Investing in new medical technologies: A decision framework

Abstract

Purchasing and reimbursement decisions in healthcare systems with fi nite resources are increasingly infl uenced by formal health economic analysis. It is therefore sensible for a company considering the development of a new medical technology to assess its potential cost effectiveness as early as possible in the development cycle. This document describes a process by which an organisation can add rigour to decisions about which technologies to pursue, as well as creating a persuasive argument for outside investment. The process consists of a series of analyses that should be conducted before substantial investments are made. The stages of the algorithm are: strategic considerations, clinical problem defi nition, headroom analysis, return on investment analysis and further economic analysis. This paper concentrates on the clinical problem defi nition and headroom analysis aspects of the process. Two worked examples of calculating headroom for theoretical products in tissue engineering of urogenital tissue are given. The health gain in urethral tissue is unlikely to be suffi cient to justify the cost of a regenerative medicine solution, whereas bladder substitution after tumour resection has the potential to be cost effective providing marginal costs do not exceed £ 16,000. The framework discussed here provides a structure for investment decisions that can illuminate a situation, which may otherwise appear hard to fathom. A headroom analysis is primarily useful as a barrier to misguidedly investing in those devices, which can never be cost effective.

Industry Perceptions of Barriers to Commercialization of Regenerative Medicine Products in the Uk

“…Investors, unsurprisingly, were reported as not wanting to invest in a company that had uncertain product sales. It was suggested that one way in which companies might overcome this barrier was to perform economic modelling early on in the product development phase to establish what sort of clinical benefit would sustain a product marketed at a certain price [28]. Indeed, most of the companies that did not have products on the market at the point of the interview mentioned that they try to address reimbursement issues early on by keeping prices low.…”

A method for the early health technology assessment of novel biomarker measurement in primary prevention programs

“…The purpose of performing early HTA at this stage of the product development process is to assist health technology firms in making realistic commercial valuations of the conceived new products by providing for each potential new biomarker technology a rough estimate of the maximum additional cost for which its intended clinical application is still likely to be cost effective. In this section, we will describe how this upper bound on the technology's cost, also known as the commercial headroom available [13], can be estimated for an improved, biomarker-based screening test.…”

Can health economics aid decision making in healthcare innovation in academia?

“…The aim of this approach is to improve the development decisions made and increase the likelihood of the product being commercially successful (Craven et al, 2009;Cosh et al 2007). We propose that this concept could also be applied to the assessment of the value of healthcare technology innovations developed by academia, for example at the early stages of either a research funding application or during technology transfer.…”

“…Stage 4 of the post-development testing stage in Figure 4. Within MATCH we have worked with industry to embed this type of assessment approach earlier in the development process (Craven et al, 2009;Cosh et al, 2007), e.g. Stage 2 of the pre-development investigation stage in Figure 4.…”