PHP235 – Combining Headroom and Return on Investment Analysis To Rank Potential Commercial Value of Six Medical Devices in Development

Objectives: The development process of medical devices strongly depends on the financial resources available and the expected return on investment to manufacturers. The aim of this paper is to analyse the potential commercial viability of two disruptive and four incremental medical devices in different stages of development. Methods: The headroom method combined with the return on investment analysis was performed for one therapeutic and five diagnostic devices for different clinical target areas. Information regarding maximum additional benefit that could be obtained with 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 QALY of € 30,000 was assumed for headroom analysis. Results: The devices were ranked according to their potential commercial viability. The analysis showed that two disruptive and two incremental devices had reasonably good balance between headroom and unit cost, and two incremental devices had no good balance. The device with the highest potential commercial viability was a disruptive therapeutic device for the cartilage repair treatment in the first clinical trial stage, with estimated headroom for the cost of the new treatment: € 74,600 and an expected production cost of the therapy: € 8,000 per unit. The market volume size was calculated based on the incidence of cartilage defects: 65% in routine knee arthroscopies. The disruptive diagnostic device for home brain monitoring of epilepsy patients in the prototype stage of development had the lowest potential commercial viability, with an estimated headroom of € 81,000 and an expected production costs per unit: € 120,000 that resulted in the unfavorable return on investment. Conclusions: The headroom method combined with a return on investment analysis, offers insight in the potential commercial viability of medical devices under development. The research on the impact of that analysis on actual R&D decision making will still be determined.