Early Evaluation of New Medical Technologies

Health economics provides the tools necessary to demonstrate value for money. These tools are typically used by healthcare providers to drive demand side decisions i.e. to select or reject treatment for reimbursement. However, these same tools can be used by healthcare technology manufacturers and investors, to inform supply side decisions i.e. to determine whether expected returns will outweigh expected costs. In a finite resource healthcare system, manufacturers need to concentrate on those products most likely to succeed in market. It makes sense to assess potential cost effectiveness as early as possible, demonstrating value for money during early stages of product development can be compelling evidence to attract further investment. However, conducting cost- effectiveness analysis when a product is yet to be developed is an extremely uncertain undertaking. I propose a simple approach, termed the headroom method, to the problem of supply side analysis. This will help manufacturers avoid misguidedly investing in technologies that are unlikely to be cost effective. I illustrate the headroom method using real examples from the regenerative medicine industry.