A real options game approach to health technology assessment

Abstract: Real options analysis (ROA) has been proposed to account for multiple decision points throughout the lifecycle of new health technologies, in situations of uncertainty and irreversible consequences. Applications to date have often taken a single perspective, assuming that future arrival of information is independent of decisions of other actors. 

The seminar will present a Real Options Game (ROG) to reflect coverage, pricing and research decisions in Health Technology Assessment (HTA), illustrated using the case study of drug-eluting stents (DES) in a UK setting. 

The HTA body and the technology manufacturer were assumed to play a sequential, incomplete information game: with the manufacturer deciding whether to submit evidence, reduce price and conduct more research; and the HTA body deciding on adoption. The DES analysis modelled a series of decision points between 2005 and 2010, with decisions not depending on hindsight, but allowing for predicted changes in value, incorporating a drift in information and responses by the other party. Payoffs were estimated for both players using a probabilistic Markov model. Optimal strategies incorporating the impact of earlier decisions on research were determined. 

HTA is a dynamic and interactive process, therefore results of the ROA analyses sometimes suggested a different course of action compared to traditional analyses. The best decision may depend on predictions of how other parties will react, as well as likely evolution of the evidence base and the costs of decision reversal.