Shenanigans of Corporate Grantmaking

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It still takes the equivalent of Sam Spade to track corporate philanthropy, since so much of it occurs as “direct” corporate giving rather than publicly disclosed grantmaking through corporate foundations that have to file 990PFs. The nonprofit sector is still gunshy about asking corporate America for full corporate disclosure, despite lots of evidence of lots of perfidy in the purported charitiable activities of corporate scions. The latest revelations about corporate philanthropy come from Senators Baucus and Grassley at the Senate Finance Committee. Their 106-page report published in April 2007, charges “that drug companies were using educational grants for improper purposes, such as rewarding physicians for prescribing their drugs, influencing clinical practice guidelines and Medicaid formularies, or promoting drugs for uses that have not been approved by the FDA.” One particularly disturbing example involved Warner-Lambert (now Pfizer) “using educational grants to fund purportedly independent educational programs that actually served to promote the anti-epilepsy drug Neurontin” for so-called “off-label uses.” Company whistleblowers contacted the Departments of Justice and Health and Human Services who pursued the company for violations of federal law; Warner-Lambert ultimately paid $430 million to settle the claims.

The Committee’s 2007 report follows earlier findings released by the Committee when it was under Grassley’s leadership. The earlier report cited $1.47 billion in educational grants from 23 drug-makers in 2004, a 20 percent increase over 2003. Among the disturbing cases of that report was Johnson & Johnson having been the sole funder—to the tune of $1.3 million in grants between 1996 and 1999—to a purportedly independent patient advocacy group whose advocacy agenda was to promote the off-label use of Propulsid, a drug to treat heartburn in adults, for off-label use by children. When research linked Propulsid with dangerous heart arrhythmias in children, the toxic drug was withdrawn from the market and the supposedly independent patient advocacy group disappeared. In wonderful understatement, Senator Grassley observed that “It’s hard to see how you could call some of these grants ‘educational.’”

Perhaps the Senate Finance Committee might have cause for a bit more concern if the members saw some of the latest figures on foundation giving and the role of the pharmaceuticals. A big and increasing chunk of corporate grantmaking comes from the pharmaceutical industry. In 2005, a dozen pharmaceutical foundations accounted for over $3 billion in donations of medications to people in need. Four of these pharmaceutical foundations now rank in the top 10 largest grantmaking foundations in the U.S., including philanthropic arms of Bristol-Meyers Squibb, Merck, GlaxoSmithKline, and Jansen Ortho. Expand to the top 50 in 2004 and you capture Roche, Lilly Cares, Boehringer Ingelheim Cares, and Aventis Pharmaceuticals. Some critics might suggest that the high prices of prescription drugs makes corporations’ charitable deductions for in-kind donations a somewhat dubious form of philanthropy. It all vaguely unsettling and worth a little scrutiny by both Congressional chambers.