Those questions are central to a new study published today in JAMA Oncology
that explores new business models for funding drug development to treat pediatric cancers. The study, led by Andrew W. Lo
, Charles E. and Susan T. Harris Professor at MIT
and the director of the Laboratory for Financial Engineering, finds that a collaborative investment structure involving backing from the private sector, government, and philanthropic organizations holds the greatest promise for new drug discovery.
“As a new era of drug development dawns, 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,” says Lo. “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.”
Even as our understanding of childhood cancers is growing and mortality rates are declining, pharmaceutical companies are facing significant disincentives in pursuing new treatments. For one thing, the market for these drugs is relatively small. Childhood cancer is a rare disease—only about 15,000 cases are diagnosed in the U.S. per year. Because it’s so rare, and because drug pricing is such a sensitive subject lately, pharmaceutical companies have fewer economic incentives to invest in pediatric oncology drug development.
Another factor is the scientific challenges in pediatric oncology due to the smaller number of genetic mutations in children that can serve as drug targets. Moreover, the biology of an infant is very different from that of an adolescent, which differs still from that of a young adult, making drug development even more complex for children. Also, because drug candidates sometimes have toxic side effects, pharmaceutical companies are reluctant to include children in clinical trials until safety has first been established in adults.
Finally, drug pricing remains a big obstacle. Lo and his co-authors—Sonya Das, an MIT
undergraduate, Dr. Peter Adamson
, Professor of Pediatrics and the Children’s Hospital of Philadelphia
and Chair of Children’s Oncology Group, and Dr. Raphaël 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 in which many pediatric cancer projects are funded and developed simultaneously. The team found that a purely private-sector-funded portfolio of early-stage (Phase 1) projects produced expected returns ranging from −24.2% to 10.2%, depending on pricing assumptions, with the 10.2% figure requiring a $1 million
price tag per course of treatment for each approved drug.
To make pediatric cancer drug development economically attractive for pharmaceutical companies, prices would need to range from several hundred thousand dollars to over a million dollars. “When lives are at stake, such lofty prices may seem like price gouging even though such prices may be justified from a cost-effectiveness perspective,” says Lo. “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 these deadly childhood diseases, the study’s authors argue that a new way of funding pediatric drug development is needed. In further simulations involving philanthropic support, government guarantees, and portfolios of assets that include both late- and early-stage assets, the study reported expected returns ranging from –5.6% to 22.5%. “In the public/private partnership simulation, 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,” says Lo. “Philanthropic support helps pay for the 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 analysis, the authors published the full details of the simulations in the supplementary materials that accompany the article. The team also made all of their 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,” he says. “Treating childhood cancer is a nonpartisan issue, and under the right financing and business structures, we can do well by doing good.”
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SOURCE MIT Sloan School of Management