News and analysis
September 06, 2010

How Much Must Charities Disclose About Donors?

A Senator urges health groups to tell the public how much money they get from medical companies

Ryan Kelly/Congressional Quarterly/Getty Images

Sen. Charles E. Grassley says health charities need to demonstrate accountability.

The National Alliance on Mental Illness includes something on its Web site that is highly unusual in the nonprofit world: detailed, up-to-date information about its donors.

Each quarter it posts the names of all corporations and foundations that gave the charity more than $5,000, the specific amount they contributed, and how the money was spent.

Visitors can see, for example, that in the second quarter of 2010, Pfizer paid $35,000 for a corporate membership; Ortho-McNneil-Janssen Pharmaceuticals $60,000 to NAMI Beginnings, the group’s quarterly magazine; and Eli Lilly $250,000 to the Campaign for a Better Tomorrow, a program to help the charity carry out its educational, advocacy, and training programs.

The alliance, a prominent advocacy group in Arlington, Va., started posting such details last year after Sen. Charles E. Grassley, of Iowa, began to investigate its financial ties to the pharmaceutical industry.

Now Mr. Grassley— the senior Republican on the Senate Finance Committee—is turning an eye to 33 additional nonprofit medical groups. And he has made it clear he would like them to follow the mental-illness alliance’s lead.

“These organizations have a lot of influence over public policy, and people rely on their leadership,” he says. “There’s a strong case for disclosure and the accountability that results.”

Confidentiality of Donors

While the investigation is focused on medical issues, it could have implications for all charities that receive donations from businesses in areas that overlap with their nonprofit missions.

The Nature Conservancy, for example, recently came under fire from some supporters who worried that donations from BP were undermining the group’s response to the oil spill in the Gulf of Mexico. The nonprofit group had to spend time trying to allay such concerns, pointing to policies and procedures that they said prevented any undue influence.

The investigation also challenges the notion, protected by law, that charities have discretion over how much to reveal to the public about their donors.

“You have to preserve the confidentiality of donors and respect donors’ rights,” says Paulette V. Maehara, president of the Association of Fundraising Professionals. “Donors do have rights regardless of what Senator Grassley might think.”

Other observers, however, say Senator Grassley is right to examine nonprofit groups as part of his broader effort to unveil the possible influence of corporate cash on doctors, academic researchers, and others who offer medical advice to the public.

“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.”

Wide-Ranging Policies

The senator has asked the 33 medical groups last December how much money they got from pharmaceutical, medical-device, and insurance companies from 2006 to 2009; who the companies were and how the money was used; and how they disclose where top executives and board members get outside income.

Senator Grassley’s staff is now combing through hundreds of pages of documents that the groups sent in response, and he could announce his findings as early as this fall. is expected to announce his findings this fall.

More than half of the groups contacted by Senator Grassley gave The Chronicle all or part of the responses they sent to him (see table).

A Chronicle review of the medical groups in the Senate investigation found wide-ranging differences in the policies groups have to determine whether to acccept corporate money and when to share information about those payments with others. Some groups, like the American Heart Association and the Heart Rhythm Society, offer specific details about corporate contributions on their Web sites. But others provide just bare-bones information.

Traditionally, when charities name their contributors—in their annual reports, for example­—they generally just list names, sometimes within general giving categories (like “more than $50,000”).

The documents the nonprofits provided to The Chronicle show that the groups that Mr. Grassley is examining take in more than $100-million aggregate each year from medical companies in the form of donations, advertising revenue, exhibit fees, corporate memberships, and support for continuing medical education.

In some cases, 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.

However, a spokesman for the group, Steve Vetzner, says that was an anomaly created by the loss of income from other sources, for example a grant that was not renewed. He says only about 30 percent of the group’s revenues will come from medical companies this year.

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

Backing Legislation

Senator Grassley has previously quizzed charities about how much they receive from the medical industry. He raised the questions about the National Alliance on Mental Illness last year, citing news reports saying the organization relied heavily on pharmaceutical money (then about 50 percent of its budget, according to a spokesman for the alliance) at a time it was promoting industry-backed legislation.

He also put the American Heart Association under review in 2008 after Merck and Schering-Plough delayed releasing a delayed releasing a study challenging the effectiveness of the cholesterol-lowering drug Vytorin; Mr. Grassley wanted to know more about a statement the charity had issued encouraging patients not to stop taking the drug without consulting a doctor.

David Livingston, the association’s general counsel, says his group sent information about who was involved in drafting the statement, how much money it got from pharmaceutical companies, and how much it got specifically from Merck and Schering-Plough (about $3-million to $4-million, or less than 1one percent of its revenue in fiscal year 2008). He says he heard nothing further from Senator Grassley.

While some fund raisers worry about protecting donors’ privacy, a spokesman for the National Alliance on Mental Illness says the group has received no complaints from foundations or companies adonors about its “full disclosure” policy. Senator Grassley is facing resistance, however, in another case in which he has requested donor information. Donald Berwick, the new head of the federal Centers for Medicare and Medicaid Services, has declined to provide information about contributors to his former employer, the Institute for Healthcare Improvement.

Senator Grassley requested the information to see if Mr. Berwick had ties to companies in the health-care field that could benefit from his actions. But the Medicare chief said he did not have the power to produce the donor records because they were held by the nonprofit and were not public documents.

'We Cannot Be Bought’

Some groups, albeit a tiny minority, have decided the only way they can avoid the appearance that they are corporate shills is to refuse, or sharply limit, industry contributions.

For example, Breast Cancer Action, in San Francisco—which states on its Web site, “We cannot be bought”—does not accept any money from companies that it says profit from breast cancer, including drug makers.

“We could use the money,” says Barbara Brenner, the executive director. “But people rely on us for accurate information.”

She says the patient-advocacy charity does not want to be deterred from criticizing a breast-cancer treatment for fear of alienating a donor. For example, she says, it has urged the Food and Drug Administration not to approve Avastin, a drug produced by Genentech, for use on breast-cancer patients—and she wonders if it would have felt as free to do that if it had received money from the drug maker.

Senator Grassley, in his letter to the 33 medical groups, cited the decision by H. Richard Lamb, a professor emeritus of psychiatry at the University of Southern California who helped create the National Alliance on Mental Illness, to step down from the group’s board last October because of its “financial dependency” on pharmaceutical revenues.

“It’s not ethical, as I see it,” Dr. Lamb says now. “For one thing, it seems to me if you are going to take money from drug companies, you should take no position whatsoever on psychopharmaceutical matters.”

Instead, he says, the group’s executive director, Michael J. Fitzpatrick, co-wrote an article in the journal Psychiatric Services in 2008 urging policy makers not to impose rules that would prevent government health plans like Medicaid from paying for so-called “second generation” antipsychotic drugs for schizophrenia, even though the drugs were more expensive than earlier versions.

Dr. Lamb says that point of view, which he shares, is “worth many billions of dollars” to the same companies that provide money to the mental-health alliance.

Mr. Fitzpatrick declines to discuss the journal article, but says that “never in its history, in 31 years, has NAMI been compromised.”

Mr. Fitzpatrick says the pharmaceutical money helps the group develop public-awareness programs to fight the stigma around mental illness. He says the percentage of the group’s revenues that come from drug makers, however, is expected to fall from about 50 percent in 2008 to less than 40 percent by the end of this year­­—partly because “we’re getting more adept at fund raising from other sources.”

Dr. Lamb now serves on the board of the Treatment Advocacy Center, a mental-illness advocacy group that does not take pharmaceutical money.

Benefits to Charity

The overwhelming majority of nonprofit medical groups do seek out corporate cash as a way to help pay for their work. Douglas Henley, president of the American Academy of Family Physicians, says his group regularly faces pressure from some members to refuse industry money­. But the dollars allow it to offer programs to help doctors better treat patients, he says, and can be “appropriately managed” by following good conflict-of-interest policies.

“If we didn’t have that revenue, it’s unlikely we could conduct those programs because the only alternative would be to radically raise dues,” he says.

Carol Weisman, a fund-raising consultant for health charities, in St. Louis, says Senator Grassley’s investigation has raised concern among some groups that advocate for patients with relatively rare diseases that do not have large, powerful pools of donors. “The more devastating the disease, the less likely it is the families can fork over any money,” she says.

'Science of Reciprocity’

Some groups under review point to efforts they have been making in recent years to toughen their policies on corporate relations.

For example, the North American Spine Society, which represents medical spine specialists—a field that has been hit by a series of controversies in recent years over ties to medical-device makers­—has adopted the following changes:

  • Required medical-device manufacturers that do business with the group to follow a mandatory code of ethics.
  • Created a new position of board ethicist.
  • Barred its leaders from speaking at industry-sponsored events.
  • Greatly restricted the ability of corporations to blaze their logos on materials at educational events: No sponsorship of hotel keycards, registration-badge lanyards, welcome receptions, or meals. If companies want to provide tote bags, their logos must be hidden inside.

Furthermore, as of October 2010, no society board members or key leaders will be allowed to accept any industry money for consulting, speaking, or travel.

Ray Baker, the group’s president, says the society was influenced by the work of David and Sheila Rothman, experts in medical ethics at Columbia University who are advising the group.

“We really started looking at how even very small things can influence behavior,” Dr. Baker says.

Studies show that small trinkets can increase donations or sales, according to an article in the American Journal of Bioethics in 2003 about pharmaceutical gifts to doctors that Mr. Rothman cites­. For example, customers spent more money in a pharmacy when the owner gave them a cheap key chain, it says.

Even doctors, who are trained in the scientific method, can be influenced by the “science of reciprocity,” or the desire to offer something in return, Dr. Baker says. People think, “of course you wouldn’t be influenced by a pen,” he says. “The science is, yes, you will be influenced by a pen.”