.

That led me to Jim Kahn, who I continue to work with to this day. He really got me into cost-effectiveness analysis, which became the focus of most of my work. Mainly, my efforts were concerned with the economics of HIV treatment and prevention in developing countries. Resources are always constrained, so I find it compelling to answer the question: how can you do the most good with what you’ve got?

The shift to psychedelic therapies came after I met Rick Doblin. I had a serendipitous meeting with him at Burning Man. It was maybe a ten-minute conversation, but I walked away thinking, “Okay, my life is different now.” I phased out the global health work and phased in psychedelic economics. About five years ago, I started the Collaborative for the Economics of Psychedelics at UC Berkeley.

Your research shows psychedelic therapies could be cost-saving for the healthcare system. How does an expensive therapy end up saving money? How do we keep the costs below the threshold where it stops being economically viable?

An expensive therapy ends up saving money if it reduces future costs. Take the new generation of hepatitis C medications. When they first came out, the cost was roughly $100,000 for two pills plus supportive care, and people lost their minds. They called it unconscionable price gouging. I worked with ICER on a cost-effectiveness analysis, and somewhat to my surprise, found that this new therapy was very cost-effective even at those prices because it was a cure that prevented expensive downstream costs like liver transplants and hospitalizations.

It's important to understand the difference between “cost-effective” and “cost-saving,” because people often conflate them. Cost-effective means good use of money compared to feasible alternatives. In other words, you're buying health benefit at a good price. Most medical care doesn't save money, but it produces health benefit. A small subset actually saves money over time because the effects are so significant. The new antiviral treatments for hepatitis C are in that class, and over the past few years the price has fallen significantly so they are even more favorable.

For MDMA-assisted therapy for PTSD, the Phase 3 trials showed two-thirds of people “no longer met criteria for PTSD” after treatment. These were chronic, treatment-resistant cases averaging 14 to 18 years since diagnosis. Whatever they were getting wasn't really working.

In our model, if MDMA's effects lasted more than about 3.2 years, it would start to be cost-saving. Beyond one year, it was cost-effective. We used a cost of about $11,500 for therapy, which is low compared to what's being talked about now. However, even at very high price levels, the therapy is likely cost-effective depending on durability. At those high prices, it may not be widely accessible, though, which is a different problem. Something could be cost-effective but not that attractive to third-party payers.

For psilocybin therapy for treatment-resistant depression, the effects are smaller than MDMA for PTSD. Our analysis suggests psilocybin becomes cost-effective when the drug itself costs around $500.

Group therapy is one promising avenue for keeping costs down. We've seen it reduce costs by about 25% for psilocybin and 51% for MDMA with veterans. However, these numbers depend very much on the price of the psychedelic medicine itself. Group therapy can only reduce personnel costs.

But there are many other ways to reduce costs. On the provider side this could include cross credentialing, for example, of nurses, chaplains, and peer facilitators. This could expand the workforce and lower labor costs. There is a lot of interest in improving screening, so that psychedelic therapies are reserved for those who are most likely to benefit. In that way, the cost per person who benefits, which is of course the cost we are most interested in, declines.

Another obvious strategy would be public benefit manufacturing or nonprofit drugs sourcing, such as the work being pioneered by the Usona Institute. This could include public-private cost sharing pilots with philanthropic donors or foundations co-funding early implementation phases. There are also a range of payer-side innovations possible, such as outcome-based contracts where reimbursements are tied to measurable clinical improvements, or shared savings plans in which providers share in documented reductions in downstream healthcare costs.

What needs to happen for insurance companies to cover psychedelic therapies?

Somebody has to go first. It might be Medicaid. When the FDA approves a new treatment, Medicare and many state Medicaid programs usually consider adding it to their formularies. Once that happens, it gives commercial insurers the confidence to follow.

Public demand matters, too, particularly from veterans. The state programs in Oregon and Colorado are helping to reduce stigma and make these therapies seem more real to policymakers.

The economics are key. Demonstrating cost-effectiveness helps, but insurers face what’s called the “churn problem”: people change plans every few years, so a company might pay for an expensive treatment but not be around to see the savings later. That’s why keeping costs as low as possible—consistent with safety and quality—is so important. While the relationship between cost and access is more complicated than this, as a first approximation it is fair to say that the lower the cost the more people will have access to it.

Self-insured employers may lead the way. They directly benefit from improvements in employee productivity and well-being. We’ve already seen that with ketamine and with Enthea’s work. Sherry Rais has shown that psychedelic services can be woven into employee benefit plans. That may be the model we’ll see first.

How does updating cost-effectiveness models to capture positive well-being change the conversation?

In clinical trials, there's usually just one primary outcome measure. For depression, it's a symptom-based scale. The best you can do is have no symptoms—you no longer meet criteria for depression. But I like to run this thought experiment: Imagine one person waking up in the morning enthusiastic to start their day, while another drags themselves out of bed and through their day. Neither is depressed, but they have vastly different lives. We're not capturing that with symptom-based scales.

Our team is proposing that the field develop a consensus positive well-being measure to be used as a co-primary outcome in clinical trials. We're not trying to get rid of symptom-based measures, but the FDA would look at well-being alongside them.

Robin Carhart-Harris's 2021 paper comparing psilocybin with escitalopram (an SSRI) really got me thinking about this. They had something like eight well-being measures, and all of them showed substantially superior improvements in the psilocybin group compared with the SSRI group. But these well-being measures were secondary outcomes. For the primary outcome, a symptoms-based measure of depression, there was no statistically significant difference between the psilocybin and the SSRI group so the headline said there was “no difference" between psilocybin and escitalopram. The well-being results were practically treated as a footnote.

We want to convene a Delphi process combined with appropriate statistical techniques to arrive at one consensus well-being measure. It would benefit all of psychiatry, so this isn’t special pleading for psychedelics. The goal is something comprehensive that captures a wide range of positive well-being domains such as social functioning, job satisfaction, access to joy, connection with nature, and quality of relationships.

You get more of whatever you measure. By making well-being explicit in the FDA process, you're telling the whole system, "We value this. Produce more of it." And after all isn’t this the point of any therapy? We want people to flourish not merely to be rid of their symptoms.

Does your work translate to less wealthy countries and populations? How does cost-effectiveness analysis fit into global access to psychedelics?

Resource-constrained countries need cost-effectiveness analysis even more than wealthy ones. It's critical to use limited money to do the most good.

Laying groundwork for psychedelic access in low and middle-income countries is long-range work. I am very excited about it. However, you need decent mental health infrastructure to deliver these services at scale, and from a cost-effectiveness point of view, it doesn’t make sense to introduce psychedelic therapies to people who don’t have access to conventional mental health treatments which, after all, are relatively inexpensive and do provide benefit to many people. At least for the foreseeable future psychedelic therapy should be reserved, in most resource-poor settings, for people who've failed conventional treatments.

We published a paper on MDMA for PTSD in Ukraine, where there's movement to reschedule MDMA and psilocybin for research. Our analysis shows it's likely very cost-effective and probably cost-saving there. War-torn countries with high trauma prevalence like Ukraine are obvious candidates for MDMA and should be fast-tracked. Rick Doblin wants to seed research in other countries, and I'm all in. It will take years. It's time to start.

Want more from Elliot?

Dig into his papers, or support UC Berkeley's Collaborative for the Economics of Psychedelics with a donation to fund more research.

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DISCLAIMER: This newsletter is for educational and informational purposes only and is not intended as a substitute for professional medical advice. The use, possession, and distribution of psychedelic drugs are illegal in most countries and may result in criminal prosecution.