Is there about to be a psychedelic drug boom in mental health treatment? In May researchers released data from a phase 3 trial that used MDMA (street name: ecstasy) along with talk therapy to treat people who have post-traumatic stress disorder (PTSD). And COMPASS Pathways (CMPS 0.27%) is exploring the use of psilocybin (the active ingredient in "magic mushrooms") in combination with talk therapy, to treat people who have severe depression.

How big is this possible new market going to be? Corinne Cardina, bureau chief of healthcare and cannabis at Fool.com, and Motley Fool writer Taylor Carmichael discuss this emerging new treatment paradigm in a clip from Motley Fool Live, recorded on May 14.  

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Corinne Cardina: Do you want to go ahead and jump into psychedelics?

Taylor Carmichael: Sure.

Cardina: All right. Speaking of risky, and biotech, and cutting-edge technology in the healthcare space, there has been some exciting developments in psychedelic drugs. Last week results from a phase 3 trial of MDMA, which is actually combined with talk therapy in this trial, targeting post-traumatic stress disorder, really blew everybody away. The remission rates in this trial were double that of a placebo. The results are going to be published in the Nature Medicine journal and according to The New York Times, FDA approval could come by 2023. What is the potential market for PTSD that could be treated with MDMA? What do we know about this market?

Carmichael: Well, there are a lot of people that have post-traumatic stress disorder. A lot of it's soldiers, but there are also civilians, ordinary people who have traumatic events in their lives and it affects them. I think the market opportunity that I saw was anywhere up to, I want to say $80 billion. Let me check my notes real quick. $20 billion to $80 billion was the market opportunity. One, for people who don't know, MDMA is ecstasy. This is a drug that's been illegal for a long time. What they're doing, they're giving ecstasy to people with PTSD, and they're combining that with talk therapy. It's highly regulated, it's not just people going off on their own and using drugs. They take ecstasy and then the therapist talks to them through the experience and chats with them through the experience. We're going to talk about ecstasy and magic mushrooms, just to use the street terms. Those are two things, they both require talk therapy. That's an interesting aspect. I think in healthcare, what we've seen over the last several decades is talk therapy has declined, and has been replaced with people on depression using drugs. The pharmaceuticals, Prozac and Zoloft and all these drugs that are to help with depression. Talk therapy, which has always been expensive has declined and people taking drugs instead. Well, this kind of flips it on its head and we're back to the importance of talk therapy. In this trial, they gave the people ecstasy and then they had counselors talk them through it. Obviously, you know if you had ecstasy or have not had ecstasy, so I don't know how good they were at masking the (placebo) versus the real thing. But they also did talk therapy with people who do not have ecstasy. But they saw dramatic improvements in the people that had ecstasy and were able to talk to their therapist about their issues and they're not exactly sure how the science works. Part of it is, the experience decreases your fear, and it makes you feel, I guess safe, but decreases your fear. As such, you're able to talk about traumatic events without getting upset by them. Just that talking of it takes away a lot of the stress and a lot of anxiety. Apparently, it has been very successful.

Cardina: It's for severe PTSD. It's called MDMA assisted therapy. Like you said, it's not people getting street drugs and going to their house and trying to work through things, it's very controlled. But like you said, I think what's interesting about this is a double-blind study, it's already been published in Nature Medicine. It's a really interesting read if you're interested in this. But it is hard to mimic MDMA if you're in the placebo. Definitely, I'm curious about that. I haven't read through the whole thing. But it's really interesting because it's a cutting-edge field in healthcare. Harkens back to the early days of medical marijuana. There may be some parallels in terms of the market as we overcome stigmatization and try to find medical applications.