Funding Pediatric Cancer Drug Development

Rebecca M. Knight

May 15, 2019

4 Min Read

Why is it so hard to develop drugs for children with cancer? And what can be done about it? Those questions are central to a Massachusetts Institute of Technology (MIT) study published in JAMA Oncology exploring new business models for funding drug development to treat pediatric cancers (1). Led by Andrew W. Lo (the Charles E. and Susan T. Harris professor at and director of MIT’s Laboratory for Financial Engineering) finds that a collaborative investment structure involving money from private-sector, government, and philanthropic-organization sources holds the greatest promise for new pediatric oncology drug discovery.

“As a new era of drug development dawns,” Lo says, “scientists are finding cures and treatments for different types of cancers every day. But for a variety of reasons, childhood cancers are being left behind. Spurring innovation in this field requires us to be more creative in our approach to financing. And if there is one patient population that really needs our support and advocacy, it’s our children.”

A Niche Market: Even as scientists’ understanding of childhood cancers is growing and child mortality rates are declining, pharmaceutical companies are facing significant disincentives to pursuing new treatments. For one thing, the market for pediatric oncology drugs is relatively small. Childhood cancers are fairly rare: Only about 15,000 cases are diagnosed in the United States each year. As a result, and because drug pricing is a sensitive subject these days, drug companies have fewer economic incentives to invest in pediatric oncology drug development than in other, more lucrative areas.

Another complicating factor is the scientific challenge presented by the relatively small number of genetic mutations in children that can serve as oncologic drug targets. Moreover, the biology of an infant is very different from that of a toddler, adolescent, and young adult — making drug development for children even more complex overall. And because drug candidates can have toxic side effects, pharmaceutical companies can be reluctant to include children in clinical trials until the safety of their products has been established in adults.

Finally, drug pricing remains a big obstacle. Lo and his coauthors — MIT undergraduate student Sonya Das, Peter Adamson (professor of Pediatrics and the Children’s Hospital of Philadelphia and chair of Children’s Oncology Group), and Raphael Rousseau (chief medical officer at Gritstone Oncology) — ran several simulations to evaluate the economic viability of a “multiple shots-on-goal” approach to therapeutic development. Under such a development strategy, many pediatric cancer projects are funded and developed in parallel. The research team found that a portfolio of early stage (phase 1) projects funded only by private-sector sources produced expected returns ranging from −24.2% to 10.2%, depending on pricing assumptions. To reach that 10.2% return figure, each approved drug would require a US$1 million price tag per course of treatment.

To make pediatric cancer drug development economically attractive for pharmaceutical companies, prices thus would need to range from several hundred thousand dollars to >$1 million. “When lives are at stake, such lofty prices may seem like price gouging,” Lo says, “even though such prices may be justified from a cost-effectiveness perspective. The political ramifications could be immense, so the issue is treated like a third rail. No one wants to touch it.”

To make progress in fighting deadly childhood cancers, the study’s authors argue that a new way of funding pediatric drug development is necessary. In further simulations involving philanthropic support, government guarantees, and portfolios of assets that include both early and late-stage assets, the study reported expected returns ranging from –5.6% to 22.5%.

“In the public–private partnership simulation,” Lo explains, “the private sector does the heavy lifting, but the so-called ‘Valley of Death’ — the process of taking preclinical research through to phase 1 clinical trials, where the financial risk is greatest — is taken on by government and charitable groups. Philanthropic support helps pay for R&D in the early stages, and the government guarantee reduces the downside risk of investment at a reasonably low cost to taxpayers. This is the kind of collaborative approach that’s needed to make pediatric cancer drug development attractive to investors and the private sector.”

To encourage other researchers and practitioners to experiment with and extend their analyses, the authors published the full details of their simulations in supplementary materials that accompany the JAMA Oncology article. The team also made all its computer code open-source and freely available.

“Our hope is that government agencies, policymakers, philanthropists, drug companies, and investors will be motivated to action by our findings,” Lo says. “Treating childhood cancer is a nonpartisan issue, and under the right financing and business structures, we can do well by doing good.”

Das S, et al. The Challenge of Pediatric Oncology: New Business Models to Accelerate Innovation. J. Clinical Oncol. 36(15) S10528. doi:10.1200/JCO.2018.36.15_suppl.10528.

Rebecca M. Knight is a freelance journalist. Contact Paul Denning at the MIT Sloan School of Management, 238 Main Street, Cambridge, MA 02142; [email protected].

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