Canadian charities and pharmaceutical donations -some ethical issues

February 15, 2009 | By: .(JavaScript must be enabled to view this email address) Mark Blumberg
Topics: Canadian Charity Law, Global Giving, Ethics and Canadian Charities, Avoiding 'Charity' Scams

There are many legal and ethical issues with the donation of pharmaceuticals to developing countries.  In this note I will touch upon some of the ethical issues.

Over the last few decades the number and uses of pharmaceuticals have increased.  There has also been a surge in the amount of donation of pharmaceuticals to developing countries.  There have been many abuses by different actors and therefore charities accepting pharmaceutical donations and shipping such donations to developing countries need to be careful that they are not creating more problems than good. 

This note is not about sham charities claiming to send millions of dollars in pharmaceuticals when in fact they are sending very little because they are using valuation techniques that artificially inflate the value of the pharmaceuticals.  Unfortunately this scheme has been quite common in Canada.  This note is about legitimate charities who want to do good and providing some ideas on issues that can come up with pharmaceutical donations.

Over the last couple of decades many organizations have been concerned with the abuse of pharmaceutical donations.

Provision 7.7 and 7.13 of the Interaction PVO standards provide useful guidance on the donation of pharmaceuticals to developing countries.  When you read the guidance below from Interaction you can just imagine the abuses that gave rise to two or three pages of ethical guidance dealing with the donation of pharmaceuticals.

7.7 Material Assistance

7.7.1 Programs involving the provision of emergency and material assistance shall be carried out, to the maximum extent feasible, in a manner intended to undergird and enhance local know-how and productive capacity, to avoid the creation of dependencies, to reduce vulnerability to future disasters, and to lay the basis for long-term development.

7.7.2 Materials provided shall be appropriate, based on an assessment of local needs, and sensitive to the local culture and situation. Any donations of goods and services will be accessible to disabled men, women, and children.

7.7.3 Members involved in the provision of food aid shall be guided and informed by the Representative Food Aid Standards, promulgated by Food Aid Management. A member utilizing gifts-in-kind (GIK) shall be guided and informed by the Interagency Gifts-In-Kind Standards Project6 of the Association of Evangelical Relief and Development Organizations (AERDO).

7.7.4 A member receiving and distributing medical supplies shall be guided and informed by The Use of Essential Drugs, containing the sixth model list of essential drugs promulgated by the World Health Organization.

7.7.5 A member utilizing gifts-in-kind shall have policies that clearly describe the valuation and auditing methods used, including diminution of value based on dating and shelf life; establish limits to the number of times that goods will be passed to other PVOs before being passed on to an end user; assure that only gifts-in-kind that are related to the basic mission and purposes of the organization and that are appropriate to the local situation will be received and disbursed; that processing fees will be assessed in relation to the cost incurred, not to the value of the goods involved; that gifts-in- kind will be used for the purpose intended by the donor and will not be diverted for financial gain
unrelated to the purpose for which the gift was made; and that proper documentation will be maintained on all gift-in-kind transactions.

7.13 Pharmaceutical and Medical Resources

7.13.1 The actions of the PVO: Regarding the provision of pharmaceutical and medical resources, a PVO should operate in a way consistent with its stated mission and nondiscriminatory practices. A member receiving and distributing medical supplies shall be guided and informed by The Use of Essential Drugs15, containing the sixth model list of essential drugs promulgated by the World Health Organization. All donations should be used in the furtherance of the stated mission, purpose, and program objectives of the donor, its affiliates, and partners. Donations should be used for the benefit of the sick and needy without prejudice to race, class, sex, or political or religious affiliation. Donations should not be unduly influenced by the internal or financial considerations of the PVO. For purposes of recording revenue and expense, gift-in-kind donations should be valued at their fair value as of the date of donation. Only organizations that take possession of a gift-in-kind donation from the original donor or which provide the donation to an end-use recipient should record the value of the GIK donation as revenue. Service fees related to GIK donations should be based on administrative, warehousing, or other similar costs incurred in the receipt and distribution of GIK. The basis and method for valuing donated GIK should be disclosed in an organization’s audited financial statements.

7.13.2 The authority of the recipient: A PVO should be guided by needs expressed by qualified host-country recipients. Qualified recipients may be appropriate governmental agencies or qualified private sector entities, such as national or international non-governmental organizations, local hospitals, and community health centers. All donations should be based on an expressed need and be relevant to the disease pattern in the recipient country. Drugs should not be sent without prior consent from the recipient. Donating PVOs should inform recipients of key logistical information regarding the delivery of pre-approved drug donation shipments being made between the recipient and donating PVO.

7.13.3 The appropriateness of the resources: All donated resources should be approved and appropriate to the recipient location, and there should be no double standards in quality. All donated drugs or their generic equivalents should be approved for use in the recipient country and appear on the national list of essential drugs or, if a national list is not available, on the WHO Model List of Essential Drugs16, unless requested otherwise by the recipient. The presentation, strength, and formulation of donated drugs should be similar to those of drugs commonly used in the recipient country. All donated drugs should be obtained from reliable sources and comply with quality standards in both the donor and recipient countries. Drugs that have been issued to patients and then returned to a pharmacy or elsewhere, or were given to health professionals as free samples, should not be donated. After arrival in the recipient country, all donated drugs should have a remaining shelf life of at least one year. An exception may be made, provided that the responsible professional at the receiving end acknowledges that he or she is aware of the shelf life and that the quantity and remaining shelf life allow for proper administration prior to expiration. In all cases, the date of arrival, the expiration dates, and the quantities of the drugs should be communicated to the recipient well in advance. All drugs should be labeled in a language that is easily understood by health professionals in the recipient country; the label on each individual container should contain, at minimum, the International Nonproprietary Name (INN) or generic name, batch number, dosage form, strength, name of manufacturer, quantity in the container, storage conditions, and expiration date.

7.13.4 The assurance of effective handling and delivery: The shipment and delivery of donations should be the responsibility of the PVO and cause as little burden as possible to the qualified host-country recipient. Donated drugs should be presented in unit size and packaging appropriate for the dispensing authority. All drug donations should be packed in accordance with international shipping regulations and be accompanied by a detailed packing list which specifies the contents of each numbered shipping unit by INN, dosage form, quantity, expiration date, volume, weight, and any specia l storage conditions. The weight per carton in each shipping unit should not exceed 50 kilograms. Unless in recipient-approved, pre-packaged units, drugs should not be mixed with other supplies in the same carton. In the recipient country, the value of the drug donation declared on customs and import documents should be no higher than the wholesale price of its generic equivalent in the recipient country, or the wholesale world-market price for its generic equivalent. Costs of international and local transport, warehousing, port clearance, and appropriate storage and handling should be paid by the donor agency, unless specifically agreed otherwise with the recipient in advance.

7.13.5 The assessment of activities: A PVO should maintain documentation relating to the handling and use of all donations. PVOs should maintain written policies and procedures to evaluate potential pharmaceutical donations to ensure that they meet appropriate programmatic, medical, cultural, and ethical criteria. All donations should have proper documentation relating to product value, inventory, verification of receipt, and record of end-use or transfer.

Do you require legal advice with respect to Canadian or Ontario non-profits or charities?


Charity Lawyer Mark Blumberg

Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.
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