Thanks to lucrative tax breaks and other benefits for American corporations, child sponsorship groups are distributing tens of millions of dollars worth of surplus goods each year in the developing world.
Known by corporations and charities as “gifts-in-kind,” the products, ranging from clothing to medicine to baby food, are donated overseas to the needy. But sometimes the goods end up unused in warehouses or buried in landfills, never reaching the children, clinics and schools they are intended for.
American corporations often have a big incentive to donate the goods to charities. They get one deduction for their cost of production plus a bonus writeoff for giving away the goods. Donations also are good publicity for companies, as well as a way for them to exercise good will.
But child sponsorship organizations such as Children International, World Vision, Food for the Hungry and Feed the Children also benefit. These four charities alone report handling more than $200 million worth of donated goods each year.
A powerful fundraising tool for many charities is the assertion that they spend the majority of their income on furthering their mission–something charity officials refer to as “program services”–rather than on administration and fundraising. It’s often easier and less expensive for charities to collect and distribute in-kind donations, which are considered program services, than to raise cash from the public.
For example, a charity that takes in and distributes $1 million in donated goods can tell its supporters that it spent $1 million on program services without having to use hardly any of its cash. As a result, competition is often fierce among charities to attract corporate in-kind donations.
“What they are trying to do is get big-dollar donations to bolster the program income of the organization,” said Susan Ikazaki, who directed corporate donations for Children International from October 1991 to February 1995.
In-kind donations undoubtedly help feed, clothe and educate the world’s poorest people. For example, a drug donated by Merck & Co. Inc., a leading U.S. pharmaceutical company, has during the past decade significantly reduced the spread of river blindness in Africa, the Middle East and Latin America.
There is little oversight. The U.S. government cannot block the export of donated medicines no matter how close they are to the expiration date. And in-kind donations often are fraught with waste, according to interviews with three dozen charity officials, international aid experts, company officials and regulators.
A report commissioned by Doctors Without Borders, an experienced international relief agency, found that 50 percent to 60 percent of the approximately 30,000 metric tons of donated medical supplies that poured into Bosnia during the civil war were unusable. Similar problems occurred after other disasters, including the 1988 Armenian earthquake, the 1985 earthquake in Mexico City and the genocide in Rwanda in 1994, according to charity and relief workers.
Health experts say some drugs remain effective for months after they expire. Others quickly lose their potency and in some cases become dangerous.
Last July, in the port city of Guayaquil, Ecuador, Richard Salazar pushed open the front door of a health ministry warehouse and flipped on the light. Stacks of boxes were piled 10-feet high on a green tile floor.
A beefy man with a crown of black hair, Salazar, who helps inventory drugs in the warehouse, quickly walked to one corner and stood before a dozen brown boxes he said were donated by the child sponsorship group Children International.
He reached into one of the boxes and pulled out a six-pack of large white plastic bottles containing a drug called Resaid, a nasal decongestant. With his index finger, Salazar poked at a small number stenciled on the label of one of the bottles: “10-96.”
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“That’s the date of expiration,” he said in July 1997, and then impatiently began to estimate the number of expired pills. “Eighty-one thousand,” he concluded.
He pried open the top of another box, traced by its lot number to the charity, to reveal dozens of neatly sealed containers of Ventolin, a drug used to treat asthma and other respiratory problems. Again, Salazar pointed to the date of expiration, “Aug-96,” and calculated the number of expired pills: 57,600.
“The majority of the things (drugs) we get (from CI) expire in one or two months,” said Pedro Anchundia, manager of the Guayaquil health ministry warehouse. He and Salazar said the drugs are distributed quickly, but some are returned and destroyed because they have expired.
Victor Mariduena, head of Children International’s operations in Ecuador, said that his charity occasionally distributes drugs that are only a month or two shy of their expiration date. But he said the nearly expired medicines are in such demand that they are quickly disbursed and used in hospitals and clinics.
If health officials are stuck with expired drugs, Mariduena said, it’s simply because they failed to pass the medicines on quickly enough.
“Don’t blame me for their inefficiency,” he said.
Children International reported that between October 1996 and September 1997 it distributed more than $22 million in donated products, a figure that accounted for more than one-third of its total income, according to its financial statement.
Ikazaki, the former Children International official, said there was sometimes tension in the charity between those in charge of programs, who wanted medicines that could be used in the projects, and administrative officials who wanted to take in and distribute costlier items. “The program people wanted aspirin, antibiotics, good primary-care-type medicines that we could use in our projects. What was more often offered was more sophisticated, specialized medicines, say for cancer or diseases not treated in our clinics,” Ikazaki said.
“The question is, how much does it really benefit the projects?” she said.
While several health officials in Guayaquil said Children International gave them donated medicines that were useful and had extended shelf life, many other health experts said they routinely had to destroy a large percentage of the medicines.
In Guayaquil, one health ministry document obtained by the Tribune recorded a donation by Children International of eight types of medicines to the health ministry in October 1996, six of which had two months or less of shelf life.
Another example cited by the health ministry was a December 1996 shipment of hepatitis A vaccine produced by Merck that was worth about $800,000.
About 17,000 doses arrived just seven weeks before their expiration date and were immediately distributed to health clinics and hospitals because of fears the doses would go bad, health officials said. Officials said they did not have enough time to search out those most at risk for the illness and instead quickly doled out the vaccines.
A medical broker that handled the shipment said Children International notified Ecuadorean officials that the drugs were coming about five weeks before they arrived.
“We didn’t have time to do a study,” explained Jorge Toledo, chief of protection and development at the health ministry. “We don’t know what percentage (of the vaccines) were thrown away.”
The vaccine manufacturer and the companies that produced the drugs being warehoused in Guayaquil explained that the donated goods were products they could no longer commercially sell. The medicines were handed over in time to be properly used overseas, officials said, even though they said they do not track the drugs closely once they are donated to a charity.
“Our requirements are strict,” says Brenda Colatrella, manager of product donations at Merck. “The understanding is that they (a charity) will ship and deliver (the donations) prior to expiration. It is my understanding that when they receive the product they do work to get it out as quickly as possible.”
Thad Jackson, executive vice president of International Medical Services for Health, a Sterling, Va., non-profit group that shipped the donated Resaid and Ventolin to Children International, said he isn’t sure why boxes of expired drugs were left in the Guayaquil warehouse.
Jackson said he recognized that donated medicines sometimes expire before they can be properly used–part of the risk of trying to do something productive with medicine that was going to be destroyed.
“You throw a lot of mud on the wall and hope some of it sticks,” he said, referring to donated medicines. “The part that doesn’t stick, you try to make sure that it doesn’t do any harm.”
In addition to pharmaceuticals, the in-kind trade involves a wide variety of other commodities, including seeds.
Since 1990, Food for the Hungry has reported receiving more than $25 million in donated vegetable and flower seeds, which charity officials say they dispersed to needy families. Several million dollars of that total were flower seeds, according to the companies and brokers that donated many of the seeds to the charity.
Charity officials said the organization passed the seeds out to impoverished farmers who grew the flowers and sold them to purchase food and other necessities. They also said that flowers improve the spirit of a community.
But when the Tribune asked to see the impact of such efforts first-hand, Food for the Hungry officials said they have no large-scale projects that use donated flower seeds. In one case, more than a ton of donated flower seeds was shipped by Food for the Hungry to Nicaragua in 1994, where it sat in a warehouse nine months before being buried in a landfill, according to Kevin Sanderson, an official for World Relief, a Wheaton-based charity that handled the seeds on behalf of Food for the Hungry.
Sanderson said several tons of donated vegetable seeds in the same shipment were a great benefit to thousands of poor farmers. David Collins, a Food for the Hungry official in Canada, said the flower seeds were used for micro-enterprise, but because the shipment took place four years ago, he could provide no other details.
The vast majority of the tens of millions of dollars in medicines donated annually by large U.S. drug manufacturers are given away when they have a shelf life of less than a year, according to industry experts and relief workers. Any product with less than a year’s validity generally can’t be distributed for retail sale because stores feel they have too little time to sell the product before it expires.
Charities that receive the donated medicines often face the same or greater problems in using the drugs before they expire, particularly when customs problems and poor infrastructure in developing countries are factored in, according to international relief workers and other experts.
The World Health Organization, along with seven major relief groups, drafted a set of voluntary guidelines in 1996 that would prohibit charities from distributing medicines if the drugs have a shelf life of one year or less.
The guidelines already have been adopted by a handful of countries. But some charity groups argue that enforcing the one-year rule would dry up their supply of donated medicines, a portion of which they say helps save lives.
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For example, Freddie Vera, general administrator of Guayaquil’s National Institute of the Child and the Family, said he was able to effectively use all of the 1,800 hepatitis B vaccines donated in July 1996 by Children International, even though the vaccines arrived only eight months before their expiration date.
Hans Hogerzeil, a WHO medical officer and expert in donated products, remains unconvinced that the agency’s new guidelines will deter appropriate donations.
“Both the charities and the American pharmaceutical industry find (the voluntary code) difficult because they want to donate a drug just before it has expired,” Hogerzeil said. “They want to purge their stocks. We don’t want this.”