"The companies seem to have concluded that developing new psychiatric drugs is too risky and too expensive," said Richard Friedman, professor of clinical psychiatry at Weill Cornell Medical College in New York.
The pullback came after a series of failures in clinical trials that evaluated anti-depressants and anti-psychotic medications, he said.
In one recent case, a new treatment for schizophrenia from US drugmaker Eli Lilly (Ly2140023) was scrapped after it failed in a phase 3 clinical trial, leaving the company with a huge loss on the millions it had already invested.
It's been nearly a decade since the last big blockbuster drug -- Eli Lilly's anti-depressant Cymbalta, in 2004 -- hit the market, and that was more than a decade after the previous big seller, Wyeth's anti-depressant Effexor, according to Dr. Friedman.
Friedman said the decline in spending was apparent at the 2011 conference of the American Society for Clinical Pharmacology and Therapeutics, where just 13 of the 300 presentations were related to pharmaceutical interventions and none involved a new psychiatric drug.
"There is very little in the pipeline," said Friedman. "Eventually you have to rely on what is available and what is available is essentially what we call 'me-too drugs.'
"They basically share the same mode of action as the older drugs," he said, noting that some go back as far as the 1950s, albeit the newer ones may be more effective and have fewer side effects.
According to Steven Paul, professor of psychiatry at Weill Cornell Medical College, , the drop in research and development investment has been "very significant."
"It has to be at least half of what has been invested 10 to 15 years ago," Paul, who has previously held senior research positions at Eli Lilly and the National Institutes of Health, told AFP.
Unique challenges in treating the brain
Laboratories often prefer to invest in cancer, heart disease and diabetes, for which biological targets are well-defined and easier to study, Friedman said.
Given that it takes about a billion dollars to develop a new drug, he added, many companies view that as a "huge gamble."
Treating the brain brings unique challenges, said Paul Summergrad, chairman of the department of psychiatry and medicine at Tufts University school of medicine in Boston.
"The brain is extremely complicated to work on," he told AFP.
Psychiatric illness "is generally more likely to be a disorder of both neurochemistry and circuits, as well as complicated gene and environmental interactions," he said.
"It is harder from a scientific standpoint to study these disorders."
Summergrad said new techniques in neuroscience have emerged in recent decades that allow for a better genetic understanding of psychiatric disease, accompanied by new imaging advances that show a range of abnormalities in the brain.
But despite these strides, these techniques remain "relatively new... so I think it's a challenge for the pharmaceutical industry. That why they have in part backed away from the work of taking care of those illnesses."
AFP asked five major pharmaceutical companies for comment on this story, including Merck, Pfizer, Bristol-Myers Squibb, Sanofi and GlaxoSmithKline.
Only Merck responded.
"As we are doing very little in this area, we respectfully decline to participate. Merck is now focusing on Alzheimer's Disease," said Caroline Lappetito, a spokeswoman for Merck.
Thomas Insel, the director of the National Institute of Mental Health, has blogged about the dearth of progress in mental health innovation.
"Paradoxically, while companies are making business decisions to shift away from central nervous system targets, the scientific opportunities for progress have never been better," he wrote in 2010.
He also expressed dismay that his institute's annual budget at $1.4 billion was not enough to pick up the slack from drug firms.
For Liza Gold, a professor of clinical psychiatry at Georgetown University, the lack of new medication is a big problem.
"It's a very difficult thing to say somebody, 'We don't have anything else, this is what we got,'" she told AFP.
Experts still have hope, however, based on a project launched this year by president Barack Obama to unravel the mysteries of the brain, which Friedman said "has definitely got huge promise."
The Brain Research Through Advancing Innovative Neurotechnologies program sets aside $100 million in investment in its first year by a host of federal agencies.