Investing in new medical technologies: A decision framework

Purchasing and reimbursement decisions in healthcare systems with finite resources are increasingly influenced 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 definition, headroom analysis, return on investment analysis and further economic analysis. This paper concentrates on the clinical problem definition 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 sufficient 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.