Recent Developments in the Canadian Psychedelics Industry

Recent Developments in the Canadian Psychedelics Industry

Introduction

The psychedelics industry in Canada continues to shift, and the outcomes of certain developments remain unclear. During times of unpredictability, understanding the landscape, and potential future development, is crucial for industry participants and stakeholders. In this bulletin, we provide an update on the key advancements and trends in the Canadian psychedelics space since our last annual review of 2022.

Accessing Psychedelics

Psychedelics are classified as controlled substances under the federal Controlled Drugs and Substances Act (the “CDSA”). In effect, this designation means that most activities involving psychedelics are prohibited with certain exceptions. As noted in our prior bulletins, there are currently three avenues for individuals to access psychedelics in Canada – an exemption under section 56 of the CDSA, the Special Access Program (“SAP”) and clinical trials.

Section 56 Exemptions

Section 56 of the CDSA permits the Minister of Mental Health and Addictions and Associate Minister of Health (the “Minister”) to grant discretionary exemptions for access to controlled drugs and substances, on a class or individual basis, if such exemptions would serve a medical, scientific, or other public interest purpose (“Section 56 Exemption”).[1]

On January 31, 2023, the first province-wide Section 56 Exemption took effect in British Columbia, permitting adults to possess prescribed amounts of opioids, methamphetamine, cocaine, and MDMA, without facing criminal charges.[2] Concerns arose in the province around the use of illicit drug use in public spaces, resulting in the B.C. government twice amending its Section 56 Exemption to limit its application in public spaces, among other limitations.[3] As of May 7, 2024, B.C.’s Section 56 Exemption only applies in private residences, shelters, and designated health care clinics and possession of opioids, methamphetamine, cocaine, and MDMA is once again prohibited in most public spaces.[4]

Shortly thereafter, on May 17, 2024, the City of Toronto’s request for a Section 56 Exemption to decriminalize possession of all drugs listed in the CDSA was rejected. The Minister found that the proposal, initially submitted on January 4, 2022, did not adequately protect public health or maintain public safety.[5] Concerns included the feasibility for law enforcement to implement the plan, protection of youth, and the lack of support from key players like the Ontario provincial government.[6]

A significant portion of individual applications for Section 56 Exemptions have similarly been denied. In November 2024, it was reported that since 2020, 643 patients and healthcare practitioners have applied to access psychedelics through a Section 56 Exemption. Only 101 (about 16%) of those applicants were approved; and 415 (about 65%) were rejected.[7] The reasons for rejection of each specific application are not readily available, though in 2022, CBC News had reported that applicants who apply for a Section 56 Exemption for personal use have been rejected in favour of funneling such applicants through the SAP.[8]

SAP

Medical practitioners may request access to certain psychedelics for eligible patients through the SAP. Eligible patients include those with serious or life-threatening conditions where conventional treatments have failed, are unsuitable, or are not available in Canada.[9]

In November 2024, it was reported that out of 471 SAP applications to access psilocybin or MDMA since 2022, 318 applications (about 68%) were approved.[10] Where an applicant is unsuccessful in its SAP application, such applicant is not barred from applying for a Section 56 Exemption as an alternate route.

On February 27, 2023, Health Canada issued a notice to stakeholders detailing the requirements for health care practitioners seeking access to psychedelics through SAP for the purposes of psychedelic-assisted psychotherapy.[11] The notice acknowledged growing interest in this therapy and the associated psychological and physical risks for patients.[12]

Clinical Trials

The number of authorized clinical trials involving psychedelics, such as psilocybin, MDMA and ketamine, have increased in recent years. In 2024, Canada’s psychedelic research space saw approximately:

• 18 ongoing clinical studies using ketamine;
• 15 ongoing clinical studies using psilocybin; and
• 2 ongoing clinical studies using MDMA.[13]

The Government of Canada has also taken steps to enhance the scope of research on psychedelics. On June 29, 2023, the Minister announced a research grant of nearly $3 million to support three clinical trials using psychedelics. The grant comes from a special research competition that was conducted in 2022 and supports trials involving psilocybin-assisted psychotherapy as a treatment option for alcohol use disorder, treatment-resistant depression, and end of life psychological distress in advanced-stage cancer patients.[14] The grant was funded by the Canadian Institutes of Health Research (“CIHR”), Canada’s federal health research funding agency. The CIHR ran research competitions that provided nearly $4 million of additional funding for psychedelics research in 2023 and over $4 million of funding in 2024.[15]

Challenging Barriers to Accessibility

To build on the existing avenues described above, several legal initiatives have taken place in recent years to further increase exposure and/or access to psychedelics in Canada.

On July 27, 2022, 8 Canadians filed an application against the Government of Canada and the Minister of Health, claiming that the current means of accessing psilocybin are insufficient and therefore violate section 7 of the Canadian Charter of Rights and Freedoms (“Charter”).[16] The application seeks, among other things, orders to make the CDSA’s prohibition of psilocybin unconstitutional for medical uses.[17] If successful, medical use of psychedelics would no longer be illegal and the psychedelics industry would be fundamentally changed as a result. This litigation remains ongoing.[18]

On September 25, 2023, the Federal Court dismissed an application for judicial review brought by healthcare practitioners to challenge 96 Section 56 Exemption refusals made by the Minister. The healthcare practitioners sought Section 56 Exemptions to possess and consume psilocybin in the course of their own training for psilocybin-assisted therapies. The Minister determined that the Section 56 Exemptions were not necessary for a medical or scientific purpose or otherwise in the public interest, as the applicants could access psilocybin through clinical trials. The applicants argued that the Minister’s decisions were unreasonable, claiming that the Minister failed to grapple with central arguments and evidence, gave non-transparent reasons for the decisions, and did not address arguments about the impact a refusal would have on the patients’ rights to life, liberty, and security of the person. The Federal Court held that the Minister’s decisions were reasonable and dismissed the application.[19]

On November 21, 2023, three applicants filed a notice of constitutional question where they argued that the CDSA’s prohibition of psilocybin violates sections 2(b) and 7 of the Charter.[20] The applicants had been charged as part of a police raid of a psilocybin dispensary. They argued that psilocybin is critical to allow a person to experience the freedom of thought protected by section 2(b) in a more fulsome manner.[21] The litigation remains ongoing.[22] This is a fundamentally different argument from that discussed above, relating to the insufficiency of access for medical purposes, however is indicative of an environment where there’s increased appetite for challenging the Government of Canada’s limitations on access to psilocybin in particular.

Keeping with this trend, on May 24, 2024, the Federal Court struck down a Health Canada decision to reject an SAP request for psilocybin to treat cluster headaches.[23] Health Canada reasoned that the request did not contain sufficient information about the safety and efficacy of psilocybin and that therapeutic alternatives were available on the market.[24] The Federal Court found the refusal unreasonable, holding that Health Canada failed to consider the applicant’s arguments under section 7 of the Charter and regarding the inadequacies of available alternative medicines. The Federal Court also held that the decision was inconsistent with prior communications from Health Canada where, in speaking with the applicant’s doctor, they acknowledged that the safety of psilocybin for cluster headaches was established.[25] Following this decision, Health Canada approved use of psilocybin through the SAP program to treat cluster headaches for the first time.[26]

Conclusion

The psychedelics industry has undergone significant transformation in recent years, with further developments on the horizon as Charter challenges make their way through the courts, and with possible changes of government on a federal level in Canada as well as with respect to certain provinces. We will continue to monitor these developments closely to keep you informed of the evolving regulatory and market landscape.

[1] Controlled Drugs and Substances Act, SC 1996, c 19, s 56.
[2] Health Canada, Subsection 56(1) class exemption to possess small amounts of certain illegal substances in the province of British Columbia – health care clinics, shelters and private residences (Ottawa: Health Canada, 30 May 2024), online.
[3] Health Canada, Statement from the Minister of Mental Health and Addictions and Associate Minister of Health (Ottawa: Health Canada, 14 September 2023), online; supra note 2.
[4] Supra note 2.
[5] Health Canada, Statement from the Minister of Mental Health and Addictions and Associate Minister of Health (Ottawa: Health Canada, 17 May 2024), online.
[6] Ibid.
[7] Omar Mosleh, “These patients are considering MAiD. They say Canada has made it harder to access magic mushrooms — a treatment giving them reason to live”, Toronto Star (13 November 2024), online.
[8] Caroline Barghout & Kimberly Ivany, “Terminal cancer patient denied magic mushrooms after Health Canada rule change”, CBC News (February 28, 2022), online.
[9] Health Canada, Health Canada’s special access programs: Request a drug, (Ottawa: Health Canada, 15 March 2024), online.
[10] Supra note 7.
[11] Health Canada, Notice to stakeholders: Requests to the Special Access Program (SAP) involving psychedelic-assisted psychotherapy, (Ottawa: Health Canada, 27 February 2023), online.
[12] Ibid.
[13] Health Canada, Clinical Trial Search, online.
[14] Canadian Institutes of Health Research, Government of Canada invests nearly $3 million to study the potential benefits of psilocybin-assisted psychotherapy (Ottawa: Canadian Institutes of Health Research, 29 June 2023), online.
[15] Canadian Institutes of Health Research, Funding Decisions Database, online.
[16] Hartle v. Crown (27 July 2022), Ottawa T-1560-22 (FCC) (Statement of Claim, Hartle) at para 176.
[17] Ibid at para 183.
[18]  Canada, Federal Court, “Recorded Entry Summary Information: T-1560-22” (last visited February 10, 2025), online.
[19] Toth v. Canada (Mental Health and Addictions), 2023 FC 1283 at para 116.
[20] R.v. Akila (21 November 2023), London 2311998232310420801 (ONCJ) (Notice of constitutional question, Akila) at 2.
[21] Ibid.
[22] Dale Carruthers, “London magic mushroom shop still open after chain claims to shut 30 locations”, London Free Press (December 5, 2024), online.
[23] Lance v. Canada (Attorney General), 2024 FC 787 at para 97.
[24] Ibid at para 35.
[25] Ibid at paras 64-90.
[26] Sharon Kirkey, “‘Suicide headache’ patient granted magic mushroom access after Health Canada U-turn”, National Post (June 12, 2024), online.

By Leila Rafi, Sasa Jarvis, Kiira Kaarid, Veronica Russo and Gary Preteau (Articling Student)

A Cautionary Note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2025