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An investment appraisal approach to clinical trial design

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  • Martin E. Backhouse

Abstract

In this paper, a general investment appraisal model is presented which shows how pharmaceutical companies could take profit considerations into account when making decisions about the design of randomized controlled trials. A general model is presented based on the net present value method of investment appraisal. The approach is illustrated with a hypothetical example which shows how optimal (net present value maximizing) designs can be determined based on choices about sample size and endpoint measurement. The method could be extended to accommodate considerations about other trial design features, and could be used to determine a portfolio of studies which maximizes the expected return on a given development or trial budget. Furthermore, the approach could be used by pharmaceutical companies to evaluate the incremental costs and benefits of incorporating non‐clinical objectives into trials, such as quality of life research and economic evaluation studies. A number of practical difficulties would need to be overcome to utilize the approach. Directions for further research are therefore highlighted centred on the key components of the model: a trial cost function, a product demand function, innovation diffusion processes and Bayesian approaches to trial design. © 1998 John Wiley & Sons, Ltd.

Suggested Citation

  • Martin E. Backhouse, 1998. "An investment appraisal approach to clinical trial design," Health Economics, John Wiley & Sons, Ltd., vol. 7(7), pages 605-619, November.
    • Handle: RePEc:wly:hlthec:v:7:y:1998:i:7:p:605-619
    DOI: 10.1002/(SICI)1099-1050(1998110)7:7<605::AID-HEC375>3.0.CO;2-9
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    Cited by:

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    3. Fleurence, Rachael L. & Torgerson, David J., 2004. "Setting priorities for research," Health Policy, Elsevier, vol. 69(1), pages 1-10, July.

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