As the president of a benefit corporation in the healthcare space, I often find myself explaining what exactly a benefit corporation is and how it differs from a traditional C-corporation. More importantly, I feel compelled to make the case for why the healthcare and pharmaceutical industries, of all sectors, should overwhelmingly embrace the benefit corporation model—and yet, frustratingly, almost none do.

What Is a Benefit Corporation?

A benefit corporation is a type of for-profit business that commits to balancing profit with purpose. While traditional C-corporations are legally obligated to prioritize maximizing shareholder value above all else, benefit corporations broaden their mission. They are legally required to consider the impact of their decisions not just on shareholders, but also on employees, customers, communities, and the environment. This dual focus on financial success and social responsibility is not just a tagline; it is embedded in the company’s DNA through its charter and is subject to accountability via regular public reporting.

Traditional C-corporations, on the other hand, operate under a more singular mandate: deliver maximum returns to shareholders. Executives of C-corporations must act in the best interests of the corporation and its shareholders. They can even be sued by shareholders for making a decision that does not maximize shareholder value. This model often encourages short-term thinking and decision-making that prioritizes profitability—sometimes at the expense of other stakeholders, including patients and the broader community.

Why Healthcare and Pharmaceuticals?

The healthcare and pharmaceutical sectors exist to improve lives, cure illnesses, and alleviate suffering. Their products and services are not just commodities; they are necessities that can mean the difference between life and death. Given the immense responsibility these companies bear, it is baffling that so few embrace the benefit corporation model. Here’s why they should:

1. Mission Alignment: The fundamental goal of healthcare should be to prioritize patient well-being. Operating as a benefit corporation ensures that this mission is not overridden by the pursuit of profit. Imagine a world where every decision—from drug pricing to research priorities—was evaluated based on its benefit to patients and society, not just its contribution to quarterly earnings.
2. Accountability and Trust: The public’s trust in pharmaceutical companies - and even doctors - is often low, largely because of perceived price-gouging and profit-driven practices. Benefit corporations are required to report on their social and environmental impact, fostering transparency and building trust with stakeholders, including patients and regulators.
3. Long-Term Thinking: By broadening their focus beyond shareholders, benefit corporations are better equipped to invest in long-term research and development, even in areas that may not promise immediate financial returns. This is especially critical in developing treatments for rare diseases or neglected conditions that are currently overlooked because they are not deemed “profitable enough.”
4. Employee and Community Engagement: Benefit corporations often prioritize creating positive impacts for their employees and communities. In healthcare, this could translate into better working conditions for healthcare workers, equitable access to medicine, and partnerships that address systemic health disparities.

Hospitals, Private Practices, and Health Insurance Companies

The principles of benefit corporations are not only relevant to pharmaceutical companies but also extend to other critical areas of the healthcare system, including hospitals, private practices, and health insurance companies.

Hospitals: Only about half of the U.S. hospitals are organized as nonprofit entities, which aligns with their mission to serve communities. However, for-profit hospitals, typically structured as C-corporations, often focus on generating shareholder returns, which can lead to decisions that prioritize profitability over patient care. If these hospitals embraced the benefit corporation model, they could legally balance profit with the imperative to improve patient outcomes, address public health issues, and reinvest in underserved communities.

Private Practices: Many private practices are structured as sole proprietorships, partnerships, or professional corporations. While these structures allow doctors to maintain independence, they often leave room for profit to take precedence over broader social goals. Some larger private practices may opt for the C-corporation structure. If private practices adopted the benefit corporation framework, they could set a powerful example by prioritizing community health initiatives, equitable access to care, and sustainable practices—all while maintaining profitability.

Health Insurance Companies: Health insurance companies are typically structured as C-corporations, focusing on generating returns for shareholders. This structure often drives decisions that prioritize cost containment and profitability over patient access and affordability. Some insurers operate as mutual companies or nonprofits, reinvesting earnings into improving services or lowering premiums. If more health insurance companies transitioned to the benefit corporation model, they could prioritize equitable access to care, transparency in pricing, and innovative solutions to reduce systemic healthcare inequities.

Why Aren’t There More Benefit Corporations in the Healthcare Space?

Despite these compelling reasons, the adoption of the benefit corporation model in healthcare remains minimal. Why? Here are a few reasons:

1. Investor Resistance: Many investors are accustomed to the traditional C-corporation model and may view the expanded mission of a benefit corporation as a potential drag on profitability. Convincing them that a dual-purpose model can yield sustainable financial returns takes effort and evidence.
2. Cultural Inertia: The healthcare and pharmaceutical industries have long been dominated by traditional models of corporate governance. Shifting to a benefit corporation structure requires not just legal changes, but also a significant cultural shift.
3. Misconceptions: Some companies fear that being a benefit corporation will make them less competitive or restrict their ability to make tough decisions. In reality, benefit corporations may thrive precisely because their mission-driven approach resonates with consumers, employees, and even investors.

A Call to Action

As someone deeply invested in healthcare’s ability to do good in the world, I believe it’s time for our industry to embrace the benefit corporation model. Does any pharmaceutical company, hospital, or doctor’s private practice really want to be on record saying “No thanks, we don’t want to be a benefit corporation, we’ll rather go after more profit”. This isn’t just about altruism; it’s about aligning our corporate structures with the fundamental purpose of healthcare itself: improving lives. By becoming benefit corporations, healthcare and pharmaceutical companies can set a new standard for what it means to be truly patient-centered, transparent, and innovative.

To my colleagues across the industry: let’s rise to this challenge. The stakes are too high, and the opportunity to lead with purpose is too great to ignore.

Thomas Weimbs, PhD
President and Chief Scientific Officer
Santa Barbara Nutrients, Inc
(A Benefit Corporation)