Deworming medicine donations have made some non-profits seem bigger and stronger than they really are
Upwards of 100 million deworming pills are distributed annually by US-based non-profits to help Third World residents fight intestinal parasites that consume food in their stomachs, causing hunger and starvation.
These chewable generic pills — mainly mebendazole and albendazole — are highly effective, especially for kids; just two pills a year and the worms stay gone. It’s a terrific, feel-good health-improvement story for any non-profit to tell.
But for years these medicines and some questionable accounting have been just as effective in enabling perhaps a dozen non-profits on the annual Forbes list of the 200 largest US charities to inflate their stated contributions and financial efficiencies. The pills can be bought on world markets in Europe, China and India for 2 cents each. But they have been valued on some non-profits’ financial statements as non-cash gift-in-kind (GIK) donations worth as much as $16.25 per pill—81,000 percent above that world market price.
Over the years this practice has added billions of dollars to charities’ reported donations. It has spread, in large part, via a shadowy network of pill-pushing brokers, intermedi- aries and agents. Some operate as their own charities or as stalking horses for obscure drugmakers. In some cases these middlemen supply not only the medicine, but also suitable-for-the-auditor paperwork showing inflated drug values.
Forbes can’t find any evidence that a large bulk deworming medicine donor anywhere shelled out in cash more than a few pennies per pill. Yet loose accounting rules for donated GIK goods, a questionable drug-pricing list and the drug price disparity between US and foreign markets have provided charities some cover for their use of even the most egregious GIK valuations. Indeed, the biggest scandal here might just be what’s legal.
If the kids are getting needed medicine, why worry about the accounting? The charities are trying to look growing and efficient as they fight for cash contributions from the would-be donor. “That’s clearly the reason they do it,” says Christopher Murray, a University of Washington health professor who runs the Institute for Health Metrics & Evaluation, which is funded by the Bill & Melinda Gates Foundation.
Significantly, not every big charity plays the goose-the-financial-statement game. The New York City-based United States Fund for Unicef books the same deworming meds at only 2.6 cents. Direct Relief International of Santa Barbara, California, uses 3.2 cents. Kansas City’s Children International eschews donations and buys deworming meds on the open market for no more than 4 cents a pill and often much less. “More cost-effective and straightforward,” the charity says.
(This story appears in the 17 February, 2012 issue of Forbes India. To visit our Archives, click here.)