Why Investors Hate Medtech Innovation for Kids

by Barry Didato

Medical Solutions for Children

Julius Caesar once said, “Men believe that which they wish to be true.” Today, this statement rings true when sampling investors’ opinions that enough is being done to assist innovators trying to bring medical solutions to help sick children.

Most investors are horrified to learn the reality is that less than 6 percent of medtech investment in the US goes toward pediatric innovation even though children comprise 25% of medical need. Further, the 6 percent that finds its way to help with pediatric innovation — largely through groups such as The Innovation Institute, nonprofits, impact investors and philanthropists– is divided among preemie, infants, toddlers, young children and pre-teens.

Why such astoundingly poor attention to children? Sophisticated investors will give you a myriad of reasons, but in the end, its all about numbers, market size and return on investment.

As a population, children are typically deemed as being generally healthy. This is not, however, the case for the adult and elderly populations who are a “sweet-spot” for investors. For instance, in 2014 an American Cancer Association Report estimated that cancer would kill roughly 2,000 children and nearly 6,000 adults in the U.S[1]. Due to these types of statistics and the complexities associated with the size and growth of children’s bodies, medical innovation is typically catered toward the adult population and is extremely limited for the pediatric population.

As a result of this disparity, investors often do not consider the development of devices or medication specific to children as attractive or commercially feasible investments[2]. Unfortunately, this means that smaller versions of adult medical devices are rarely developed for the relatively small numbers of children who require them in comparison to adults. In addition, the costs to manufacture the technology associated with child-size devices, when compared to the total numbers in need, often make the financial returns less attractive than the relatively large numbers typically associated with adult populations.

Big data and connectivity for doctors worldwide, combined with new technologies for personalized medicine, to 3D printing are shattering many of these barriers, but investor help through groups such as The Innovation Institute and impact investors are still an essential ingredient to bringing about change to fuel pediatric innovation.

The reality is that, until now, much of pediatric medicine has remained unchanged or remarkably slow to evolve due to the lack of professional investor interest.

Advancements have been slow and sporadic. Some innovators, such as Zero Point Frontiers Corporation have taken it upon themselves to leverage emerging technologies (such as 3D printing) to make such things as a prosthetic limbs for a mere $5, which is one percent of the typical cost using older, conventional technologies that can cost upwards of $50,000.

Consider that for less than the price of a fast-food meal, you can provide a child with a missing limb. That’s a paradigm shift that is scalable, transferable and can easily have global impact.

Big data, genomics and personalized medicine are also shattering investors’ reluctance to back innovation in pediatric medicine. Until now, many clinical trials have avoided the perils of engaging children as participants, and as a result, clinicians often prescribe medication for children by scaling down adult doses and monitoring their pediatric patients for serious side effects. These types of practices, however, do not ensure the adequate safety of prescription drug use in children.

One of the main problems is that the majority of drug studies involve adult participants and clinicians cannot simply calculate the equivalent child dosage based on weight. This is due to the biological differences between adults and children [3, 4]. In general, it takes longer for medication to be absorbed through the intestines of adults than it does in children. Furthermore, adults’ bodies have usually reached physical maturity and this makes it easier for them to consume certain prescription medications without experiencing harmful unintended effects.

Another problem is that many clinicians prescribe drugs to children who are classified as off-label[5]. These are drugs that have only been tested and approved for adult usage. The Food and Drug Administration (FDA) requires medication to have appropriate drug labels indicating the use for adults before it can be prescribed or sold, but this requirement does not enforce pediatric labeling. Nonetheless, prescribing off-label drugs to children is a routine practice that typically involves making estimations about safety, efficacy, and dosing[6]. This is quite risky because childhood involves continuous stages of growth and development.

Clinical research has also shown that the frequency of unintended harmful side effects, some of which are life-threatening, doubles when children are prescribed off-label drugs. Potential investors who are aware of the circumstances surrounding these types of practices, which given today’s technologies are more and more being considered the best of a bad choice, are often reluctant to financially support pediatric associations due to potential lawsuits for which they may also be held liable.

What can you do? Imagine yourself or your children being in a desperate position of need, and next time you have an opportunity to support pediatric innovation, have the moral courage to be part of the change you wish to see in the world.  Invest in pediatric innovation. Quite literally there will be children, siblings and parents all over the world who will thank you for your courage and generosity. That can be a great return on investment.

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    Barry Didato is chief investment officer and Executive vice president of The Innovation Institute, a globally recognized institute based in Newport Beach, California. The Innovation Institute serves nonprofit partners cultivating innovative solutions to transform healthcare worldwide. For more information, visit www.ii4change.com

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