Thanks to Hollywood, people across the country are familiar with a cocaine bear, but only in Oregon can a person find a psilocybin bear.
“These are our vibrating tactile neural feedback bears, but they are getting a psilocybin treatment as you can see,” therapist Cathy Jonas said as she pointed to the blindfolded stuffed animals in reclining chairs.
Jonas’ mental health practice, EPIC Healing in Eugene, is among several businesses that are first in line to provide legal treatments to people using psychedelic mushrooms.
In 2020, voters in Oregon became the first in the country to legalize the manufacture and administration of psilocybin statewide. Proponents and researchers say the drug can help rewrite stubborn pathways in the brain, and help human beings — not just bears — overcome difficult mental health challenges like addiction, treatment-resistant depression and post-traumatic stress disorder.
After more than two years of regulatory rulemaking and licensing, businesses like EPIC Healing are nearly ready to open. Jonas thinks she could be inviting people into her cozy treatment rooms as early as June, and the state announced Wednesday it had officially licensed the first legal grower of psychedelic mushrooms.
The hype around the emerging industry has frequently overshadowed the financial challenges businesses are going to face in the coming years. So-called psilocybin service centers can cost tens of thousands of dollars just to open, let alone operate. People who want to provide therapy with mushrooms are also racking up significant licensing fees and education costs.
The complicated financial landscape around psilocybin means none of the early businesses are guaranteed to survive the next few years as Oregon tries to navigate the uncharted landscape of allowing therapeutic use of a drug that is still illegal federally.
Like many Oregonians who voted to approve psilocybin treatments through Measure 109, Noah Heller was excited about the possibility of the drug.
Heller broke through years of depression with the help of ketamine, a drug that is commonly used as an anesthetic. Ketamine clinics across the country have seen success as an alternative to more widely used methods for treating depression.
Heller hoped psilocybin could be used similarly, but with a lower cost to patients.
“Ketamine therapy costs $3,000 just for an initial series, and most folks can’t afford that,” he said. “So I started to do my due diligence about what it would take to open up a psilocybin service center.”
What Heller found was a labyrinth of state fees and federal tax pitfalls that were clearly going to make psilocybin in Oregon as expensive as ketamine, if not more costly. Heller is a participant in the Portland Psychedelic Society, and a prominent critic of Oregon’s rollout of the drug program.
Jonas is wading her way through many of the obstacles Heller saw early. She will spend around $12,000 on liability insurance, $10,000 for a state license, thousands on state-required security systems, and she plans to hire at least four employees to meet the rigorous requirements around giving someone a four- to six-hour experience with psilocybin — all before she’s seen a single patient.
Jonas also needs to navigate the Internal Revenue Service’s rules around Section 280E of the U.S. tax code, which bars businesses from taking any type of deduction if their work involves “trafficking in controlled substances.” Cannabis businesses in Oregon frequently pay high federal taxes because of the law. Psilocybin business owners are worried they may have it worse, and could end up paying an 80% or higher tax rate.
“I have a legal team now,” Jonas said. “You don’t think of these things when you’re thinking about healing with plant medicine.”
Heller is concerned that many Oregonians trying to start careers in psilocybin, particularly the people paying for certifications to oversee the sessions, will never see a return on their investments.
“I believe in magic mushrooms. I like magic mushrooms, but I’m wary of magical thinking,” Heller said. “This is federally illegal. And there are no service centers that are open. And you might face high taxes. To expect regular Oregonians to shoulder that risk is problematic.”
Oregon has already seen one major provider of psilocybin education, Synthesis Institute, collapse earlier this month. That downfall left students who paid as much as $11,000 for certification unsure if they’d even graduate. A related company quickly stepped in to try stabilizing the situation for the students and the fragile industry.
In some ways, the financial uncertainty has been baked into Oregon’s psilocybin program from the beginning.
Lack of funding
Measure 109 did not ask the state of Oregon to create a tax to develop the program, even though the psilocybin industry it created was certain to require heavy regulation.
“Here’s the truth,” said Sam Chapman, the former campaign manager for 109, “had we allocated a bunch of money in the measure, the measure would not have passed.”
Chapman now runs the nonprofit Healing Advocacy Fund, which tries to educate people on the myriad rules surrounding psilocybin.
“These are hard conversations with people who, you know, kind of get the rug ripped out from underneath them,” Chapman said. “But I think it’s way more important for people to walk through those pain points now than to lose their entire life savings on the back end.”
Without a sustained funding source like a tax, the regulatory body overseeing the industry — Oregon Psilocybin Services — will need to rely largely on the fees it collects from businesses and facilitators to run the program.
Psilocybin Services estimated it would need around $6.5 million to operate in the 2023-2025 biennium, the first years of publicly open businesses in the state. During that same time, the agency estimated it would license around 750 facilitators and 28 service centers. Estimates by OPB show that if those workers, businesses and associated growers pay the maximum amount required in fees, Psilocybin Services would generate around $4.8 million — a notable shortfall.
Angela Allbee, the manager for Psilocybin Services, said because the industry is so new, it’s difficult to tell what the state’s budgetary needs are.
“Our budget is an estimate that will most likely change over time, and due to recently transitioning from the development phase of our work into licensing, it may take time to understand how fees are covering the costs of our section’s work,” she said in a statement.
Still, in its most recent budgetary request, Psilocybin Services notes that if it were to have a shortfall in the coming biennium, it may not be able to meet regulatory requirements and some areas of the state may not have access to psilocybin services. (Psilocybin access in Oregon is already somewhat limited after voters in many jurisdictions east of the Cascades approved bans on service centers in November.)
Despite the uncertainty, Chapman said many Oregonians are still eager to pay for an early spot in the industry.
“Frankly, at times, I’ve been professionally nervous to tell people the realities and then I’m pleasantly surprised,” he said, noting as recently as March 17 he explained during an educational session that opening a service center could cost tens of thousands of dollars. “I told that to a couple of people in Southern Oregon. They’re like, ‘Oh, OK, that’s the next step.’”
Examine Oregon’s psilocybin program for any period of time, and you’ll quickly come across the word equity. The Psilocybin Services agency notes in its budget request that equitable access to the drug is critical because it could help people of color address “toxic stress, anxiety, and trauma due to racism,” if delivered in a culturally responsive way. The Healing Advocacy Fund is in process of providing around 25 students with a “needs-based fellowship” focused on getting people who aren’t wealthy and white into psilocybin training programs. And the state of Oregon requires that all businesses handling mushrooms file an equity plan.
But the business realities of the nascent industry mean it is likely to be the domain of the wealthy, at least early on.
“I think people’s expectations are a little bit more than a reality,” said Daniel Huson, owner of Rose City Laboratories.
Rose City is the first lab in the state to apply for a license and meet Oregon Health Authority requirements for testing the purity and potency of psilocybin mushrooms. As a cancer survivor who grew up in Grass Valley, California, witnessing the relief people with serious illnesses receive from what he calls “plant medicines,” Huson cares about how accessible psilocybin will be in Oregon.
“It’s super expensive,” Huson said of launching a business in the new industry, “which is mind-boggling to me a little bit because [the state] rolled this out as being an equitable plan.”
For businesses paying the high fees to open, there are few options but to pass the costs on to people seeking treatments.
Huson was an early adopter in Oregon’s cannabis industry, running several medical dispensaries, growing operations and edible manufacturing businesses before focusing on his laboratory. He also helped craft some of Oregon’s rules around cannabis. That background gives him some sense of what a drug market may look like as it becomes a quasi-legal enterprise. He estimates the average psilocybin treatment in Oregon is likely to be at least $600 for a session. For Jonas, the Eugene therapist, a treatment course with psychedelic mushrooms — including a “preparation” and “integration” conversation — is likely to cost between $2,000 and $3,000.
Jonas is hoping to lower her session costs eventually by holding them in groups, possibly at a future retreat. She is also trying to remind herself why she became interested in psychedelics.
“It’s so easy to get lost in this business phase right now of the logistics and then to lose track of what got us here. Why are we doing this work?” she said. “I think it’s gonna be beautiful if it’s done right.”
It’s a sentiment shared by nearly everyone shelling out money to build the first legal psilocybin program in the country — a hope that with enough optimism about mushrooms’ healing potential and enough time, the industry will pencil out.
Correction: The caption on a photo of Rose City Laboratories has been updated to reflect that, while the Portland lab is the first in Oregon to apply for a psilocybin testing license, the license has not yet been issued. OPB regrets the error.