The rethorics of value is usually plagued with deliberate misunderstandings. Specially, those that quote themselves as value creators may appear on a close look as a value extractors. This is precisely what the book of Marianna Mazucatto does. It identifies the patterns to assess value creation and extraction and the private of public and private roles.Chapter 7 on Extracting Value through the Innovation Economy is specially helpful. You'll find there the patents as a value extraction process or the pharmaceutical pricing discussed in detail. Therefore, a must read.
In modern capitalism, value-extraction is rewarded more highly than value-creation: the productive process that drives a healthy economy and society. From companies driven solely to maximize shareholder value to astronomically high prices of medicines justified through big pharma's 'value pricing', we misidentify taking with making, and have lost sight of what value really means. Once a central plank of economic thought, this concept of value - what it is, why it matters to us - is simply no longer discussed.
The logical outcome of a combination of monopoly and rigid demand is sky-high prices, and this is precisely what is happening with specialty drugs. It explains why pharmaceutical companies enjoy absurdly high profit margins: in addition to the normal profit rate, they earn huge monopoly rents.59 A value-based assessment of the kind NICE carries out can be helpful because it reduces demand for the monopolists’ drugs and prevents them from charging whatever price they choose. The downside, however, is that increased elasticity of demand for drugs comes at the cost of leaving some patients without the medicines they need, because pharmaceutical companies may not cut their prices enough to treat everyone who needs the drug if doing so would reduce profit margins by more than the companies want.
