Pay-For-Success Contracts: An Open Source Alternative to Psychedelic Patents

by Savva Kerdemelidis, Celeste Alvarez, Chris Byrnes & Graham Pechenik

The role of patents in the ongoing psychedelic renaissance incites robust debate. Are patents necessary to recoup the high cost of clinical studies and regulatory approval required to bring psychedelics to market? How can one patent psychedelic compounds or treatments that have been used for decades or centuries? In some cases, the patent system has facilitated biopiracy, expropriation of traditional knowledge, and market consolidation by powerful Western pharmaceutical companies. Can we find other market mechanisms that forgo patents—and these problems—altogether?

In this piece, we describe an alternative pay-for-success (PFS) contract system that can be used instead of patents to bring psychedelics into the clinic, including off-patent and naturally occurring compounds. We first detail the history of psychedelic therapy and analyze how this history creates unique market failures when patents enter the scene. We then describe how a PFS contract system works and how it can solve critical market failures that patents cannot.

History of Psychedelic Use

Prior to Western recognition of the therapeutic potential of psychedelics and the present psychedelic gold rush, mind-altering plants and fungi played a central role in cultural practices in various parts of the world. Preceding written history, prehistoric cave paintings from Algeria and Spain appear to depict hallucinogenic Psilocybe mushrooms (Akers et al., Econ Bot., 2011;65, 121–128). As recounted by 16th century Spanish missionary Bernardino de Sahagún in the Florentine Codex, mind-bending cacti and fungi, such as peyote and the Aztec’s teonanacatl, “flesh of the gods,” played a central role in Indigenous religious and healing ceremonies (Schultes, American Anthropologist, 1940; 42:429-443; Nichols, J Antibiot (Tokyo)., 2020;73(10): 679-686). Today, members of the Native American Church (NAC) continue to use peyote as a means to expand their consciousness and commune with God and the spirits, restoring balance and enhancing a sense of community, and benefiting their overall health without necessarily treating a single indication (Jones, Contemporary Justice Review, 2007;10(4): 411-415).

Although Western and Indigenous ideas of therapeutic value may not completely align, previous use of psychedelics in a therapeutic context is undeniable. Setting aside any differences in the subjective experiences they elicit, psychedelic cacti and mushrooms from Mexico and the American Southwest, ayahuasca from the Amazon basin, and iboga from equatorial Africa, to name a few, are connected by recognition of their healing and transformative properties.

Although Western culture has been slow to accept and adopt the medicinal potential of psychedelic therapy, there was a brief period of open scientific research on natural and synthetic psychedelics…