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October is Cooperative Month, a time to celebrate a business model that puts people before profit and empowers its members through shared ownership and governance. Yet despite their widespread presence and valuable impact, many people still do not fully understand what sets cooperatives apart from other business models.
In this blog, we will explore:
- Defining Principles of Cooperatives
- Common Misconceptions of Cooperatives
- The Cooperative Model in the Pharmacy Benefit Industry
What is a Cooperative?
A cooperative is an independent entity that is member-owned and governed. It exists to serve the mutual interests of its members, offering economic value, shared benefits, and a voice in governance.
Cooperatives follow a globally recognized set of principles that emphasize equality and solidarity. These principles ensure that cooperatives are:
- Voluntary and open to all, regardless of size or industry
- Democratically controlled with each member having an equal vote
- Focused on member economic participation, where members contribute to and share in the financial success of the cooperative (patronage dividends)
- Autonomous and independently operated with decisions based on members’ needs, not those of external investors
- Committed to education and training to strengthen member engagement, skills, and informed decision-making
- Aligned with other cooperatives, leveraging resources, sharing expertise, and strengthening their impact on communities
Common Misconceptions of Cooperatives
Misconception: Cooperatives Are the Same as Other Shared Business Models
Cooperatives are fundamentally different in structure, governance, and purpose from other business models, such as coalitions, collaboratives, and collectives. While they may share an emphasis on collaboration and common goals, cooperatives stand apart as legally recognized, member-owned, and democratically governed organizations. Within a cooperative, no single organization holds more influence than another. Value generated by the cooperative is returned to members and reinvested in the organization to strengthen it. Additionally, the cooperative’s long-term stability and sustainable framework distinguish it from other shared business models.
Misconception: Cooperatives Require Heavy Member Involvement
Joining a cooperative does not mean additional responsibilities. While members have the option to vote on governance, be elected to the Board of Directors, and attend educational webinars and meetings, they can choose their level of involvement.
Additionally, most cooperatives employ experienced staff to oversee operations, finances, and strategic planning, allowing members to benefit from the cooperative without taking on additional responsibilities.
Misconception: Cooperatives Are Short-Term
Cooperatives are legally recognized business entities that are structured for long-term operation. Their longevity stems from their ability to evolve with member needs, reinvest returns into strategic initiatives, and uphold democratic decision-making. Some cooperatives have been operating for centuries.
Misconception: Cooperatives Serve Smaller Markets Only
The cooperative model can succeed at any scale: local, regional, national, or international, and it can compete with traditional business models in size, innovation, and impact.
Misconception: Cooperatives Are Only for Certain Industries
While cooperatives are often associated with agriculture, finance, and retail, their reach extends far beyond these familiar sectors. Cooperatives thrive in housing, energy, healthcare, education, transportation, and technology. The cooperative model is flexible and value-driven, making it effective in virtually any industry where people come together to meet shared needs and goals.
The Cooperative Model in the Pharmacy Benefit Industry
National CooperativeRx demonstrates how a cooperative business model can deliver exceptional value in a complex industry.
While traditional pharmacy benefit business models may offer scale and competitive pricing, they often come with trade-offs: limited transparency, misaligned incentives, and a lack of focus on member needs.
That is where National CooperativeRx sets itself apart. It bridges the divide between cost efficiency and ethical stewardship through its cooperative model.
- Group Purchasing Power: The scale of its membership provides leverage to negotiate favorable pricing and terms with its PBM partner, far exceeding what individual employer groups could achieve independently.
- Independent Oversight: Led by industry experts who serve solely on behalf of members, the Cooperative ensures objective oversight of its PBM partner and prioritizes member interests in every decision.
- Financial Returns: As a not-for-profit, National CooperativeRx returns 100% of negotiated rebates, discounts, market check savings, and audit recoveries to its members, who also receive patronage dividends.
- Equal Voice in Governance: Every member holds an equal vote in shaping the Cooperative’s direction, reinforcing its commitment to transparency and democratic control.
This model proves that cost efficiency does not have to come at the expense of values, transparency, and member voice.
Celebrate Cooperative Month
Cooperative Month is a great time to reflect on the value of being part of a cooperative. It is an opportunity to recognize what membership truly means and to help others understand the real impact and value cooperatives bring to industries and communities across the country.
Thank you to the members and partners of National CooperativeRx who have made our cooperative such a success.
