IDEAS home Printed from https://ideas.repec.org/a/eee/tefoso/v112y2016icp338-346.html
   My bibliography  Save this article

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

Author

Listed:
  • Markiewicz, Katarzyna
  • van Til, Janine A.
  • Steuten, Lotte M.G.
  • IJzerman, Maarten J.

Abstract

The market success of a medical product depends on its commercial viability, yet this may be hard to predict during the development process of medical devices. This paper aims to determine if applying the Headroom method combined with return on investment (ROI) analysis allows for estimation of the potential commercial viability of one therapeutic and five diagnostic devices. The devices were targeted at different disease areas. Information regarding the maximum additional health benefit that could be obtained with the new device, the estimated production price and expected sales volume was gathered from literature and expert opinions. A willingness-to-pay threshold for one additional Quality-Adjusted Life Years of €30,000 was assumed for Headroom calculation. The analysis showed that the device with the highest estimated headroom per unit was RAPAI: a computed tomography photo-acoustic instrument for imaging inter-phalangeal joints (€1,645,120), followed by CBPM: continuous blood pressure measurement device (€922,440), Home Brain Monitoring (HBM) device (€750,000), a portable point-of-care (POC-CKD) device (€36,250), and the IHP: injectable healing plasters (€22,100). The devices with the highest estimated ROI were RAPAI (€14,951,200), and POC-CKD (€14,100,000), followed by HBM (€9,450,000), CBPM (€8,624,400), and IHP (€7,050,000). Overall, RAPAI is expected to have the highest potential commercial viability and HBM and IHP the lowest. The presented combined method is feasible, useful, and informative to help assess the potential commercial viability of medical devices under development. It might be an answer to the growing need of performing value-based pricing of devices replacing currently dominating cost-plus pricing approach.

Suggested Citation

  • Markiewicz, Katarzyna & van Til, Janine A. & Steuten, Lotte M.G. & IJzerman, Maarten J., 2016. "Commercial viability of medical devices using Headroom and return on investment calculation," Technological Forecasting and Social Change, Elsevier, vol. 112(C), pages 338-346.
    • Handle: RePEc:eee:tefoso:v:112:y:2016:i:c:p:338-346
    DOI: 10.1016/j.techfore.2016.07.041
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0040162516302013
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.techfore.2016.07.041?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Maarten Ijzerman & Lotte Steuten, 2011. "Early assessment of medical technologies to inform product development and market access," Applied Health Economics and Health Policy, Springer, vol. 9(5), pages 331-347, September.
    2. Susanne Hartz & Jürgen John, 2007. "The contribution of economic evaluation to decision-making in early phases of product development: a methodological and empirical review," Jena Economics Research Papers 2007-094, Friedrich-Schiller-University Jena.
    3. Hartz, Susanne & John, Jürgen, 2009. "Public health policy decisions on medical innovations: What role can early economic evaluation play?," Health Policy, Elsevier, vol. 89(2), pages 184-192, February.
    4. Drummond, Michael F. & Sculpher, Mark J. & Torrance, George W. & O'Brien, Bernie J. & Stoddart, Greg L., 2005. "Methods for the Economic Evaluation of Health Care Programmes," OUP Catalogue, Oxford University Press, edition 3, number 9780198529453, Decembrie.
    5. Marra, Carlo A. & Woolcott, John C. & Kopec, Jacek A. & Shojania, Kamran & Offer, Robert & Brazier, John E. & Esdaile, John M. & Anis, Aslam H., 2005. "A comparison of generic, indirect utility measures (the HUI2, HUI3, SF-6D, and the EQ-5D) and disease-specific instruments (the RAQoL and the HAQ) in rheumatoid arthritis," Social Science & Medicine, Elsevier, vol. 60(7), pages 1571-1582, April.
    6. Bergman, Jukka & Viljainen, Satu & Kassi, Tuomo & Partanen, Jarmo & Laaksonen, Petteri, 2006. "Managing the exploration of new operational and strategic activities using the scenario method--assessing future capabilities in the field of electricity distribution industry," International Journal of Production Economics, Elsevier, vol. 104(1), pages 46-61, November.
    7. Takeru Shiroiwa & Yoon‐Kyoung Sung & Takashi Fukuda & Hui‐Chu Lang & Sang‐Cheol Bae & Kiichiro Tsutani, 2010. "International survey on willingness‐to‐pay (WTP) for one additional QALY gained: what is the threshold of cost effectiveness?," Health Economics, John Wiley & Sons, Ltd., vol. 19(4), pages 422-437, April.
    8. A. E. Ades & G. Lu & K. Claxton, 2004. "Expected Value of Sample Information Calculations in Medical Decision Modeling," Medical Decision Making, , vol. 24(2), pages 207-227, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jonathan Dando & Maximilian Lebmeier, 2020. "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-speci," Journal of Innovation and Entrepreneurship, Springer, vol. 9(1), pages 1-28, December.
    2. Wang, Yi & Rattanavipapong, Waranya & Teerawattananon, Yot, 2021. "Using health technology assessment to set priority, inform target product profiles, and design clinical study for health innovation," Technological Forecasting and Social Change, Elsevier, vol. 172(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Maarten Ijzerman & Lotte Steuten, 2011. "Early assessment of medical technologies to inform product development and market access," Applied Health Economics and Health Policy, Springer, vol. 9(5), pages 331-347, September.
    2. Thomas Grochtdreis & Hans-Helmut König & Alexander Dobruschkin & Gunhild von Amsberg & Judith Dams, 2018. "Cost-effectiveness analyses and cost analyses in castration-resistant prostate cancer: A systematic review," PLOS ONE, Public Library of Science, vol. 13(12), pages 1-25, December.
    3. Wang, Yi & Rattanavipapong, Waranya & Teerawattananon, Yot, 2021. "Using health technology assessment to set priority, inform target product profiles, and design clinical study for health innovation," Technological Forecasting and Social Change, Elsevier, vol. 172(C).
    4. Ava A John-Baptiste & Wei Wu & Paula Rochon & Geoffrey M Anderson & Chaim M Bell, 2013. "A Systematic Review and Methodological Evaluation of Published Cost-Effectiveness Analyses of Aromatase Inhibitors versus Tamoxifen in Early Stage Breast Cancer," PLOS ONE, Public Library of Science, vol. 8(5), pages 1-9, May.
    5. Andrea Iannaccone & Thomas Marwick, 2015. "Cost Effectiveness of Transcatheter Aortic Valve Replacement Compared with Medical Management or Surgery for Patients with Aortic Stenosis," Applied Health Economics and Health Policy, Springer, vol. 13(1), pages 29-45, February.
    6. Hoa‐Thi‐Minh Nguyen & Tom Kompas & Roslyn I. Hickson, 2014. "Aid and the Control of Tuberculosis in Papua New Guinea: Is Australia's Assistance Cost‐Effective?," Asia and the Pacific Policy Studies, Wiley Blackwell, vol. 1(2), pages 364-378, May.
    7. Adam Fridhammar & Ulrika Axelsson & Ulf Persson & Anders Bjartell & Carl A. K. Borrebaeck, 2021. "The Value of a New Diagnostic Test for Prostate Cancer: A Cost-Utility Analysis in Early Stage of Development," PharmacoEconomics - Open, Springer, vol. 5(1), pages 77-88, March.
    8. Andrija S Grustam & Nasuh Buyukkaramikli & Ron Koymans & Hubertus J M Vrijhoef & Johan L Severens, 2019. "Value of information analysis in telehealth for chronic heart failure management," PLOS ONE, Public Library of Science, vol. 14(6), pages 1-23, June.
    9. Maarten J. IJzerman & Hendrik Koffijberg & Elisabeth Fenwick & Murray Krahn, 2017. "Emerging Use of Early Health Technology Assessment in Medical Product Development: A Scoping Review of the Literature," PharmacoEconomics, Springer, vol. 35(7), pages 727-740, July.
    10. Beth Woods & Paul Revill & Mark Sculpher & Karl Claxton, 2015. "Country-level cost-effectiveness thresholds: initial estimates and the need for further research," Working Papers 109cherp, Centre for Health Economics, University of York.
    11. Julie A. Campbell & Andrew J. Palmer & Alison Venn & Melanie Sharman & Petr Otahal & Amanda Neil, 2016. "A Head-to-Head Comparison of the EQ-5D-5L and AQoL-8D Multi-Attribute Utility Instruments in Patients Who Have Previously Undergone Bariatric Surgery," The Patient: Patient-Centered Outcomes Research, Springer;International Academy of Health Preference Research, vol. 9(4), pages 311-322, August.
    12. Garry R. Barton & Tracey H. Sach & Anthony J. Avery & Claire Jenkinson & Michael Doherty & David K. Whynes & Kenneth R. Muir, 2008. "A comparison of the performance of the EQ‐5D and SF‐6D for individuals aged ≥ 45 years," Health Economics, John Wiley & Sons, Ltd., vol. 17(7), pages 815-832, July.
    13. Lotte Soeteman & Job Exel & Ana Bobinac, 2017. "The impact of the design of payment scales on the willingness to pay for health gains," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 18(6), pages 743-760, July.
    14. Lauren E. Cipriano & Thomas A. Weber, 2018. "Population-level intervention and information collection in dynamic healthcare policy," Health Care Management Science, Springer, vol. 21(4), pages 604-631, December.
    15. Saara Huoponen & Marja Blom, 2015. "A Systematic Review of the Cost-Effectiveness of Biologics for the Treatment of Inflammatory Bowel Diseases," PLOS ONE, Public Library of Science, vol. 10(12), pages 1-23, December.
    16. Xiaoyi Liu & Jonghyun Lee & Peter Kitanidis & Jack Parker & Ungtae Kim, 2012. "Value of Information as a Context-Specific Measure of Uncertainty in Groundwater Remediation," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 26(6), pages 1513-1535, April.
    17. Nick Bansback & Huiying Sun & Daphne P. Guh & Xin Li & Bohdan Nosyk & Susan Griffin & Paul G. Barnett & Aslam H. Anis, 2008. "Impact of the recall period on measuring health utilities for acute events," Health Economics, John Wiley & Sons, Ltd., vol. 17(12), pages 1413-1419.
    18. Paal Joranger & Arild Nesbakken & Halfdan Sorbye & Geir Hoff & Arne Oshaug & Eline Aas, 2020. "Survival and costs of colorectal cancer treatment and effects of changing treatment strategies: a model approach," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 21(3), pages 321-334, April.
    19. Fischer, Barbara & Telser, Harry & Zweifel, Peter & von Wyl, Viktor & Beck, Konstantin & Weber, Andreas, 2023. "The value of a QALY towards the end of life and its determinants: Experimental evidence," Social Science & Medicine, Elsevier, vol. 326(C).
    20. Saha, Sanjib & Gerdtham, Ulf-G. & Toresson, Håkan & Minthon, Lennart & Jarl, Johan, 2018. "Economic Evaluation of Interventions for Screening of Dementia," Working Papers 2018:20, Lund University, Department of Economics.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:tefoso:v:112:y:2016:i:c:p:338-346. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.sciencedirect.com/science/journal/00401625 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.