The Evolution of For Benefit Medicines (FBM) – September 30, 2015
For Benefit Medicines (FBM) was born from a long-shared vision to establish an Australian-owned, social enterprise company that markets generic medicines (approved by the Australian Government’s Therapeutic Goods Administration), and reinjects 100 per cent of profits from the sales of such medicines back into local patient support and medical research initiatives.
Pharmacologist and marketer, Barry Frost and business manager, John Hurley had this idea for over 5 years. The publishing of an article in the Harvard Business Review in November, 2011 entitled “The For Benefit Enterprise” some years later confirmed the validity of the business model.
Penned by journalist, Heerad Sabeti, the article outlined how society is moving into a new era characterised by the blurring of traditional boundaries and business roles, in which for-profit businesses are tackling social and environmental issues, non-profits are focusing on developing sustainable businesses, while governments are adopting a market-based approach toward service delivery. This blurring of boundaries and roles has opened the doors to a new type of enterprise in which business is not driven by a desire to profit, but rather, by social aims, coined the “The For-Benefit Enterprise”.
Sabeti highlighted the hardships encountered by many “For-Benefit Enterprise” businesses with securing a legally recognised format for their business, and the subsequent confusion with the not-for-profit and for-profit models of business, making it challenging for this enterprise to exist.
However, with change afoot, and this burgeoning business model, Sabeti argued it wouldn’t be long before the “For Benefit Enterprise” style business became more commonplace.
This article provided the impetus for Frost and Hurley to coin their new business, For Benefit Medicines.
“The article provided inspiration for our name, For Benefit Medicines,” Barry said.
When delving deeper into the Harvard Business Review article, Frost learned more about the new, For Benefit class of organisation. Like non-profits, For Benefits can pursue diverse social missions. Like for-profits, they can generate a broad range of products and services that improve quality of life for consumers, create jobs, and bolster the economy.
Combining the social with commercial is not new – consider hospitals, universities, arts organisations, and general goodwill. However, the For Benefit model goes far beyond, by redefining fiduciary duty, ownership, governance and stakeholder relationships in fundamental ways.
Below are some pivotal For Benefit characteristics currently being codified in new legal structures:
- Embedded purpose: A commitment to mission is in the organisation’s DNA. Fiduciary duty is tied to purpose.
- Earned income: Sales of goods and services generate most of the income.
- Inclusive ownership: Ownership rights are allocated among stakeholders in accordance with their contributions.
- Stakeholder governance: Decision rights regarding information and control are distributed among stakeholder constituencies.
- Fair compensation: Employees and other stakeholders are compensated in proportion to their contributions.
- Reasonable returns: Limitations on investment returns protect the organisation’s ability to achieve its mission.
- Social and environmental responsibility: Social and environmental performance is constantly improved throughout the stakeholder network.
- Transparency: Social, environmental, and financial performance and impact are fully and accurately assessed and reported.
- Protected assets: Social-purpose assets are preserved upon dissolution, conversion, or ownership transfer.
Frost and Hurley crafted FBM into Australia’s first not-for-profit (NFP) pharmaceutical company whose sole purpose is to distribute 100 per cent of profits to local patient support and medical research organisations.
While operating like other conventional pharmaceutical companies, FBM’s four-point plan ensures all profits are distributed to the designated beneficiaries:
- Under its Constitution, FBM is restricted from distribution of any of its profits to shareholders
- FBM is independently audited by Grant Thornton Australia.
- FBM has a low cost base with minimal staff.
- All donations are recorded on FBM’s website – www.forbenefitmedicines.com.au – to ensure total transparency.
“Given our personal experience of family and friends living with, and surviving breast cancer, Hurley and I elected to source breast cancer medications, in order to kick-start FBM,” said Frost.
“We aim to expand our catalogue of FBM generic medications and areas of giving, to continue to distribute further profits generated from the sale of such medications, to additional patient groups and medical research organisations in corresponding therapeutic fields.
“Our future areas of focus include prostate cancer, multiple sclerosis, schizophrenia, depression, Alzheimer’s and Parkinson’s disease,” Frost said.
“In subscribing to the philosophy that ‘every cloud has a silver lining’, our long-term goal is to fund activities that ultimately improve the health and wellbeing of all Australians.”
To learn more about FBM, it’s products and constitution, head to www.forbenefitmedicines.com.au