Commercial viability of medical devices using Headroom and return on investment calculation

Markiewicz, Katarzyna; Til, Janine Astrid van; Steuten, Lotte Maria Gertruda; IJzerman, Maarten J.

doi:10.1016/j.techfore.2016.07.041

Cited by 23 publications

(25 citation statements)

References 46 publications

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“…In previous studies, Markiewicz et al 10 and Chapman et al 11 concluded that early health economic modeling is able to distinguish favorable and unfavorable innovations. Although we found differences between innovations in the magnitude of the potential cost-effectiveness, and the likelihood of reaching this potential, we were not able to dismiss any of the 30 innovations because they all were potentially cost-effective through improving health and/or saving costs.…”

Section: Discussionmentioning

confidence: 99%

“…5 In this so-called early health technology assessment (HTA), which includes early health economic modeling, the focus is often on the ‘commercial viability’ of new technologies. 6-10 This is deemed to allow companies to stop further development if results suggest that the product is unlikely to become cost-effective. Ijzerman et al refer to this as “fail fast, fail cheap.” 5…”

Section: Introductionmentioning

confidence: 99%

“…They suggest that “early HTA and coverage with evidence development initiatives could provide technology developers with useful input regarding the decisions they make.” 2 These decisions may transcend the go/no-go decision that is the current focus of early HTA. 5,10,11 To date, such a larger role for early HTA is not yet formally substantiated with empirical evidence.…”

Section: Introductionmentioning

confidence: 99%

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Problems and Promises of Health Technologies: The Role of Early Health Economic Modeling

Grutters

Govers

Nijboer

et al. 2019

Int J Health Policy Manag

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Background: To assess whether early health economic modeling helps to distinguish those healthcare innovations that are potentially cost-effective from those that are not potentially cost-effective. We will also study what information is retrieved from the health economic models to inform further development, research and implementation decisions. Methods: We performed secondary analyses on an existing database of 32 health economic modeling assessments of 30 innovations, performed by our group. First, we explored whether the assessments could distinguish innovations with potential cost-effectiveness from innovations without potential cost-effectiveness. Second, we explored which recommendations were made regarding development, implementation and further research of the innovation. Results: Of the 30 innovations, 1 (3%) was an idea that was not yet being developed and 14 (47%) were under development. Eight (27%) innovations had finished development, and another 7 (23%) innovations were on the market. Although all assessments showed that the innovation had the potential to become cost-effective, due to improved patient outcomes, cost savings or both, differences were found in the magnitude of the potential benefits, and the likelihood of reaching this potential. The assessments informed how the innovation could be further developed or positioned to maximize its cost-effectiveness, and informed further research. Conclusion: The early health economic assessments provided insight in the potential cost-effectiveness of an innovation in its intended context, and the associated uncertainty. None of the assessments resulted in a firm ‘no-go’ recommendation, but recommendations could be provided on further research and development in order to maximize value for money.

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Section: Discussionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Problems and Promises of Health Technologies: The Role of Early Health Economic Modeling

Grutters

Govers

Nijboer

et al. 2019

Int J Health Policy Manag

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“…Every intervention in Grutters' sample demonstrated some scenario in which it was cost-effective, as did an earlier smaller review by Markiewicz and colleagues. 7 This is not surprising. First, compared with late-stage models, early models are programmed with less complete data of lower quality and higher uncertainty.…”

Section: Stop or Go?mentioning

confidence: 96%

How Useful Are Early Economic Models? Comment on "Problems and Promises of Health Technologies: The Role of Early Health Economic Modelling"

Love-Koh

2019

Int J Health Policy Manag

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Early economic modelling has long been recommended to aid research and development (R&D) decisions in medical innovation, although they are less frequently published and critically appraised. A review of 30 innovations by Grutters et al provides an opportunity to evaluate how early models are used in practice. The evidence of early models can be used to inform two types of decision: to continue development ("stop or go") or to alter future R&D activities. I argue that early models have limited use in stop or go decisions, as less resource and data undermine the reliability of the models’ indicative estimates of cost-effectiveness. Whilst they are far more useful for informing future R&D directions, the best techniques available from statistical decision science, such as value of information analysis, are not regularly used. It is highly recommended that early models adopt these methods to best deal with uncertainty, quantify the potential value of further research, identify areas of study with the greatest potential benefit and generate recommendations on study design and sample size.

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“…The understood fallibilities of rNPV calculations has led to the development of new valuation models, such as the Headroom method that determines the maximum reimbursable price (Cosh, Girling, & Lilford, 2007;Girling, Lilford, Cole, & Young, 2015;Markiewicz, van Til, & IJzerman, 2016), Early-Stage Health Economic models (Brandes, Sinner, Kääb, & Rogowski, 2015;Miquel-Cases, Steuten, Retèl, & van Harten, 2015;Retèl, Grutters, van Harten, & Joore, 2013) which only study interventions ready for clinical trials or market launch, or Multi-Criteria Decision Analysis (Middelkamp, van der Meer, Hummel, et al, 2016;Thokala, Devlin, Marsh, et al, 2016) which is based on collecting feedback from stakeholders based on hypothetical products and then use this to estimate the value of the product. The maximum reimbursable price and early-stage health economic models seem best suited when a product is already on the market for one disease, and drug repositioning is being considered as a way to increase revenues, without high development cost and risk.…”

Section: Literature Reviewmentioning

confidence: 99%

A novel valuation model for medical intervention development based on progressive dynamic changes that integrates Health Technology Assessment outcomes with early-stage innovation and indication-specific clinical success rates

Dando

Lebmeier²

2020

J Innov Entrep

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All stakeholders involved in the development, licencing, and market access of health care technologies use stage-specific valuation matched that integrates risks and outcomes to inform their decision making. A stage-specific valuation method, based on defining future cash flows for a product that are success-rate probability adjusted prior to being discounted with a risk rate, is termed risk-adjusted net present value, and a negative value indicates that a loss will be made and therefore the product should probably not be developed. However, values exited from these calculations can be highly variable depending on the data used to generate the calculation, and in light of the estimated $2.6bn in capitalised costs that is necessary to move an innovation to market, without any guarantee of product reimbursement, the financial risk is very high. Indeed recent return on investment numbers for life science investment are staggeringly low, significantly lower than the weight-adjusted cost of capital, implying healthcare R&D is economically unattractive. The outcome is that the objectives of modern intervention R&D are more linked to moving risk off the books or downstream to larger companies, which at face value seem better positioned to develop the products further, when in fact a complete reconfiguration of approaches, models and realistic actions and strategies are likely to generate more value. As NPV calculations are only as good as the data used to generate it, and both accurate and comprehensive values ideally should be used, based on real market dynamic, the latest clinical success rates and considering the latest reimbursement approaches, more formal HTAs for therapeutic intervention, we reassessed valuation approaches, integrated the reality of later stage clinical validation, product reimbursement based on Health Technology Assessment perspectives, and downstream costs to generate a whole value chain calculation. The outcomes led us to consider an alternative risk rate model based on dynamic changes that occur throughout the R&D process. While modelled for medical intervention development, the outcomes of this work can also be applied for evaluation of diagnostics and

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Commercial viability of medical devices using Headroom and return on investment calculation

Cited by 23 publications

References 46 publications

Problems and Promises of Health Technologies: The Role of Early Health Economic Modeling

Problems and Promises of Health Technologies: The Role of Early Health Economic Modeling

How Useful Are Early Economic Models? Comment on "Problems and Promises of Health Technologies: The Role of Early Health Economic Modelling"

A novel valuation model for medical intervention development based on progressive dynamic changes that integrates Health Technology Assessment outcomes with early-stage innovation and indication-specific clinical success rates

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