title: HEADROOM APPROACH TO DEVICE DEVELOPMENT: CURRENT AND FUTURE DIRECTIONS.
abstract: OBJECTIVE
  The headroom approach to medical device development relies on the estimation of a value-based price ceiling at different stages of the development cycle. Such price-ceilings delineate the commercial opportunities for new products in many healthcare systems. We apply a simple model to obtain critical business information as the product proceeds along a development pathway, and indicate some future directions for the development of the approach.
  
  
  METHODS
  Health economic modelling in the supply-side development cycle for new products.
  
  
  RESULTS
  The headroom can be used: initially as a 'reality check' on the viability of the device in the healthcare market; to support product development decisions using a real options approach; and to contribute to a pricing policy which respects uncertainties in the reimbursement outlook.
  
  
  CONCLUSIONS
  The headroom provides a unifying thread for business decisions along the development cycle for a new product. Over the course of the cycle attitudes to uncertainty will evolve, based on the timing and manner in which new information accrues. Within this framework the developmental value of new information can justify the costs of clinical trials and other evidence-gathering activities. Headroom can function as a simple shared tool to parties in commercial negotiations around individual products or groups of products. The development of similar approaches in other contexts holds promise for more rational planning of service provision.
authors.affiliation: Institute for Applied Health Research,University of BirminghamA.J.Girling@bham.ac.uk.
authors.forename: Alan
authors.initials: A
authors.lastname: Girling
authors.affiliation: Division of Health Sciences,University of Warwick.
authors.forename: Richard
authors.initials: R
authors.lastname: Lilford
authors.affiliation: Office of Health Economics.
authors.forename: Amanda
authors.initials: A
authors.lastname: Cole
authors.affiliation: School of Information Systems, Computing and Mathematics,Brunel University.
authors.forename: Terry
authors.initials: T
authors.lastname: Young
mesh_terms: D035843:Biomedical Research / Q000379:methods*; D003362:Cost-Benefit Analysis; D004864:Equipment and Supplies; D006801:Humans; D018803:Models, Economic; D019057:Quality-Adjusted Life Years; D035501:Uncertainty
keywords: Development decisions; Headroom analysis; Medical devices