Controversies in Philanthropy: FSSO 119-100 Fall 2021

Ethical Dilemmas in Nonprofit Healthcare Funding




What is a Patient-Assistance Charity? 

Patient-assistance charities have become a popular trend in pharmaceutical companies’ efforts to assist patients in paying for their products.

The process follows as drug companies give hundreds of millions of dollars each year to charitable organizations, which in turn provide financial support to cover patients’ prescription co-pays or other medical expenses.

Half of America’s 20 largest charities are affiliated with pharmaceutical companies. 

What is the Problem? 

Controversy arises because pharma-affiliated charities fund co-payments only on prescriptions for drugs that they manufacture.

In 2016, pharmaceutical companies spent approximately $7.4 billion through charities. The co-payment on the price of a drug is typically around 10% of the cost the pharmaceutical company charges to the insurance provider; this means that if $7.4 billion were all spent on covering co-payments, drugmakers could earn $74 billion in revenue.

While pharmaceutical companies argue that helping patients with their co-payments is a way to make medications more accessible, it's entirely their advantage because consumers are only concerned about personal cost.

A Citi Research report from 2017 found that every $1 million the pharmaceutical industry spends on charitable donations has the potential to generate nearly $21 million for the sponsor company.

Harming Consumers? 

If a pharma-charity offers to cover a patient’s copayment expense, the patient will most likely choose the name-brand medication over the cheaper, generic option.

Additionally, pharmaceutical companies broaden their co-payment programs as they continue increasing their drug prices.

The Securities and Exchange Commission (SEC) has been investigating independent charities that are sponsored by pharmaceutical companies. Essentially, these independent organizations use the funding they receive from pharmaceutical firms to cover patients’ copayments; therefore, consumers aren’t aware pharmaceutical companies are profiting off their payments while increasing the prices of their own medications.

As an example, Andrew Lelling, a US attorney, explains that, “Pfizer knew that the third-party foundation was using Pfizer’s money to cover the co-pays of patients taking Pfizer drugs”...”masking the effect of Pfizer’s price increases.”

Johnson& Johnson, Astellas, Gilead Sciences, Celegne, Biogen among others have faced similar investigations.

Adding on, pharma-charity contributions are tax-deductible. In the US, companies that give products for the benefit of the “needy or ill” can deduct up to twice the cost of donated goods from their taxes.











 

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