Market Size Thought Experiment
Before we attempt to answer the potential market size question for psychedelic treatments, first, ask yourself the following:
- Do you know anyone who has suffered from depression, addiction, anxiety, or ADHD?
- How many people do you think may suffer from negative thoughts and mental problems in private, but never discuss it in public or never see a doctor?
- For healthy people, if psychedelics were widely available to use, and the substances were proven to increase the average human’s sense of calmness and peace, their levels of creative mental ability, or to provide a new perspective on life, how many people do you believe would explore that new therapy?
This thought experiment gives an idea of the potential widespread use of psychedelic therapies both medicinally, and potentially recreationally, if clinical trials are able to prove to aid or cure mental health issues. Perhaps even more importantly, if medicinal trials are successful, the world can begin to change 50 years of damaging narrative, to remove the stigmas of psychedelic drug classifications.
Q: What is the current market size of mental health drugs and treatments both in the United States and Worldwide?
It is believed that in the US, roughly 1/5 people suffer from mental health related issues. In addition to that staggering number, a study from 2010 in the United States listed that for every $1 spent on depression treatment directly (prescriptions, outpatient, inpatient and emergency costs), there are up to $6.60 of indirect costs (comorbidity direct cost, comorbidity workplace cost, MDD workplace cost, MDD suicide cost). There were 328 million people residing in the US in 2019, so as per the data, 65 million suffered from some form of mental illness. Direct costs for mental illness averaged $3,076 per person in 2019, and if indirect costs were applied at the same rate as the study from 2010, $20,308 per year can be added. The same depression treatments and approaches from 2010, were still being employed in 2019 and over $200 billion was spent directly on mental health issues in the United States last year.
Worldwide, the estimated stats for mental health are lower, but still 10.7% of the people suffered from mental health issues in 2017, according to ourworldindata.org. Worldwide population excluding the US, was 7,384 billion in 2019. So, with 10.7% experiencing mental health issues, 790 million people worldwide required treatment. Also, outside of the US, costs per person are lower, but even if costs were 1/4 of the US on average, the total worldwide market equates to $607 billion in direct costs outside of the US, with indirect costs still being multiples of that.
Q: What is the growth rate of the mental health sector, and how big will it be in 5 years?
2020 has been an incredibly traumatic year for many, likely accelerating the previous growth rate of about 4.5-5% each year for the past five years in the US in the mental health space. If a 5% growth model is applied to the market size numbers listed above, it is not unreasonable to say that by 2025, the market could reach over $1 trillion worldwide. If one applies the indirect costs from the 2010 study to the direct costs in 2019, then the total societal benefit associated with potentially curing mental illness for some who suffer, is obvious.
Q: If the compounds prove to be effective, and are lowered from Schedule 1 to Schedule 3, 4, or even legalized, how much market share can psychedelic treatments displace?
Because psychedelic drugs are currently sold mostly in the black market, it is impossible to accurately state the current worldwide numbers, but estimates vary between $8-20 billion per year. If these drugs prove to help with various mental illnesses, and become accepted in more societies, surely a spike in growth rates of users will occur. Then there’s also the question of how many people without proper health plans, who cannot afford expensive prescriptions of stimulant drugs today, would try this alternative path? By 2030, if psychedelic drugs are curing many of the mental illnesses currently prohibiting members of society from being productive, then then a market share of 10-15% would not be unreasonable, and could be even higher. Within 10 years, the psychedelic drug market could be 100 billion? 200 billion? More? The number of variables for this number to be calculated is just too high at this point, but certainly the market could be huge. The research data will tell the story.
Q: How much has been invested thus far?
As of March, 2020, the psychedelic drug industry had received an estimated $220 million worth of investments, dominated by the Peter Thiel backed Atia Lifesciences. Since then, another $100+ million has been invested in April and May, 2020. It is clear the race to conclude research proving the anecdotal stories of Psilocybin, LSD, Ibogaine, MDMA, Ketamine, and possibly even DMT, is well underway. The results of the research studies will determine how much market disruption will occur, and how big the secondary benefits will be for society.
One last comment on market size… We didn’t mention the potential market size for micro-dosing these compounds. That niche use of these substances, if proven effective for its users, could balloon into a whole new sector. Think cigarettes, but instead of net negative effects on society, massive positive effects. We will save that subject for a future article.