UFS Dispensaries

This is an abridged version of the case study presented in Australia’s Leading Co-operative and Mutual Enterprises in 2022 by T. Mazzarol (part of the CEMI Discussion Paper series). The full discussion paper can be accessed from the Centre for Entrepreneurial Management and Innovation website.

Founded in 1880, United Friendly Societies Dispensaries (UFS) is a mutual enterprise, owned and controlled by its members, headquartered in Ballarat, Victoria.

UFS operates a network of 21 pharmacies, 19 in regional Victoria, and two in Melbourne, along with three medical centres, two COVID clinics, and a day spa and wellness centre. UFS also provides nursing services across 16 locations across Victoria, which provide wound care, blood pressure tests, treatments of minor injuries and illness, and injections and immunisations.

In 2021, UFS had an annual turnover of more than $83.5 million and employed a total of 597 people on a full-time, part-time, or casual basis.

Background to the Friendly Societies movement

A Friendly Society is a mutually owned and managed organisation focused on the provision of mutual aid and fraternal support. Traditionally, their activities have been to provide financial assistance to cover medical, funeral, insurance, and education costs of members.

The origins of the Friendly Societies movement can be traced to the medieval guilds. Guilds and societies emerged as a collective solution to social and economic problems. The first societies reportedly emerged in Scotland and Wales in the 12th and 13th centuries. Members gained benefits in the form of unemployment support and assistance with medical, funeral and other insurance costs.

By 1800, Friendly Societies had become the dominant form of mutual assistance for working people within England and Wales. In 1815, there were an estimated 9,672 Friendly Societies, with a combined membership of more than 925,264, increasing to over 32,000 organisations with 4.7 million members by the 1870s.

A brief history of Friendly Societies in Australia

The identity of Australia’s first Friendly Society is unclear but is recorded by one source as the Loyal Mariners’ Rest Lodge of the Grand United Order of Oddfellows, founded in Sydney in 1828. Friendly Societies grew strongly, providing support to workers in the event of ill health, loss of tools, unemployment or death and by 1913 an estimated 46% of all Australians were members.

During the 1970s, the Australian health insurance system was transformed with the passage of the Health Insurance Act, 1973 (Cwt), the Health Insurance Commission Act, 1973 (Cwt) and the establishment, in 1975, of Medibank (now Medibank Private), then a state-owned enterprise. This had significant impact on the Friendly Societies and led to many members abandoning their private insurance funds.

In 2021, there were 42 Friendly Societies still operating in Australia. Many of these operate in financial services where they provide savings and tax-effective bonds, scholarship plans, funeral bonds and life insurance products. Some societies such as UFS are engaged in pharmacy and healthcare services, while others provide aged and home care services, and retirement living. In 2019, the sector had more than 800,000 members, and managed over $7.5 billion in assets.

Friendly Societies in the Australian pharmaceuticals industry

Demand for pharmaceuticals in the Australian colonies was high and the number of pharmacists was generally low. Pharmacists made significant profits, often working closely with doctors who received commissions, even writing their scripts in hieroglyphics to ensure that only their selected pharmacists could dispense the drugs.

To address these issues, Friendly Societies established their own pharmacies (dispensaries) which employed qualified, salaried pharmacists, who were free from having to make profits. Throughout the second half of the 19th Century, Friendly Societies’ dispensaries expanded across Australia and by 1911 there were Friendly Society pharmacies in every state.

UFS Dispensaries

USF Dispensaries was founded in 1880 as the Ballarat United Friendly Societies’ Dispensary, via a collaboration of nineteen Friendly Societies, with the first dispensary opening on 1 January 1881. Gradually, other Friendly Societies joined, and membership grew steadily from 1,724 in 1881, to 5,300 members by 1915.

Between 1919 and 1939, UFS operated a medical institute that provided medical services to its members and employed doctors working out of two surgeries. UFS had considered employing its own doctor as early as 1882, however due to good relations with the Ballarat Medical Benefit Society which sent all its scripts to UFS, a lack of support from member lodges who were keen to retain their own doctors and lobbying by the British Medical Association (Australia) (BMA), no immediate action was taken.

The final impetus came due to rising tensions between the Friendly Societies and doctors. Medical institutes operated by Friendly Societies employed doctors and pharmacists on salaries, this was opposed by doctors’ associations such as the BMA who viewed this as a risk to their ability to charge higher fees. An open dispute broke out between the Friendly Societies and the BMA, with many lodge doctors withdrawing their services, resulting in the UFS Medical Institute being initiated in 1918.

Throughout the 1920s and 1930s, the UFS Medical Institute operated against the background of disputes with doctors who worked through the increasingly more powerful BMA, and concurrent battles with pharmacists working through the Pharmacy Guild of Australia (PGA).

In the late 1930s the Federal Government began to develop the foundations of a National Health and Pensions Insurance Scheme, which provided medical benefits, including medical care and prescription medicines, as well as pension benefits.

This initiative impacted the medical institutes of the Friendly Societies. In 1939, as a result of the introduction of the National Health Insurance scheme, the BMA and Friendly Societies negotiated a settlement of their long-standing dispute and the UFS ceased to operate the Medical Institute.

In 2008, UFS returned to its historical association with medical services with the creation of UFS Medical at 40 Bridge Mall, Ballarat. Significant expansion occurred resulting in UFS funding the construction of a large UFS Medical Centre in Doveton St North on 9 September 2011. UFS Medical now operates across three sites, with a fourth purpose-built centre in development, and has 28 contracted GPs and a network of allied health providers and nursing staff, as well as a thriving Occupational Medicine business. According to CEO Lynne McLennan, the establishment of UFS Medical was in direct response to the needs of the Ballarat community. At the time, many local GPs were retiring, there was a shortage of doctors and it was becoming difficult to recruit new practitioners. Further, the cost and complexity facing doctors in running their own medical practices were a barrier, particularly as several major corporate groups had entered the area and were competing with independent GPs. The GPs who joined UFS Medical preferred the “middle” alternative of working for a community-based mutual which provided corporate efficiencies but returned profits to members and the community, rather than to shareholders.

Recent developments

Since 2010, UFS has continued to expand its operations within Ballarat, Melbourne, and regional Victoria. In February 2011, the fifteenth UFS pharmacy was opened and during the same period, UFS assumed management of four retail pharmacies within Melbourne. In 2013, a new pharmacy was opened within the UFS Medical Centre, providing scripts for patients of the clinic and a further medical centre was opened in Buninyong, southeast of Ballarat. During the 2016-2017 financial year, UFS opened two new pharmacies in the Macedon Ranges area, adding a further 1,500 new members within that region.

By 2022, UFS operated a network of 21 retail dispensaries across metropolitan and regional western Victoria, three UFS medical centres, COVID-19 testing and vaccination clinics, a day spa, and had a membership of at least 51,188. Over the past 10 to 15 years, the Society has experienced major change, but responded to the needs of the Ballarat, metropolitan and regional Victorian communities. This has included providing support to smaller Friendly Societies.

In 2019, UFS commenced an ongoing evidence-based program of innovation, aimed at both improving existing processes and services, and creating new solutions to meet the health needs of members. The company’s agile and flexible response to the pandemic has been partly attributed to the culture and mind-set generated by this work.

Managing the COVID-19 pandemic

The outbreak of the pandemic in late 2019 impacted the health of the Australian community and was still of concern in mid-2022. As had been the case back in 1919-1920 with the Spanish Flu outbreak, the medical and pharmacy services were on the frontlines.

One of the first initiatives undertaken by UFS was to open a testing clinic. During 2020, as the pandemic grew in intensity, UFS expanded its operations and a total of 44,211 COVID-19 tests were performed between 1 July 2020 and 30 June 2021. In addition to the testing clinic, UFS established a vaccination clinic and during the four months from March to end-June 2021, the clinic administered 11,580 doses.

UFS worked closely with the State and Federal Governments’ COVID units to provide advocacy for members, while also ensuring the membership was well informed about the virus and how to take steps to protect themselves.

Purpose and member value proposition

Having a clearly defined purpose and member value proposition (MVP) are strategically very important to CMEs. The services a CME provides should be relevant to this purpose, and they should be designed to deliver value to members. The mission statement of UFS is:

UFS aims to improve the health of our members and the local community.

The UFS Constitution, which outlines the objects of the company, is consistent with its overall mission and continues the long tradition of the society’s work in providing medical, pharmaceutical and related health care to the community that was started in 1880.

The primary way UFS has delivered value to members throughout its long history has been via discounts on products and services. This continues today with members receiving discounts across a range of items. Pressure from discount pharmacies in recent years has made these discounts less attractive. This has implications for the recruitment and retention of members. As member discounts are no longer as significant as they once were, the emphasis has been to highlight the Society’s community investment, and to focus member engagement on a value added rather than a price competitive strategy.

Strategic outlook and future directions

The need to develop a sustainable competitive advantage has led UFS to broaden its range of services. While it has reached the maximum number of pharmacies it can operate in Victoria, it has managed to increase its market share by securing management agreements. Its Supercare nursing contract has enabled UFS to deliver services state wide, and the re-establishment of its medical services has diversified the business portfolio.

UFS was also developing its entry into the area of home health care. The board and management had undertaken the necessary planning and feasibility study for this initiative, but at the time of writing their proposal for the service has been delayed, as attention has been diverted to the COVID-19 pandemic.

UFS has promoted a concept of “health for life” and this continues to be a focus for its future strategic direction. The Society has already developed a good reputation in delivering medical and pharmacy services and, given UFS’s ageing membership, this offers the opportunity to grow with their members as their various needs evolve.

At time of writing, the board had yet to finalise its latest long-term strategic plan, however, the Society is looking forward to a bright future, pursuing the same purpose that had motivated its establishment some 140 years before. While many things have changed, the fundamental needs of their members for high-quality and affordable medical, health and pharmaceutical services have remained the same.

Key lessons from the case

The long and successful history of UFS is testimony to its commitment to the original purpose for which the organisation was created. While many Friendly Societies have disappeared in the face of changing political, economic, social and legal factors, the need for high-quality medical, pharmaceutical and associated healthcare services at an affordable price has remained a constant. The values of UFS remain consistent with the values that existed when the society was established, to benefit its members and the communities in which it operates.

UFS is an exemplary role model of a successful, contemporary Friendly Society. Its long history provides a legacy of commitment to the pursuit of a clear purpose, focused on creating benefit for its members. Operating, as it does in a dynamic and competitive environment, UFS will face numerous challenges in the future. However, by drawing upon the lessons of its past, and applying the expertise, competence and wisdom of its board and executive management in pursuit of steady but sustainable growth, there is no reason why the Society will not be around for a long time to come.