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What is HEOR? Health Economics and Outcomes Research explained


Health Economics and Outcomes Research (HEOR) is the application of the principles of economics to health and healthcare to guide what should be provided, how it should be delivered, and to whom.

In this introduction, we explain the key concepts in HEOR and provide an example of its role in healthcare decision-making.

What is HEOR?

The demand for healthcare is increasing. Populations are aging in many countries. There is also incredible innovation in healthcare, with treatments being developed for diseases we were previously unable to treat, and outcomes being improved with increasingly personalized medicine.

But resources – and therefore the provision of healthcare – is often limited, either by the quantity of drugs or devices available or the services available to deliver them. Not every therapy can be provided, and decision-makers must be able to make informed choices based on the explicit quantification of costs and benefits for different uses of healthcare resources.

That’s where HEOR is invaluable.

2 key principles of HEOR: scarcity and opportunity cost

The two key principles of HEOR are scarcity and opportunity cost.


1. Scarcity

all resources used to provide healthcare, and which result in health outcomes, are limited.

We saw this in the COVID-19 pandemic, when some countries had shortages of equipment and healthcare workers to provide the services and care needed for patients with the virus.


2. Opportunity cost

the lost opportunity in using one healthcare intervention to treat a patient when another could have been chosen; this situation arises because of finite resources.

For example, the cost of a nurse who treats a patient with COVID-19 but cannot also treat a patient with cancer who might also benefit from that care. If there were enough nurses to treat all patients who needed care, then choices and trade-offs would not be needed.

An example of how the principles of HEOR were used to make decisions during the COVID-19 pandemic

HEOR concepts can be used to better understand how increasing healthcare needs can be met in the most efficient and equitable way.

During the COVID-19 pandemic, for example, demand for vaccines initially outstripped the supply. Some countries struggled to organize supplies, storage, and delivery, which limited access by the populations. The principles of HEOR considers how to achieve the maximum health gain for a fixed budget. In this example, you may get the most value for your money by giving the vaccine to patients at highest risk of hospitalization or death, because those patients will benefit most, and you could gain the greatest savings by avoiding the cost of hospitalization.

At this point, it is important to recognize that HEOR brings one perspective to inform decision-making. In the example of COVID-19, governments and healthcare systems had to balance health economics with other considerations, such as the impact on the wider economy.

4 ways to approach the complexities of economic evaluations within HEOR

An economic evaluation is a framework that helps compare the estimated costs and consequences of different ways of delivering healthcare – for example, comparing two different treatments in a particular disease area.

It is a comparative analysis used to estimate both costs and outcomes for the different treatment options, and thus inform decision-making.

There are four main ways to approach the complexities of economic evaluation within HEOR:

  1. Cost-minimization analysis
  2. Cost-effectiveness analysis
  3. Cost-utility analysis
  4. Cost-benefit analysis.


4 ways to approach the complexities of economic evaluations within HEOR

4 ways to approach the complexities of economic evaluations within HEOR

Supporting pharmaceutical and biotechnology manufacturers with world-class HEOR capabilities

We help pharmaceutical and biotechnology manufacturers navigate the complexities of HEOR evaluations. Our Global HEOR capabilities include:

Strategic HEOR consulting: Develop coherent and credible value narratives to explain where, when, and how new products can deliver value to patients, providers, and payers

Evidence planning: Identify critical gaps in evidence needed to support HEOR value frameworks and develop research plans to address these needs

Early modeling: Develop early economic models in hēRo3 to inform pipeline asset management, HEOR evidence generation, and market access planning

Trial-based analytics: Design and conduct post hoc analyses of clinical trial data sets to mine them for HEOR value “nuggets”

Evidence synthesis: Compile, analyze, and synthesize evidence from published studies to support value frameworks for new products
Modeling and simulation: Develop cost-effectiveness and budget impact models to support reimbursement, pricing, and heath technology assessment submissions for new products

Real-world evidence (RWE) analytics: Design and conduct analyses of RWE datasets to generate the evidence needed to support product value frameworks and market access.

HEOR modeling made simple

Make more informed, data-driven decisions for pipeline assets and clinical development strategies with hēRo3, unique technology enabled services to meet your company’s needs.



Partner with our experts to rapidly build high-value models that enhance and empower decision-making.

Save time and money with our innovative technology and maximize return from internal groups.


Get in touch for a confidential conversation about your HEOR needs

Connecting with us from early-stage development through to successful launch and beyond helps your HEOR and value, evidence, and access teams to strengthen their understanding of complex market access risks and opportunities, accelerate the development of robust evidence, and deliver strategies that identify and communicate value in line with payers’ rapidly evolving needs. Get in touch for a confidential conversation about your HEOR needs.

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