Cost-effectiveness analysis and budget impact analysis are two important methods used in health technology assessment, reimbursement and market access.
Both are part of health economics, but they answer different questions.
Cost-effectiveness analysis evaluates whether a health technology provides good value compared with existing alternatives. Budget impact analysis estimates the financial impact of adopting that technology within a healthcare system, payer budget or institution.
A technology may be cost-effective because it provides meaningful health benefits for the cost. However, it may still have a high budget impact if many patients are eligible or if treatment costs are substantial.
In simple terms, cost-effectiveness analysis asks:
Is this technology good value for money?
Budget impact analysis asks:
Can the healthcare system afford it?
What is cost-effectiveness analysis?
Cost-effectiveness analysis compares the costs and outcomes of two or more healthcare interventions.
In HTA, it is often used to compare a new medicine, medical device, diagnostic test or healthcare intervention with the current standard of care.
The purpose is to understand whether the additional benefits of a new technology justify the additional costs.
Cost-effectiveness analysis may consider outcomes such as life years gained, quality-adjusted life years, clinical events avoided, disease progression, adverse events and quality of life.
It may also include treatment costs, monitoring costs, healthcare resource use and long-term consequences for the healthcare system.
The result helps decision-makers understand whether a technology represents value for money.
What is budget impact analysis?
Budget impact analysis estimates the expected financial consequences of adopting a health technology.
It focuses on affordability within a specific budget context. This may be a national healthcare system, regional payer, hospital, insurer or reimbursement body.
A budget impact model usually considers the eligible patient population, expected treatment uptake, market share, treatment duration, acquisition costs, administration costs, monitoring costs and changes in healthcare resource use.
Unlike cost-effectiveness analysis, budget impact analysis is usually more focused on short- to medium-term financial impact.
It helps decision-makers understand how much the adoption of a technology may cost over a defined period.
Why are both analyses important in HTA?
HTA decisions usually require an understanding of both value and affordability.
Cost-effectiveness analysis helps show whether a technology provides sufficient benefit compared with its cost. Budget impact analysis helps show whether the healthcare system can absorb the financial impact of adoption.
These perspectives are complementary.
A technology may provide strong value but still require careful budget planning. Another technology may have a low budget impact but limited additional value compared with existing options.
Decision-makers need both types of analysis to make informed choices about reimbursement, pricing and access.
How do these analyses support market access?
Cost-effectiveness and budget impact analyses help companies communicate the economic value of their technology.
They support discussions with payers, reimbursement bodies and HTA agencies by showing how a technology compares with alternatives and what financial impact may be expected.
These analyses can also help identify key uncertainties.
For example, results may be sensitive to treatment duration, patient population size, clinical effectiveness, utility values, local costs or market share assumptions.
Understanding these drivers can help companies refine their evidence strategy, pricing approach and value communication.
For market access, economic evidence should not be treated as an isolated technical exercise. It should be connected to the broader value story.
When should economic modelling begin?
Economic modelling should begin early in the HTA and market access planning process.
Early models can help test assumptions, identify data gaps and understand what evidence may be most important for decision-making.
They can also inform clinical development, real-world evidence planning, pricing strategy and local adaptation of global models.
If economic modelling starts too late, important evidence gaps may be discovered close to submission, when there is limited time to address them.
Early modelling allows organisations to prepare stronger, more credible and more locally relevant submissions.
Final thoughts
Cost-effectiveness analysis and budget impact analysis are both essential for HTA, reimbursement and market access.
Cost-effectiveness analysis helps determine whether a health technology offers good value for money. Budget impact analysis helps estimate whether the financial impact is manageable within a healthcare budget.
Together, they provide decision-makers with a more complete understanding of value, affordability and uncertainty.
At Clevidence, we support organisations with cost-effectiveness modelling, budget impact analysis, health economic evaluations, model adaptation, uncertainty analysis and HTA value communication.