Key Takeaways:
President Donald Trump signed an executive order on April 18 directing the FDA to fast-track psychedelic drugs for mental illness, a policy reversal that sent shares of Compass Pathways up nearly 30%.
President Donald Trump signed an executive order on April 18 directing the FDA to fast-track psychedelic drugs for mental illness, unlocking $50 million in federal funds and priority review vouchers for three companies developing psilocybin and MDMA-like therapies.
"The grounding for the executive order was the need to get new treatment options to patients who are urgently in need of them," said Kabir Nath, chief executive officer of Compass Pathways, one of the three companies to receive a priority review voucher from the FDA six days after the order.
The order directs the FDA commissioner to issue priority review vouchers to psychedelic drugs with Breakthrough Therapy designation, a category that includes Compass's synthetic psilocybin candidate COMP360 for treatment-resistant depression, Usona Institute's psilocybin for major depressive disorder, and Transcend Therapeutics' methylone for PTSD. Compass reported a positive Phase 3 trial result for COMP360 in February and plans to file for approval in the fourth quarter. The FDA also cleared an early-stage trial for noribogaine, a derivative of ibogaine, targeting alcohol use disorder — the first authorized human trial of such a compound in the United States.
The policy shift marks a sharp reversal from Trump's first-term stance on controlled substances and comes as his economic approval ratings hit record lows. While the order does not by itself approve any drug, it signals broader political acceptance of a field that has struggled for decades under Schedule I classification — potentially accelerating a market that could serve the more than one billion people worldwide living with mental health conditions, according to World Health Organization data.
The executive order specifically references ibogaine, a psychoactive compound derived from a West African shrub that some advocates believe may treat addiction and traumatic brain injuries. But unlike psilocybin or MDMA, ibogaine has not undergone large-scale clinical trials in the United States and has been linked to potentially serious cardiovascular side effects, researchers say.
"Psychedelic compounds have different safety profiles, different risks," said Brandon Weiss, a researcher at the Center for Psychedelic and Consciousness Research at Johns Hopkins University School of Medicine. "Ibogaine has particularly high cardiovascular risks, and so what needs to be done is a very measured, methodical weighting of the safety and the efficacy."
The FDA's rejection of MDMA-assisted therapy in 2024 — citing concerns about trial design and the need for additional data — showed the agency remains cautious despite mounting public enthusiasm. In late-stage trials sponsored by the Multidisciplinary Association for Psychedelic Studies, roughly 71% of participants with severe PTSD no longer met diagnostic criteria after MDMA-assisted therapy sessions.
Even with political backing, the path to widespread adoption faces significant obstacles. Psychedelic therapies require hours of preparation, supervised treatment sessions lasting 8 to 12 hours, and follow-up integration therapy — a model that is difficult to scale within existing healthcare infrastructure. A single psilocybin session can cost as much as $3,000, with no insurance coverage currently available, according to a 2025 Guardian report.
The regulatory framework also remains complex. Psychedelics are classified as Schedule I controlled substances under federal law, meaning any approved drug would require rescheduling by the Drug Enforcement Administration before it could be prescribed. State-level regulations add another layer of complexity, and the recent resignation of FDA Commissioner Marty Makary following reports that Trump was considering firing him has introduced uncertainty about the agency's leadership during this transition.
Compass Pathways' Nath said the company is adhering to the same FDA standards applied to all drugs and would not have begun the approval process if the data were insufficient. "We are very pleased to see that the grounding for the executive order was the need to get new treatment options to patients," he said in a statement.
The last time the FDA granted Breakthrough Therapy designation to a consciousness-altering drug — Johnson & Johnson's Spravato (esketamine) for treatment-resistant depression in 2019 — the agency required a strict Risk Evaluation and Mitigation Strategy program mandating certified treatment facilities and patient monitoring protocols. A similar framework for psychedelic drugs could limit the speed of market adoption even after approval.
This article is for informational purposes only and does not constitute investment advice.
