I've never met anyone or read anything that would suggest that target panic was anything other than a mental problem. If recognizing it as such helps you to solve it, more power to you.
Some archers never develop target panic, and your friend may well be one of them. For someone who has never experienced a problem to deny the existence of it is somewhat egocentric, don't you think? While he may not have target panic, it is possible that he could have a fear of heights, or a fear of being in tightly enclosed spaces. Would it help him to overcome these fears if other people were to tell him that there is no such thing as acrophobia or spacephobia?
Target panic is just a name we have assigned to various symptoms people have, which could include the inability to come to full draw before releasing the arrow. Maybe your friend's objection is that it's too dramatic a name, in that nobody really panics because of it. Maybe target frustration would be a better name, but target panic is the name we're stuck with at the moment.
All of those of us who have suffered from it have started by trying to reason our way out of it, I'm sure. Most of us are grown men who feel we have excellent control of our emotions, and it's embarrasing when we can't come to full draw when we know we're fully capable of doing it. We should just be able to say to ourselves, "hey, this is stupid, just stop doing it!" Going to extremes, one day I was rock-climbing with a psychiatrist, and I asked him why, if a patient was crazy enough to see snakes crawling on the walls, he couldn't just explain to him that there really were no snakes crawling on the walls, and just to ignore them. He explained to me that as far as the patient was concerned, there really were snakes crawling on the walls, and telling him to ignore them just didn't work.
So when reasoning our way out of it doesn't work, we look for other solutions.... Fortunately, target panic isn't terminal, and my own experience is that if I work my way through it, it eventually subsides, and I have a period of relatively target panic free shooting. During these times, of course, I convince myself that I licked the problem and it's never coming back, which is a comfortable illusion....