Jenna Kluwe remembers all the beautiful moments she saw in a converted dental clinic in east Portland.

For six months, she managed the Journey Service Center, a “psilocybin service center” where adults 21 and older take supervised mushroom trips. She watched elderly clients with terminal illnesses able to enjoy life again. She saw one individual with obsessive compulsive disorder so severe they spent hours washing their hands who could casually eat food that fell on the floor.

“It’s like five years of therapy in five hours,” Kluwe, a former therapist from Michigan, said.

In 2020, Oregon made history by becoming the first US state to legalize the use of psilocybin in a supervised setting, paving the way for magic mushrooms to treat depression, PTSD and other mental health challenges. A flurry of facilities like the Journey Service Center, as well as training centers for facilitators to guide the sessions, sprung up across the state.

But five years later, the pioneering industry is grappling with growing pains. Kluwe recalled how early last year, her business partner abruptly told her the center was out of money and would close in March – the first in a wave of closures that set off alarms about the viability of Oregon’s program.

The Journey Service Center isn’t alone. The state’s total number of licensed service centers has dropped by nearly a third, to 24, since Oregon’s psilocybin program launched in 2023. The state’s 374 licensed facilitators, people who support clients during sessions, similarly fell. And just this week, Portland’s largest “shroom room” – an 11,000 sq ft venue with views of Mt Hood offering guided trips in addition to corporate retreats – reportedly closed down.

“The attrition is setting in, and a lot of people are not renewing their license because it is hard to make money,” said Gary Bracelin, the owner of Drop Thesis Psilocybin Service Center.

Psilocybin facilitator students participate in an experiential activity during a training session near Damascus, Oregon, in 2022, prior to the launch of the state’s psilocybin program in 2023. Five years later, the number of licensed facilitators in the state has dropped to 374. Photograph: Andrew Selsky/AP

Many worry about how the program’s rules and fees have pushed the cost of a psilocybin session as high as $3,000, putting it out of reach for many just as psychedelics are gaining mainstream acceptance as a mental health treatment. Insurance typically doesn’t cover sessions, meaning people have to pay out of pocket.

Furthermore, the industry is struggling to reach a diverse group of clients: state data show that most people who’ve taken legal psilocybin in Oregon are white, over 44 and earn more than roughly $95,000 or more a year.

Depending on who you ask, these are either signs of an experiment buckling under hefty rules and fees – or a landmark program finding its footing.

“It’s not totally shocking for a brand new program to have a higher price tag,” said Heidi Pendergast, Oregon director of advocacy group Healing Advocacy Fund. She added: “I think that any new industry would see this sort of opening and closing.”

Pendergast pointed to data showing the program is safe with severe reactions vanishingly rare among the estimated 14,000 people who have taken legal psilocybin in the state since mid-2023.

Some practitioners, however, say the state has a long way to go to realize the program’s promises, while other centers are experimenting with new ways to keep costs down, broaden their clientele, and integrate with the mainstream medical system.

‘Some of them are total overkill’

Legal psilocybin seemed like a natural fit for Bracelin. The self-described serial entrepreneur previously founded a cannabis dispensary chain and did sales and marketing for outdoor products during snowboarding’s early days. When the program launched, he started jumping through the many hoops for Drop Thesis to start taking clients in January 2024.

The first obstacle, he said, was finding a property that met the state’s requirements to be more than 1,000 feet from a school and not located in a residential area – with a landlord willing to rent for the center. Bracelin said more than a dozen landlords turned him down before he found a spot. Then there was the challenge of getting insurance for a business centered on a federally illegal drug. The center used private funders instead of banks, he said.

Drop Thesis charges $2,900 for a session, which can last up to six hours as well as before and after meetings with a facilitator, while offering discounts to veterans and during Pride Month as well as one monthly scholarship that covers the full price, Bracelin said.

Factored into the price of a session is the cost of a facilitator and a “licensee representative” who walks clients through paperwork and other requirements. State rules require centers to pay a $10,000 annual licensing fees, install surveillance cameras, alarm systems and securely store mushrooms in safes.

“Some [rules] are definitely justified,” Bracelin said. “And some of them are total overkill, out of fear from people who don’t understand the product.”

Meanwhile, he said the black market is thriving and less-regulated companies sell products marketed as “magic mushroom edibles” that contain chemicals, some dangerous, instead of psilocybin.

Adding to regulatory hurdles is the fact that Oregon’s local governments can ask voters to ban psilocybin businesses, creating a patchwork of bans in 25 of Oregon’s 36 counties and in dozens of cities.

Mushrooms for patient use are shown at a psilocybin service center in Gresham, Oregon. Photograph: Craig Mitchelldyer/AP

Angela Allbee, the manager of Oregon’s psilocybin program, said in an emailed statement that the state became the first to enact regulations for a drug that’s federally illegal, and those regulations were written with broad input that have proven safe. As more data and feedback come in, the state will consider adjusting the rules, she said.

The drug’s illegality at a national level also makes marketing difficult with social media companies banning content that mentions it, Pendergast said. A survey conducted by her group last year found that 58% of Oregon adults had “some or little knowledge” of psilocybin therapy.

After a wave of people trained to become facilitators, many dropped off because there weren’t enough clients, said Max Kelemen, executive director of the Portland Psychedelic Society.

“It’s like a cart before the horse,” he said.

‘Most of our microdosing is like a yoga class’

Tucked away in a drab building in south-east Portland, the Pacific Northwest Integrative Center feels more like a yoga studio than a psilocybin center.

A sign inside advises visitors to remove their shoes before entering an open area where mats are spread out on the floor. Here, the center hosts “microdosing” sessions, where participants take a fraction of the amount of psilocybin used for profound, day-long psychedelic experiences.

Mats on the floor at the Pacific Northwest Integrative Center. Photograph: Jake Thomas/The Guardian

Centers have turned to microdoses, which have been touted for their supposedly subtle cognitive benefits, to broaden their base of repeat clients with a less costly and time-consuming option.

Rules still require microdose clients to fill out paperwork and stay at the center for 30 minutes for their first session and 15 minutes for sessions afterward. The center fills that wait time with yoga or meditation classes for up to 25 people, offering packages of 10 microdose sessions for $200 (plus $10 to $20 for the psilocybin).

“Most of our microdosing is basically like a yoga class, where you take a microdose at the beginning and fill out a whole bunch of paperwork,” said Mike Averill, the center’s founder.

Averill said clients will benefit by moving away from doing just a single day-long session to multiple doses in a community. But he added that microdosing will never be the center’s main source of income, and insurers covering longer macrodose sessions would be key to long-term sustainability.

Mike Averill, the center’s founder. Photograph: Jake Thomas/The Guardian

Drop Thesis also offers microdoses that are paired with black-light painting night or a 1920s-themed interactive murder mystery game. But Bracelin said potential microdose clients are still turned off by the requirements, especially how state regulations bar them from driving home.

“You’re over regulating us because there is this fear that people are going to freak out and run naked down the street,” Bracelin said.

Prohibitively high costs

Early last year, Dr Eric Lee had cleared Oregon’s bureaucratic hurdles and was on the verge of opening a psilocybin service center. But he hesitated – the only way to make it work financially was to charge clients the prohibitively high rate for a session.

Three years ago, Lee found himself depressed after being sued and breaking up with a longtime partner. A friend convinced Lee to go to a music festival where he took mushrooms, felt supported by his group of friends and bounced back.

Lee said he didn’t want others to face barriers to that kind of experience. So he paused the opening and reworked the business model for Space Psychedelic Center, which charges $900 for a session. He said he cut costs by owning the building and running the center himself – cleaning, bookkeeping, and handling other chores. His facilitators are independent contractors paid $560 per session. But he acknowledged his model “isn’t easily replicable”.

Although psilocybin is associated with mental health concerns, the 2020 ballot initiative that created Oregon’s program was designed to keep it outside of the medical system. Now, many supporters say it needs an outside source of cash, which could come from integration with the medical system.

Oregon lawmakers earlier this year took a first step toward making that a reality.

Any adult who clears an initial screening can take psilocybin for any purpose. That removed medical gatekeeping. But it has kept doctors, counselors and other licensed professionals from discussing the legally gray drug with patients for fear of sanctions.

A new bill that takes effect next year allows medical professionals to discuss psilocybin with patients, which could open the door to insurance covering part of the cost.

Before a session, clients meet with facilitators for “preparation”, to discuss their goals, and again afterward for “integration”, to process the experience. Both meetings often touch on mental health, so a therapist who is also a facilitator could potentially bill insurance for those portions, said Averill, owner of the Integrative Center and a licensed therapist.

Colorado and New Mexico have both passed psilocybin laws that integrate the drug into their medical systems.

Erin Pappas, a facilitator at Drop Thesis and a doctoral student in psychiatric nursing, said she hopes psilocybin will be legally reclassified federally, allowing her to prescribe it to patients.

“We’re having a mental health crisis in this country right now,” she said. “I don’t understand the negativity against something that is working so well.”

But Kluwe, the manager of the closed Journey Service Center, cautioned that insurance coverage might not be a panacea. She said insurers are not likely to cover psilocybin for grief because it isn’t medically necessary.

“Why are we making this so hard for this program to work?” she said.

‘I’m hopeful that this model can work’

Rebecca Martinez worked as the volunteer coordinator for the 2020 ballot initiative that legalized psilocybin in Oregon. But after voters approved it, she began to have regrets.

Rebecca Martinez, who worked on the 2020 ballot initiative. Photograph: Jake Thomas/The Guardian

She heard critiques that the initiative would create an overly restrictive system that would cost too much and worsen existing disparities. She started worrying the system critics warned of was taking hold.

Instead of stepping back, she went on to co-found the Alma Institute, a now defunct facilitator training school with a focus on diversifying the workforce. Last year, she co-founded the Cora Center, the first center with a majority of Bipoc and LGBTQ+ facilitators.

Located in a converted residential home on a busy Portland street, the center specializes in group sessions of six to eight participants. Group sessions mean lower costs because the cost of facilitators is split among multiple clients. Sessions take place in a hall-like room centered on an altar with a candle, traditional herbs, and a charango – a small Andean stringed instrument. The center’s lead facilitators, both raised in the Andes, aim to blend Oregon’s psilocybin framework with their ancestral traditions, Martinez said.

“There’s just something special that happens in groups,” Martinez said. “Especially if they have a shared purpose, whether it’s a grief group or people living with chronic pain, or if they share a lived experience or identity.”

The Cora Center’s lead facilitators, both raised in the Andes, aim to blend Oregon’s psilocybin framework with their ancestral traditions, Martinez said. Photograph: Courtesy of the Cora Center

The center welcomes everyone and its clients are mostly white. It also holds quarterly sessions for people of color and plans to add one for immigrants, Martinez said. Prices are sliding scale, with group sessions ranging from $650 to $1,200. The Sheri Eckert Foundation, a psilocybin financial-aid nonprofit, also sponsors some groups.

Still, Martinez said the state-required demographic data shows the center has more work to do to ensure psilocybin is accessible. Currently, the center is in a sprint to get enough partner organizations and programming to keep its doors open, she said. If not, it’ll close in June.

“I’m still hopeful that this model can work,” Martinez said. “But a lot of things would have to go right. And it’s possible.”