A Tale of Two Strategies: Does COMPASS Have the Right One?
Two weeks ago, Tesla announced on Twitter that it would make charging networks available for free to all U.S. electric vehicles by the end of 2024. The same day, behind a paywall, Business Insider published a story about everyone’s favorite psychedelic pin̈ata, COMPASS Pathways.
The Business Insider article begins with the familiar COMPASS story about how it grew from a fledgling nonprofit into a $400 million company by way of capital infusions from three billionaires, including Christian Angermayer. The heart of the article touches on an oft-asked, soul-searching question in the psychedelics industry: whether and to what extent companies must operate for-profit and monopolize medicine to succeed. In the article, Angermayer says: ”Biotech is all about having monopoly. That’s the whole of biotech. You do something novel, you finance it, and you own it.” Rick Doblin of MAPS, on the other hand, notes that “nonprofit organizations have faltered” but that “the whole is space built on non-profits.”
Elon Musk clearly has a different view from Angermayer’s “monopoly is all” creed. In 2014, he famously proclaimed that “Tesla, other companies making electric cars, and the world would all benefit from a common, rapidly-evolving technology platform.” Musk then laid open the Tesla patent portfolio, pledging not to enforce them against any party relating to electric vehicles or related equipment so long as the party acts in good faith. Today, he still believes “patents are for the weak” and goes further, asserting that patents “don’t actually help advance things; they just stop others from following you.” Tesla, of course, still has thousands of patents. But its filings are down significantly.
Some say Musk’s open IP stance has little to do with altruism. They’re probably right. In the early days of a market, reducing access costs for follow-on innovators has the potential to increase improvements and market adoption. The growth of the electric car depends on expanding charging station networks. Allowing others to use Tesla’s patented charging technology brings other companies from across the industry together to create compatible charging stations for the benefit of all. Tesla also benefits from the growth of the electric car space—even if it means more competition—by creating more customers, selling secondary products, and lower costs from more efficient infrastructure at-scale.
Non-monopolization Can Lead to Innovation, Profit, and Growth
The free software movement presents another paradigmatic example of how non-monopolization can equal more innovation, profit, and growth—not just for society or a sector in the aggregate, but for individual companies themselves. Most of the internet runs on Linux—free software—which has proliferated as a platform largely due to copyleft. Copyleft is the legal technique of licensing a protected work on condition that derivative works be licensed downstream on the same terms.
Software, of course, isn’t the same as biotech. In general, the cost of developing software is far less than the cost to bring a novel pharmaceutical to market. The economics and value of patent rights between the two industries is entirely different. Nonetheless, I can’t help but observe that the challenges psychedelic-assisted therapy will face over the next decade share a lot in common with the electric car and other nascent, infrastructure intensive industries.
What Challenges will COMPASS (and Other Psychedelics Companies) Face?
From my vantage point, COMPASS’s biggest business challenges in the next 10 years won’t be from its putative competitors: MAPS, Usona, a Carey Turnbull outfit, or any number of psychedelic upstarts. Rather, COMPASS’s biggest challenges will come from a non-existent infrastructure, a regulatory environment inhospitable to psychedelic-assisted therapy, and stigma from prohibition. When Angermayer states that the “whole of biotech” relies on monopolies, he compares psychedelic-assisted therapy, which has loads of baggage, to a mature industry that does not. The comparison between psychedelics and biotech is not quite apt.
While biotech is different from software, if the time-horizon is just the next decade, I’m split between Musk and Angermayer. I’m not against patents, even in the pharmaceutical or psychedelic space. Far from it. A deliberate IP and patenting strategy will be paramount to future success on the market, even if one wants to go the non-profit route. One can easily see why free software works for software but not FDA-approved biotech products: a hacker in a basement can write world-changing software. That same individual can’t carry a drug through an FDA approval process. Developing drugs requires teams and capital-intensive research. And as noted above, even the free software relied on copylefted IP to succeed.
I expect that even the bottom-line focused companies, including but not limited to COMPASS, realize on some level the need for cooperation to establish common infrastructure, at least in these early days of the psychedelics industry. For example, atai’s $500,000 donation to the MAPS nonprofit is likely to help it get through the gate and lubricate the wheels of bureaucracy in a way that will also benefit atai, as well as atai’s competitors.
A Middle Ground
Bottom line: is making it difficult for competitors to set up shop and mining the field for IP a winning strategy? I’m not so sure—whether posed as a question about the psychedelics industry as a whole or companies like COMPASS individually.
Ultimately, as—or if—the industry matures, the best approach both industry-wide and for companies themselves might be somewhere in the middle: an IP strategy that eschews pure monopolization but exploits the benefits of IP in ways that do not discourage cooperation on bigger picture items to build out the network. Such strategies could include patent pools, where two or more patent owners trade license-rights, or standardized license rates.
For this operation to be profitable, it will undoubtedly take more than one or two successful psychedelic medicine companies building out the infrastructure. Monopolization isn’t necessarily the best way to make that happen.