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How to prove your innovation provides value-for-money

29th April 2022

By Evelyne Priestman, Senior Health Economist at Health Tech Enterprise

How to measure the health benefits of your innovation.

Measuring the improvement in health achieved by an innovation is important for successful medical device development; the sooner an innovator knows where the technology can achieve maximum health improvements, the better the technology design can be targeted for optimal market positioning. Of course, some innovations may not be able to achieve sufficient improvements in health outcomes as compared against the price they charge and the additional resources they require; in this case, the innovation may well need to go back to the drawing board to consider how it can either achieve better outcomes or lower price points.

How, then, should an innovator go about measuring improvements in health outcomes to inform a cost-effectiveness analysis? Most innovators decide on condition-specific measures to show improvements in patient health, as these are clinical measures that are widely accepted by the medical community and collected as part of a study to demonstrate clinical effectiveness. In some jurisdictions, such as Germany, these are accepted as valid measures to inform cost-effectiveness decisions by the statutory health insurance funds.

However, in jurisdictions such as the UK, Canada and Australia, these measures are considered insufficient because incremental improvement in health cannot be compared against an alternative innovation in a completely different condition, setting, or patient group. For example; how would a budget holder compare the pounds per percentage HbA1c lowered in diabetes with the pounds per percentage reduction in breast cancer tumour size? And how do we justify the sacrifices which would need to be made by patients in other parts of the healthcare system in a situation of scarcity and limited budgets?

The need for a generic measure of health outcome

What is needed is a measure that can be compared across different parts of the healthcare system, across conditions, across patients to ensure that the sacrifices made are justifiable.

One classic measure of the benefits provided by an innovation in traditional welfarist economics[i] is to use a monetary valuation for the improvements in health outcomes achievable. Using money to value the benefits is the basis of a classical Cost-Benefit Analysis. For some decision-makers, such as private healthcare providers or insurers,  this may be the preferred way of evaluating a new innovation.

However, the use of monetary measures tends to run into two key problems in publicly funded healthcare systems such as the NHS[ii] in the UK;

  • The monetary valuation of the health and life of a person tends to be less acceptable to the medical community as well as the general public
  • Valuation is strongly influenced by the willingness and ability to pay for better health outcomes; this could lead to decisions being made that prefer innovations for patients who have the necessary funds, and neglect innovations that cater to patients from more disadvantaged backgrounds

In the UK in particular, using monetary measures would not be compatible with the social value judgements (SVJ) taken by the National Institute for Health and Clinical Excellence (NICE)[iii], a public-sector body evaluating the cost-effectiveness of treatments from an NHS and Social Care perspective:

  • Health services should be distributed according to need
  • There should be no discrimination against health service recipients based on their personal or social characteristics
  • To reduce unfair health inequalities

An alternative generic measure of health is thus needed which uses something else than willingness to pay to value the benefits provided by an innovation to the health system as a whole rather than just the individual patient or the members of a private insurance policy.

Life years saved (LYs) is a generic measure for the remaining life expectancy of the patient who may benefit from the innovation. However, it does not provide information on the quality of the remaining life-years; we need a measure capable of capturing gains from reduced mortality as well as morbidity[iv].

The most widely used measure for this is the Quality-adjusted Life Year (QALY). QALYs require the application of Health-related quality-of-life (HRQoL) weights to value the relative quality of the life years saved at a value between zero and one where one is equivalent to perfect health and zero is death.

Figure 1 – Quality-adjusted life-years gained from an intervention as illustrated by Gold et al [v].

As illustrated in Figure 1, without the intervention, this patient’s health-related quality-of-life would deteriorate according to the lower curve and die at time Death 1. However, the same patient would deteriorate more slowly, live longer and die at time Death 2 with the intervention. The surface area between the two curves is the number of QALYs gained by the intervention.

Other measures exist, such as, for example, the disability-adjusted life year (DALY), preferred to assess the burden of a condition by the World Health Organisation (WHO).

What tool can innovators use to collect QALY weightings?

Collecting the necessary health-related quality-of-life weightings requires asking patients standardised questions about different aspects of their state of health. These questions need to be generic enough to enable comparison across different types of patients, conditions and treatments while also being sensitive enough to detect incremental changes.

There are several instruments available to do this, the most predominant of which is the EQ-5D generic preference-based measure of health outcomes developed by the EuroQoL group, a network of multidisciplinary international researchers[vi].

The EQ-5D questionnaire is made available by the EuroQoL research foundation, and measures five dimensions of health; mobility, self-care, usual activities, pain & discomfort, and anxiety & depression. It also asks patients to rate their health on a visual analogue scale (VAS). The output is a numerical value that can be combined with a person’s life expectancy to yield QALYs.

The EQ-5D is the preferred measure of NICE in the UK[vii]. It is considered to be robust, reliable and responsive for measuring health-related quality of life across many different conditions.

Why are QALYs becoming ever more important?

In the UK, demonstrating that an innovation can generate more QALYs than the alternative is an important stepping stone to securing access to the NHS marketplace. Beyond the UK, other publicly provided healthcare systems require the use of generic preference-based measures of health such as the QALY to gain reimbursement status from a funding body.

For innovators planning their first studies, collecting data on QALY weightings alongside clinical data should become part of the study design to ensure valuable data to demonstrate value-for-money to healthcare budget holders is collected at an early stage to form the basis of a solid cost-effectiveness analysis designed to convince regulators and budget holders alike.

As healthcare systems across the world are increasingly moving towards a value-based healthcare (VBH) model[viii], a system centred around rewarding outcome-based care, measuring health outcomes as well as costs will become a necessity without which innovators will find it hard to secure access to the market.



[i] Coast, J., Smith, R.D. & Lorgelly, P., 2008. Welfarism, extra-welfarism and capability: the spread of ideas in health economics. Social science & medicine, 67(7), pp.1190–1198.

[ii] Brazier, J. et al., 2007. Measuring and Valuing Health Benefits for Economic Evaluation 1 edition., Oxford University Press.

[iii] Shah, K.K. et al., 2013. NICE’s social value judgements about equity in health and social care. Health economics, policy, and law, 8(2), pp.145–165.

[iv] Robberstad, B., 2009. QALYs vs DALYs vs LYs gained: What are the differences, and what difference do they make for health care priority setting? Norsk epidemiologi = Norwegian journal of epidemiology, 15(2). Available at: [Accessed March 16, 2022].

[v] Gold, M.R. et al. eds., 1996. Cost-Effectiveness in Health and Medicine Illustrated edition., OUP USA.

[vi] EQ-5D. Available at: [Accessed March 17, 2022].

[vii]  Introduction to health technology evaluation | NICE health technology evaluations: the manual | Guidance | NICE. Available at: [Accessed March 17, 2022].

[viii] The Economist Intelligence Unit. Value-based healthcare: A global assessment. London: February 26, 2018.Available at:

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