Experience Curve
Calculator User Guide
Multidisciplinary Assessment of Technology Centre for Healthcare
“What I find… interesting
however is that MATCH
researchers have
modelled data and...
Shown that prices are
following very
predictable curves. This
raises some interesting
thoughts of course”
C. Dufresne, Boston Scientific
Contents
Page
١. Contents and Introduction
2. How to use the MATCH experience curve calculator
3. Outputs of the web-based tool
4. MATCH Price Trends Research
5. Discussion
Introduction
The experience curve is an empirical relationship that relates the price
of a product or service to the amount of experience of making and / or
delivering it to the market. The related “Learning Curve” was first
described in 1936, where it was noted that the number of man-hours
that were required to produce an aircraft reduced by a fixed percentage
with each doubling of aircraft production in a number of different
factories1.
Boston Consulting group extended the relationship to all value added
costs in the 1970s2. They used the term “Experience Curve” and found
that when the market was competitive that the relationship applied to
prices as well as costs.
The Experience Curve” relationship describes the finding that the price
of a product will decrease by a fixed percentage each time experience,
measured by the cumulative volume of shipments, doubles. Typical
values for the experience curve are in the range of 70 – 80%, meaning
that the price will decline to 70 – 80% of its value each time experience
doubles.
In the field of healthcare technologies, barriers to entry, including those
embodied in intellectual property, by regulatory requirements and by the
various procurement systems that exist, are high, and it might be
expected that markets may operate differently and that prices in the
medical device sector may not follow the same trends. This ongoing
research shows that the experience curve does generally apply to
medical devices but that a number of different factors appear to be
significant in determining how quickly prices change.
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© MATCH 2009
 How to use the MATCH experience curve tool
The MATCH experience curve calculator is a web-based tool. As the
experience curve shows the relationship between price and cumulative volume,
the data required are the historical price of the product in question and the sales
Table I: Sales data supplied for this volumes over the same historical period. For example monthly prices and sales
case study volume data for 1 year, or annual price and sales volume data for a number of
years would be suitable data sets for plotting an experience curve. The
Period ASP Volume cumulative sales volume prior to the first period is also required, unless the
initial sales data are for the period when the product was launched, to ensure
2001 2788 53577 the experience curve is accurately calculated,
2002 2388 65881
For example, consider the sales data shown in Table I. This shows annual data
2003 1997 104436 from US sales of Automated External Defibrillators taken from market research
reports. These data are entered in to the table on the first data entry page of the
2004 1824 140408 experience curve tool found on the MATCH website. In this example, the
periods are selected as “Annually”, the currency as “US dollars” and the
2005 1733 175081 volumes as “x1”, representing individual units.
2005 1594 205652

Table II: Answers to additional

questions

Table II shows the answers to the additional questions. Question 1 is the only
1 Sales prior 100000 one that must be completed in order to determine the experience curve slope.
to period 1 This is an estimation of the total volume of sales prior to the start of the data in
Table I. In this example this is estimated to be 100000 units.
2 Product Medical
Type Device
Questions 2 to 12 are answered on the second data entry page of the
experience curve tool. The purpose of these questions is to put the data into
3 Product AED context and allow this example to be compared with other cases in the MATCH
description
database. It is important to note that this information is only available to MATCH
4 Market US sales
researchers and will be used solely for research into whether specific patterns
description can be in the cases of different types of medical device. One of the aims of this
research is to enhance the predictive power of the experience curve by
5 Company n/a considering how different markets, competitive environments and different
size product types can have an effect on the rate of price decline with experience.
6 Clinical use Cardiova
area scular .

7 Year of first 1993

product (FDA)
approval

8 No. of 7
competitors

9 Size of V. Large
largest
competitor

10 FDA device 3
class

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© MATCH 2009
 The final question asks for an email address. This email address is
requested so that a short report can be sent to all users of the tool giving
an indication of how their case fits with the other cases that have been
analysed to date and outlining some of the conclusions of the MATCH
experience curve research to date.

Table III: Corelations of market

and product factors with the Once the “Submit Form” button is pressed, the user is taken to a
experience curve slope confirmation page where the data that has been added will be displayed in
Pears table format, shown below. Clicking on the “Proceed” button will complete
on the task of submitting the case to MATCH researchers and will plot the
Correl experience curve
ation

Factor Coefft. Sig.

Market 0.618 0.032**

Growth
Rate

Number of -0.511 0.09*

competitors

Years since -0.756 0.004***

first product
approval

1000.00

100.00
Output of the Experience Curve calculator
ASP

The output from the experience curve calculator displays a chart of the
experience curve and the slope of the experience curve calculated with the
data that you have supplied. A screenshot of this is shown overleaf.
10.00
100.00 1000.00 10000.00 100000.00 1000000.0 10000000.
0 00
In addition to this graphical representation of the price trend for your
product, further analysis is possible by contacting MATCH researchers
Cumulative volume directly. In particular, if you would like additional explanation of what your
results might mean, or if you have any questions about this analysis,
Figure 2: Experience curve for UK please contact us.
prescriptions of statins, showing a two
phase price decline of 96% followed by
65% after the launch of generic statins

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© MATCH 2009
 MATCH Price Trends Research

The Multidisciplinary Assessment of Technology Centre for Healthcare

(MATCH) is one of a number of Innovative Manufacturing Research
Centres (IMRC), funded principally by the Engineering and Physical
Sciences Research Council (EPSRC). MATCH researchers have been
investigating the assessment of the value of healthcare technologies. Price
trend research is an important part of this research.
We are interested in your
experiences of this tool
and would welcome your The research has found that while many medical device products follow
feedback. Please email similar price trends to products from other sectors, with experience curves of
70 – 80%, there are significant number of medical devices that follow a less
a.brown@ulster.ac.uk, or steep price decline trend, with experience curves greater than 90%.
leave your feedback on
the portal development
Current research aims to identify whether product and market factors play a
page of the MATCH
part in determining how quickly the price of a medical device declines. To
website. date the factors that show some correlation with the experience curve slope
are shown in Table III4. This analysis shows that
•Higher market growth rate is correlated with slower price decline
•More competitors is correlated with steeper price decline
•A longer period since the product was first approved is correlated with
steeper price decline
:

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© MATCH 2009

MATCH vision:
To transform the medical
devices sector by
researching, testing and
making methods available
to cut the time and cost
from concept to continuous
improvement in the market,
in support of device users,
the medical device
industry, regulators and
reimbursement agencies,
and healthcare providers
such as the NHS.
MATCH is a collaboration of
four universities, jointly
researching, training and
engaging with industry
towards this end.
Contact MATCH
Alan Brown
Research Fellow
University of Ulster
Newtownabbey
BT37 0QB
Tel: 028 9036 8925
Email:
a.brown@ulster.ac.uk
www.match.ac.uk
This web-based tool forms part of this ongoing research into the factors that
influence the trends in prices for healthcare technologies products. This
case study will further the research into the factors that are correlated with
the rate of price decline.
A two phase decline has been seen in the experience curves for some
pharmaceutical products as shown in Figure 2. This phenomenon has been
reported in literature and is typically the result of a change in the competitive
situation in the market. One avenue of MATCH research is to confirm
whether this two phase behaviour can be seen in medical device case
studies. The slow price declines, represented by the 90% experience curves
that have been seen in several case studies, may be followed at some point
in the product lifecycle by a much more rapid price decline. Predicting the
time-scales for this two phase trend is a possible future avenue for this
research.
Discussion
The Multidisciplinary Assessment of Technology Centre for Healthcare
(MATCH) is one of a number of Innovative Manufacturing Research
Centres (IMRC), funded principally by the Engineering and Physical
Sciences Research Council (EPSRC). MATCH researchers have been
investigating the assessment of the value of healthcare technologies. The
price trends research came about in order to determine how quickly a
medical device, which was not deemed cost-effective, might become cost
effective as the price decreased5.
It is clear, however, that understanding how prices change is of critical
importance to companies developing new medical technologies. For
example, better estimation of investment returns, and better estimation of
cost-reduction targets will be possible if the price trend can be accurately
predicted.
It is also noted that comparing the price decline rates of a number of product
lines can enable strategic decisions to be made about the launch of future
generations of those product lines. Faster declining prices may result in a
strategy of rapid new product launch, whereas slower declining products
may be replaced more slowly.
Lastly, the possibility of a two phase price decline trend should be
considered. Understanding the dynamics of the market is vital to continued
success and this research aims to improve that understanding in the
healthcare technologies sector.
References
1. Wright, T.P. (1935) “Factors affecting the cost of airplanes.” Journal of
Aeronautical Science, vol. 3, pp. 275-282.
2. Henderson, B.D. (1984) “The application and misapplication of the experience
curve.” Journal of Business Strategy, vol. 4, pp. 3-9.
3. Brown, A., Meenan, B.J. and Young, T.P. (2007) “Marketing Innovation: Medical
Device Prices Follow the Experience Curve.” Journal of Medical Marketing, vol.
7, No. 3, pp. 203-212.
1. Brown, A., Meenan, B.J. and Young, T.P. (2007) “Price Trend Analysis and its
Implications for the Development of New Medical Technologies.” Proceedings of
the 29th International Conference of the IEEE EMBS, Lyon, France, August 23-
26, pp. 5156-5159.
2. Girling, A. J., Freeman, G., Gordon, J. P., Poole-Wilson, P., Scott, D. A. and
Lilford, R. J. (2007) 'Modelling payback from research into the efficacy of left-
ventricular assist devices as destination therapy', International Journal of
Technology Assessment in Health Care, Vol. 23, No. 2, pp. 269-277.
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© MATCH 2009