Headroom method 60

The ability to obtain information about a product’s reimbursement potential at an early stage would be a powerful tool for developers to use during their product development. Early economic evaluations can allow developers to make more informed decision about costs, pricing and market selection that is in line with the payer needs, making their product better placed for reimbursement and adoption. Furthermore, by carrying out early economic analysis and market selection developers can provide investors with estimates of the potential gross profits that they can expect.

If a product is deemed to not be commercially viable at an early stage, then it would be advisable to terminate further development or carry out more research. This would save costs further down the development timeline, rather than getting to a stage where a product gets regulatory approval after all the cost of clinical trials and development, only to be deemed not cost-effective and to be not recommended for adoption and reimbursement. This is a fate that has been suffered by cell and gene therapies; such as Uniqure with their product Glybera, which achieved regulatory conditional approval26,221_{. However, it was not deemed adoptable by payers due to the high price of €1,000,000 per}

dose, even under the promise of the treatment being a one dose therapy it was removed from the market26,221_.

The headroom method is a tool that can be used to determine the maximum potential reimbursement price of a new product at an early stage. The headroom method incorporates the demand and supply aspect the product. Therefore, it can be used to forecast potential revenues, as it is possible to predict if the developers can produce the product at the given imbursement price and development/manufacturing cost186,192_{. As such the headroom method is an early economic evaluation tool that can be used by}

developers to determine if they should proceed or abandon products based on their commercial viability. It is worth noting that headroom method analysis is only predictive and therefore should be used as tool amongst other considerations, such as the potential to expand into other areas, other non-health related preferences and the clinical and market context of the product182,184_.

There is a wide range of literature based concerning the use of headroom methods, although this tends to be heavily focused on the area of medical devices, however the concepts and principles can be applied to CTPs186,192,222_{. The addition of information about future deviations of outcomes into the headroom}

calculations provides more realistic conclusions as it takes into account the non-linearity of inputs and outcomes over time 136,220_{. However, there are limitations as some of the fundamental inputs, such as}

the QALYs, WTP (sometimes) and the expected improvement in clinical performance, can only be capriciously assumed because of the uncertainties associated with an undeveloped product or technology, particularly in the CTPs industry220,223,224_{. Thus early evaluation models need to be done}

iteratively as more data is obtained, in order to become more robust so that the business models of CTP can facilitate confidence in the commercialisation of CTPs174_.

Research and models that combine the headroom method and gross profit have been developed, this combination produces “a feasible, useful, and informative tool for assessing the potential commercial viability of medical devices under development”186_{. The advent of economic evaluation in CTPs has}

led to such innovative methods to try and provide information as early as possible. Much of these analyses rely on accruing as much information both scientific and economic/commercial, as often possible, so that they can be as accurate as possible in their projections. However, it is important to consider that, the results are typically based on estimations and assumptions, particularly for CTPs were surrogate data is not readily available. Thus due diligence needs to be taken when choosing input sources for data, relevant and reliable sources must be sought after to ensure that the resultant outcomes are dependable for decision making purposes186_.

Using methods of analysis such as those mentioned above it is possible to predict the saleability and adoption potential of the product by the various healthcare providers. For instance, the cost- effectiveness plane, obtained from ICER results, can be used as quick tool to visualise the likelihood of the product (s) being adopted. The ideal situation for a new therapy in a competitive market would need to be in the lower right quadrant (Figure 13D), as it means that the therapy is more effective and economic in comparison to other options and the gold standard. For CTPs this a currently a difficult quadrant to enter as costs are currently very high for most CTPs thus, they tend to be found in the top right quadrant (Figure 13B). A major challenge for the CTI is to reduce costs to allow for favourable reimbursement and adoption of CTPs 186_{. The value of health economic evaluations is the information}

it provides for investors and payers alike. For developers being equipped with the concepts HTA and a firm understanding of their product, its costs and health outcomes should set them up to be in a position to successfully traverse through the reimbursement pathway.