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Should medical charities disclose where their money comes from?

How much must charities, including — or, perhaps, especially — medical charities, disclose about donors?

That question is raised in the current edition of The Chronicle of Philanthropy. An article, written by senior editor (and former Minnesota Public Radio communications director) Suzanne Perry, describes Sen. Charles E. Grassley’s (R-Iowa) current investigation into the financial ties between medical nonprofits and the pharmaceutical industry.

Last year, Grassley and his staff discovered that the National Alliance on Mental Illness (NAMI) was receiving sizable donations from pharmaceutical companies (50 percent of NAMI’s budget at the time) while simultaneously promoting industry-backed legislation. In December, Grassley sent letters to 33 other nonprofit medical advocacy groups, including such big names as the Alzheimer’s Association, the American Cancer Society and the American Heart Association, asking them to provide information on how much money they received from pharmaceutical, medical-device and insurance companies from 2006 to 2009. Grassley also asked if any of the groups’ top executives and board members personally received salaries or other types of payments from such companies.

Grassley’s report is expected to come out later this year, but The Chronicle decided to look into the issue itself. It asked the 33 nonprofits for the same information they had sent Grassley.

“We have been interested for some time in the conflict-of-interest questions that can arise when nonprofit groups take money from corporations,” Perry (no relation) told me in an email Wednesday. “Health-related nonprofits are among those that are most vulnerable to charges that their educational programs or advice to the public are influenced by industry cash. We thought that by focusing on Senator Grassley’s investigation, we could provide a snapshot of how some groups deal with this issue and how open they are about their corporate ties.”

Twenty-six groups gave The Chronicle all or part of the responses they had sent Grassley, reports Perry. Among those that declined The Chronicle’s request were the American Dental Association, the American Medical Association and the American Society of Plastic Surgeons — groups that also post few (if any) details about their corporate donors on their websites.

UPDATE: Robert Mills, a spokesperson for the American Medical Association, has informed me that I erred in saying his organization’s corporate donors aren’t listed on its website. He pointed out that a list of the 2009 corporate grants and donations given to AMA can be found in a preliminary report that appears on the website. It’s a bit difficult to locate, though. Go here, then click on “2010 Annual Meeting.” After you’ve opened the PDF document, scroll down to the 10th item (p. 44). “As you can see from the report, the AMA received $435,000 in corporate donations in 2009,” Mills wrote to me in an email. “This was less than one-percent of the AMA’s revenue in 2009.”

From the documents it did obtain, The Chronicle found that the groups Grassley is investigating receive more than $100 million in aggregate each year from drug and medical device companies. The money comes in the form of donations, advertising revenue, exhibit fees, corporate memberships and support for continuing medical education.

“In some cases,” writes Perry, “the money represents only a small share of the charity’s budget. For example, the American Cancer Society says such revenue totaled $10 million in 2009, or only 1.2 percent of the group’s nationwide income of almost $900 million. In other cases, the percentage is hefty. Mental Health America, a patient-advocacy group in Alexandria, Va., got 78 percent of its $3.2 million in 2009 revenue from medical companies.” (A Mental Health America spokesperson told Perry that last year was an anomaly and that this year the group will receive much less of its funding—about 30 percent—from medical companies.)

The responses received by The Chronicle also “shine a light on the financial ties between board members and the corporate world,” Perry writes, “with some groups submitting disclosure forms showing that trustees were stockholders, employees, consultants, or otherwise affiliated with pharmaceutical, medical-device, or insurance companies.”

Perry found that only a very few groups, such as Breast Cancer Action, turn down all corporate contributions that pose a potential conflict of interest.  “We could use the money,” Breast Cancer Action’s executive director, Barbara Brenner, told Perry. “But people rely on us for accurate information.”

Not everybody in the nonprofit world agrees that corporate funding sources need to be made public. “You have to preserve the confidentiality of donors and respect donors’ rights,” Paulette V. Maehara, president of the Association of Fundraising Professionals, told The Chronicle. “Donors do have rights regardless of what Senator Grassley might think.”

But others in the field who were contacted by Perry believe that full transparency is necessary:

“These patient-advocacy groups have kind of gotten a free pass,” says Howard Brody, director of the Institute for the Medical Humanities at the University of Texas Medical Branch in Galveston, adding that some pharmaceutical companies treat them like “an extension of the marketing department.” The groups’ ties to drug makers have attracted less scrutiny than those of doctors and academic researchers, he says, because charities like the American Cancer Society seem like “God, mother, and apple pie.”

You can read Perry’s full article here. For details of the monies received from medical companies by the 26 groups that responded to The Chronicle’s request for information, go here.

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