Health economic modelling: a guide for pharmaceutical and medical device companies


Health economic modelling is a process for synthesising and comparing the costs and benefits of new (proposed) and existing medicines or devices in order to make decisions about which interventions may lead to the best patient outcomes. It is a key component of the health economic evaluation process. Around the world, health economic modelling is a “must” for manufacturers who need to articulate the value of their new health intervention and seek market access.


An introduction to health economic evaluation

The purpose of health economic evaluation is to support decision-makers in allocating limited healthcare resources to achieve the best possible outcomes for patients. Deciding to invest in one health intervention means not investing in another. Decision-makers will be willing to invest in a health intervention only if its value exceeds that of the alternatives. A cost-effectiveness model draws information from various sources to help analyse which intervention represents the best value for the decision-maker.

There are several types of economic evaluation, all of which synthesise information about patient health and associated costs in order to inform decision making. The types of evaluation differ in how they account for the costs and benefits of an intervention (see table below).

Types of health economic evaluation

Budget impact analysis Estimates the total cost of providing intervention to a group of patients.Differs from other forms of evaluation in that it is focused on the aggregate impact on financial budgets, rather than the ratio of costs and benefits. Budget impact models typically complement cost-effectiveness analyses and are often required by NICE, SMC and other HTA agencies.
Cost of illnessEstimates the total financial impact of a health condition on a population of patients.Often used as part of healthcare commissioning or to contextualise HTA submissions.
Cost-benefit analysisCompares the costs and benefits of different interventions in purely financial terms. Can be challenging because of the difficulty in assigning a consistent financial value to health outcomes.
Cost-consequence analysisCompares the costs of different interventions with their impact on a single measure of health. Examples include mortality reduction, smoking cessation or stroke prevention.Often complements cost-utility analysis. Can help decision making by framing the impact of the intervention in terms to which healthcare decision-makers can relate.
Cost-minimisation analysisCompares only the costs of different interventions.Typically used when there is no evidence to suggest a difference in the health effects of different interventions. Often used when applying for reimbursement from the SMC.
Cost-utility analysis / Cost-effectiveness analysisCompares the costs and overall impact of different interventions on patient health. When the impact on health is measured in QALYs, the analysis is termed a cost-utility analysis.Typically required by NICE and other HTA agencies.
Return on investment (ROI) analysisCompares the upfront and ongoing costs of an investment with its financial return over a period of time, typically a number of years. This can be conducted at the individual patient level, or at an aggregate level as a ratio (e.g. return per £1 invested).Can be useful for healthcare companies as well as health and social care policy makers.
Abbreviations: HTA, health technology assessment; NICE, UK National Institute of Healthcare Excellence; QALY, quality-adjusted life years; SMC, Scottish Medicines Consortium

Health economic modelling for cost-effectiveness analysis

Deciding whether to invest in a healthcare intervention in an informed way means processing large amounts of data – e.g. about costs, efficacy, safety, and quality of life –  for a new intervention and existing alternatives. Health economic modelling aims to synthesise all this information into a single set of calculations. At Symmetron, cost-effectiveness analyses are the type of economic evaluations that we conduct most frequently, as these are required to secure reimbursement from NICE and other healthcare payers. For the cost-effectiveness analysis, we typically develop health economic models in Microsoft Excel, though we sometimes use other software platforms such as R.

There are many types of economic models for cost-effectiveness analysis, some of which are summarised in the table below. Which type of model is the most appropriate depends on the complexity in capturing the impact of the intervention, the availability of data, and the requirements of the decision-maker.

Types of economic models for cost-effectiveness analysis

Model typeThe situation modelledComment
Decision treeA typical patient faces a set of choices and consequences.The simplest form of an economic model. Decision trees do not account for the passage of time, so they are generally applied to interventions with short-term effects.
Markov modelA typical patient moves through a set of health states over time.The type of model that we use most often. It provides adequate detail for modelling most non-infectious health conditions.
Partitioned survival modelPatients move through a set of health states over time, according to a set of parametric survival equations. It is sometimes referred to as ‘under the curve’ modelling.Like a Markov model, patients move through health states; however, patient movement through health states is informed by survival equations, instead of transition probabilities as in Markov models. Commonly used within oncology.
Discrete event simulationA typical patient experiences a set of health events. Used when the timing or order of events is important. Sometimes referred to as “time to event” modelling.This model is used in situations where patients experience a number of different but related events. It is most useful to model complex interactions, as it considers only relevant events, e.g. an update of a patient’s risk of adverse events. Often combined with patient-level simulation. Common in evaluations of healthcare services.
Individual patient simulation, without interactionA group of unique patients, where each patient experiences a set of health events.Used when patients differ from one another in clinically important ways, or when a patient’s history influences his or her risk of experiencing future events. For example, patients with cardiovascular disease will often be at increased risk of an adverse event if they have previously been admitted to the hospital for a cardiovascular event. A patient-level simulation can capture the nuances of a patient’s history. Patient-level simulations are also useful to capture treatment sequences, such as those commonly used against rheumatoid arthritis.
Individual patient simulation, with interactionA group of unique patients, where each patient experiences a set of health events. The health of one patient depends on the health of other patients.Used when patients differ from one another in clinically important ways, and this needs to be taken into account. In addition, the behaviour and/or health outcomes of one patient depend on those of other patients. Applied to infectious diseases and common in evaluations of healthcare services.

Achieving market access

Bringing a new medicine or device to the market typically involves several stages of economic modelling. Modelling usually begins towards the end of product development because data must first be generated in order to construct a reliable model. Nevertheless, modelling can also be conducted earlier during development to provide initial estimates about cost-effectiveness. This early modelling can help pharmaceutical companies identify key drivers of the value of their medicine or device. Understanding drivers of value can inform research and market access by ensuring that the key data are captured and the intervention is targeted at the appropriate group of patients.
When phase III trial data and/or real-world evidence become available, they can be incorporated within an existing model or used to inform a new, more comprehensive model. The economic model can then be used to apply for reimbursement, pursue academic publication or inform decision making. The key is ensuring that the model is fit for its purpose.

Health economic modelling and Symmetron

We at Symmetron will work with you to create health economic models that meet your specific needs and follow best practices, based on our own experience and our close attention to industry trends.

  1. We recommend that you engage with health economics and outcomes research (HEOR) experts early in order to understand the available evidence, the care pathway and similar treatments already available.
  2. We identify key drivers of the value of a drug or device in order to ensure that the relevant evidence is collected and highlighted.
  3. We identify any additional evidence that may be required to develop a robust economic model, and we generate this evidence where necessary.
  4. We collaborate effectively with diverse stakeholders, including client teams, clinical experts, academic researchers, and other professionals.
  5. We co-produce economic models with end users in mind, ensuring that non-experts can easily use them.
  6. We understand how to design economic models that meet the requirements of various audiences, including health technology assessment (HTA) agencies, academic journals, and local decision makers.

The health economic models that we develop are:

  • Tailored to your needs
  • Informed by the best available evidence
  • Reflective of global best practices
  • Expertly validated
  • Designed to meet user requirements
  • Impactful for decision making

Across all our activities, we at Symmetron are driven by the goal of increasing the number of effective treatments available to patients. We are proud to help clients bring the latest scientific advances to patients in stride with the ever-changing healthcare landscape. Partner with our team by contacting us here.

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