Health Economics for Builders and Backers, August 2026

What’s New and What Matters this Month

In this month’s briefing, we start by providing our commentary on the content we released this month and close by discussing recently published literature that is relevant for this audience.

Should development-stage biotechs be thinking about health economics before launch?

Health economics and outcomes research (HEOR) is often viewed as a commercial-stage activity focused on reimbursement after a drug has demonstrated clinical efficacy. In this month’s episode of Perspectives, Rob Abbott, CEO of ISPOR, argues that this thinking is too late. Early HEOR can help development-stage companies understand not only whether a therapy works, but what it could be worth to patients, payers, and society. Economic burden studies and early economic models can quantify unmet need, identify where a new therapy could create value, and help companies differentiate their product from the current standard of care.

For builders and backers: Understanding the potential value proposition early can help companies prioritize evidence generation and help investors assess whether clinical efficacy could translate into commercial success.

If a biotech has limited capital, where should HEOR fit?

For development-stage companies, every dollar spent on HEOR competes with capital that could otherwise support clinical development or some other activity. Rob Abbott’s recommendation is not to build a large HEOR program early on, but to make targeted investments in HEOR activities that can improve later decisions. If he had to choose only two HEOR activities before Phase III trial initiation, he would prioritize early economic modeling and integrating patient-reported outcomes into clinical trials. Early economic models can identify the clinical endpoints and evidence gaps that drive the value proposition, while patient-reported outcomes can establish whether a treatment improves things that actually matter to those who might take it.

For builders and backers: Integrating HEOR into early phases of drug development does not have to require substantial capital allocation. Small, targeted investments in early HEOR can inform which outcomes drive the product’s value proposition and if you are collecting the right evidence to demonstrate it.

Should investors be thinking about HEOR in their decision making?

Abbott argues that reimbursement and economic value deserve a place alongside traditional diligence considerations. Coding and coverage pathways, evidence of improved outcomes or downstream cost offsets, differentiation from the standard of care, and exposure to changing reimbursement policy can all influence whether a development-stage product will be a commercial success. Investors can work with management teams to discuss whether the clinical development plans are generating the evidence that future payers will need in addition to the evidence needs for regulatory approval.

For builders and backers: HEOR can help understand if there is a credible path for the healthcare system to recognize and pay for the value of a drug if it is eventually approved.

Will investing in early economic modeling efforts just tell me I need to lower my drug’s price?

The analytical tools of HEOR (like economic models) can be used in different ways. Economic models are frequently associated with cost-effectiveness thresholds, health technology assessment, and scrutiny around drug prices, but that is just because they are often used in that way by some stakeholder groups. Economic models are simply an analytical tool that can extrapolate beyond short-term data and synthesize different sources of evidence to tell a story about impact and value. Economic models can look beyond the drug’s price to quantify improvements in health and to forecast downstream effects such as avoided hospitalizations and surgeries. They can even be done to evaluate broader societal impacts like productivity and caregiver time.

For builders and backers: The goal of economic modeling does not have to be determining a price. It can provide meaningful information around evidence needs and help shape (and communicate) the economic and societal value proposition of a treatment. Rather than avoiding the value conversation or letting it be driven by others, innovators and investors should estimate and communicate the economic value that their innovation could create. Economic models are useful tools to do this.

Will a drug for primary progressive multiple sclerosis be worth it to society?

In a new Leerink Center for Pharmacoeconomics analysis, we quantified the gaps in health, caregiver time, healthcare utilization, and workforce participation between someone living with primary progressive multiple sclerosis (PPMS) and a comparable person in the general US population. We then estimated how much value could be created if innovation was able to close those gaps.

We calculated an 18.8-year gap in health-adjusted life expectancy between those living with PPMS and the general population. Fully closing this gap could create approximately $4 million to $13 million in value per person living with PPMS. Beyond health, closing the gaps could free up approximately $475,000 worth of caregiver time, avoid approximately $250,000 in PPMS-related healthcare costs, and generate more than $500,000 in additional labor production per person. These estimates should not be interpreted as a price for a PPMS therapy, but rather the magnitude of the unmet need and the potential value of closing it.

For builders and backers: Safe and effective therapeutics for PPMS would create enormous societal value. Even if priced like other branded drugs in multiple sclerosis that have net prices around $60,000-$100,000 per year, they would be worth it to society. The societal value a therapeutic would create per patient would extend far beyond the exclusivity period and would continue to generate societal returns long after its “high” price tag.

What clinical endpoints drive the value proposition of a PPMS drug and need to be collected in the evidence package?

The primary clinical endpoint that drives the pharmacoeconomic value proposition is the treatment’s effectiveness slowing progression measured by the hazard ratio for disease progression. This economic model parameter determines how much time patients spend in healthier and lower-cost health states and how much time is avoided in more severe health states with higher mortality, lower quality of life, and higher healthcare utilization. Broader value elements like productivity and caregiver time also meaningfully impact the value proposition for PPMS therapeutics and should be considered in the evidence package to quantify and communicate the broader societal impact of the therapeutic.

For builders and backers: Evidence on progression, productivity, and caregiver time are essential for demonstrating the health economic proposition.

Does the U.S. market for branded drugs reward novelty?

A new analysis published in Health Affairs by Jiao, Haworth, and Lakdawalla examined whether “US pharmaceutical markets reward novel therapies more than incremental follow-on drugs”. They looked at nearly 600 small molecule drugs that were approved and marketed between 2000 and 2019. The authors note that “from 2000 through the early 2010s, the market for less biochemically novel drugs was growing.” However, there was a shift around 2013. After 2013, “revenues for high-novelty drugs started growing substantially faster than less innovative products”. They concluded that this revenue gap was driven by higher utilization rather than higher prices. Check out the figure at this link to see how the trends in gross and net revenue changed over time based on different degrees and definitions of novelty.

For builders and backers: From at least 2013 to 2019, therapeutics with more novel molecular structures, biological targets, and delivery properties had greater revenue than less novel therapeutics. This analysis suggests that developing a differentiated therapy may translate into greater utilization and commercial success.

How are drug revenues distributed over a 15-year post-launch window?

A new analysis published in Nature Biotechnology by Vogel, Cowan, and Chandra looked at the trajectory and magnitude of a drug’s revenue after launch. They looked at more than 600 new molecular entities that were approved between 1995 and 2015. The authors calculated the present value of global net drug revenue over a 15-year post-launch window and separated the findings into deciles. On LinkedIn, author Amitabh Chandra noted, “The top decile of small molecules earned $27.3B in cumulative 15-year revenue; the top decile of biologics, $38.9B. That’s 2.5x the second decile and roughly 700x the bottom one.” The article also gets into how the shape of the revenue curve over time differs by decile and therapeutic category. 

For builders and backers: Commercial returns and the trajectory of those returns vary substantially. Policies such as Medicare Drug Price Negotiation that apply after relatively fixed post-launch time periods (even with different timelines for small molecules and biologics) may affect products very differently depending on their revenue trajectory after launch.