Economics of Innovation

The development of innovative health technologies is essential for improving the quality and efficiency of health care provision.

The marketing of innovative medicines, diagnostics and other medical technologies is required to address public health priorities and to tackle patients’ unmet medical needs, while expediting patients’ access to innovation helps to maximise societal health gains and value.

However, the production of medical innovation involves a lengthy, costly, risky and scientifically challenging R&D process. Innovators carry out huge investments where the expected return is highly uncertain as projects may fail, either because they do not provide enough value or because patients cannot access the treatments due to systems being unable to afford the price.

OHE leads a wide-ranging programme of research on how to maximise the effectiveness and efficiency of R&D. Aimed at promoting innovation in health care, this theme addresses questions such as:

  • How can regulation and incentives be optimally designed to maximise the efficiency and effectiveness of medical R&D and innovation? Can be they used to drive innovation in priority areas like anti-microbial resistance or neglected tropical diseases?
  • How can innovative pricing and financing solutions help to incentivise investment in R&D, and maximise the production of and access to innovative treatments (such as personalised medicines, advanced therapies, orphan medicinal products, and cures)?
  • What role do alternative pathways of clinical development and evidence generation (i.e. the use of real-world evidence) play in maximising R&D efficiency and patient access to medical innovation?  
  • What role does market competition play in promoting investment in R&D and maximising access to medical innovation?

Key objective for this research theme:

  • Promoting innovation in health care, increasing our understanding of the value of innovation, and encouraging research and development

OHE’s policy positions:

  • Optimal innovation requires regulation and reimbursement processes that balance willingness and ability to pay for new technologies with the benefits of future research and development.
  • New models of innovation should aim to streamline development, reduce costs and speed patient benefit.

Our latest content on this theme

Taking STRIDES: The value of diagnostics against AMR

Addressing a critical gap in AMR policy and evaluation Antimicrobial resistance (AMR) is a global health crisis, projected to cause up to 10 million deaths annually…

A line chart ending in a paper airplane

OHE responds to the Trump administration’s Executive Order on Drug Prices

Professor Graham Cookson responds to President Donald Trump’s Executive Order on drug prices published earlier this week.

Advancing Rare Disease Care: Challenges and Key Issues

Today marks Rare Disease Day 2025. This time last year we published an Article entitled “ Why do we care about rare?”, summarising the origins of…

The Importance of Diversity of Supply in Rare Diseases Markets

Rare disease medicine markets often rely on single suppliers, increasing the risk of shortages and limiting treatment options. Our report explores how supplier diversity can enhance healthcare resilience and drive innovation, with actionable recommendations for policymakers.