Words like innovate, strategy, and value befuddle me. We allow them to morph into self serving interests without feeling required to offer up a definition or at the very least--clarify the context where they are applied. I have taken more than my share of economics classes both at the undergraduate and postgraduate level. The only service of those earlier classes was to provide the lexicon I use daily in deciphering the modern application and even re-awakening of an entire out-dated model.
Rethinking Economics is an international effort to reclaim theories for societal good. Here are a few of the books I would recommend, YMMV but your ability for independent thought will be a reward for sticking with any of them long enough to get the gist.
An observer from outside a well-worn ideology often asks the questions that need to be asked. In writing about health economics I often challenge the word "value". Value to whom? The health system? Pharmaceutical company? Health provider? Patient? Community? Society? You can see where I am going here. In health economics, value is often defined as a measure of cost-benefit. What about other influencers of value?
Value is confined to a measure of cost-benefit utility that obscures the influence of
monopoly, financial markets, and value extraction in the innovation process, and
renders pivotal sources of value creation – such as the state – invisible.--Mariana Mazzucato
Discussions of value aligned with health innovations are typically arguments for escalating drug prices. Basically, innovation will be stifled and the patients will suffer.
I don't buy it. I suggest reading anything by Mariana Mazzucato. Or authentic to how I discovered her powerful platform and thought provoking discussions, Rethinking Capitalism a podcast of a public lecture recorded at the London School of Economics and political Science.
As consumers we often misconstrued our role as patients in the economics scheme. When we are discussing health, the actual end-user becomes the public health systems. We are not the actual consumer. How could we possibly afford the cost of patent-protected medicines priced astronomically above even the most successful among us--multiples above our compensation.
Discussions of value in health innovation lack a wider and more dynamic understanding of the broader social and political–economic dimensions in which value is created, nurtured, and evaluated.--Mariana Mazzucato, Rethinking Value in Health Innovation: from mystifications towards prescriptions
Hearing the prevailing argument about innovation in pharma I also thought it made sense. But when you look at the financial side of the industry you can see the actual amounts directed to R&D, vs. share buybacks, marketing, executive pay--investments not linked to tangible market value. Profits are made from redistribution of wealth not necessarily rewarding public investment at the community level--the real engine of innovation and novel drug development. Available for preorder (delivered in May), The Value of Everything by Mariana Mazzucato dives deeply into how companies are valued according to the amount of wealth captured for themselves rather than for the value they create for the economy.
New medicines are covered by patents. Therefore, operating as monopolists in a given therapeutic
area, manufacturers can set prices unrestrained by competition. With many goods, the
elasticity of demand would be a constraint based on simple supply and demand logics:
the higher the price, the lower the demand for the monopolists’ product. Of course, the
elasticity of demand for medicines is quite different: people’s health is at stake.
This rigidity of demand elasticity means that public and private insurers often bear high
prices in order to meet their obligations to patients and their livelihoods. Rather than
reflecting value, higher prices are a manifestation of “what society can bear” in the face
of monopolies.--Mariana Mazzucato, Rethinking Value in Health Innovation: from mystifications towards prescriptions
Rather than reflecting value as conceived of in the conventional narrative, prices are instead artifacts of financial market expectations that are used to maximize short-term growth. The monopoly dimension of health innovation is grafted onto a second dimension: the financial environments in which these monopolists operate. Large publicly traded biopharmaceutical companies are valued on stock markets that are not based on their profits, but on the anticipation of growth in profits over time.
In this context, rather than reflecting value as conceived of in the conventional narrative, prices are instead artifacts of financial market expectations that are used to maximize short-term growth.
NIH invested > $200 million to develop the CAR-T technology, 10+ years of investment across universities and research at central Bethesda campus. Novartis licensed technology from a publicly funded laboratory at the University of Pennsylvania, and Kite Pharma received significant support in running clinical trials from the NIH. National Institutes of Health--Mariana Mazzucato, Rethinking Value in Health Innovation: from mystifications towards prescriptions
The hepatitis C case provides an illustration of this phenomenon:
with value-based prices for its hepatitis C regimens – which it acquired in the last stage
of clinical trials before FDA approval – Gilead Sciences accrued over $45 billion in the
first three years of sales (Roy and King 2016). In that period, the company spent over
$26 billion on share buybacks, compared to only $9 billion on research and
development (Roy and King 2016). Meanwhile, countries across the world have
restricted access to treatment for patients suffering from this infectious disease due to
Gilead’s prices (Iyengar et al. 2016).--Mariana Mazzucato, Rethinking Value in Health Innovation: from mystifications towards prescriptions