Finding a home for Canada's surplus drugs

Four-month-old Adrees waits, to be treated for a cleft palate, with his mother at the new CURE International hospital in Kabul. The charitable, U.S. facility is waiting on an expected $3 million in donated Canadian medications. (Paula Bronstein/Getty Images)

Fourteen years ago, John Kelsall was a just-retired CN exec who travelled to war-torn Bosnia to help distribute donated medicines. What he saw there changed his life forever.

Apart from the devastation and the children wasting away with treatable ailments, Kelsall also had a first-hand look at the mounds of useless donations that were taxing volunteers and turning off the medical teams.

"I saw World War II German medical field kits lying around, and antibiotics that were dated 1975," he says. "Remember this was in 1993."

Kelsall was in Bosnia as part of a fledgling Montreal-based charity called Health Partners International Canada (HPIC), which had just been set up and was attempting to distribute about $1 million in unused Canadian pharmaceuticals to the Third World.

When he came back he was seconded to the UN's World Health Organization to help write the new rules for donated medicines. The pressure had been building for some time. The UN had just overseen a series of disasters such as an earthquake in Armenia, drought and fighting in central Africa and Bosnia, in which mounds of inappropriate and badly identified drugs had to be destroyed.

The new rules were to be crisp and clear: Only send what's needed, what's asked for and what has at least a one-year shelf life left are the main ones.

Imbibing this message, Kelsall, a railway man almost his entire adult life, became president of HPIC and watched the charity take off.

Today, HPIC is so big it has its own climate-controlled, 26,000 square-foot warehouse in Mississauga, Ont., to house upwards of $27 million in donated pharmaceuticals and medical supplies, which was the value of last year's donations. The Canadian media is invited there this week to witness the packaging of a $1.5 million shipment, the first of two, to be airlifted shortly to a refurbished hospital in Kabul, Afghanistan.

Indeed, HPIC is so big it has even engineered what might be called its own tax incentive.

Doubling the writeoff

Earlier this year, on Feb. 16, Prime Minister Stephen Harper showed up at HPIC's Mississauga plant to officially open the new facility and extol its charitable work. A month later, in the federal budget, Finance Minister Jim Flaherty unveiled a surprise tax break that effectively doubles the tax writeoff drug companies are allowed when they donate unused medicines to international charities like HPIC.

The way the incentive is structured, it is probably only companies that donate their meds to HPIC that can benefit by it.

The rules say the receiving charity has to have been on the Canadian International Development Agency list of partner agencies and Kelsall, who has been lobbying for this change for seven years, says he can't think of many other charities that would qualify at the moment. HPIC is pretty unique in what it does.

Doctors Without Borders, for example, says the new incentives don't appear to apply to their work. But if donations take off dramatically because of the tax changes, as Kelsall predicts, who knows who else might get into the game and how tightly they will be bound by the rules.

The WHO guidelines are just that after all. Donors, even the best-intentioned ones don't ultimately get to keep track of how their donations are used or even whether recipient countries get to subtract the value of donations — which can seem larger in the case of brand-name goods — from their health budgets.

What's more, the new tax incentive is based directly on the U.S. model, which has been around since the early 1990s and which some critics say can distort the donation process in a host of subtle ways.

As things now stand, drug manufacturers can writeoff the wholesale cost of any drugs they either destroy or donate to a recognized international aid group. This doesn't change, but they will now be allowed to writeoff as well the equivalent of half the profit they would have lost on the donated goods, up to a cap of twice their wholesale value.

This is a fairly powerful incentive for companies that were already doing their bit for a variety of reasons for international aid. (Montreal-based Pfizer, for example, has donated over $26 million in excess medicines to HPIC in just over a decade.)

Donating excess pharmaceuticals allows companies to avoid the expense of destroying them but the process can also alter the recipient charities, U.S. studies have suggested.

These charities come under immense pressure to accept the donated drugs on offer (to boost their revenues and, in so doing, reduce the proportion that is seen as operating expenses.) They then must go out and "place" these drugs with other charities or aid organizations, or in countries that don't always have the health infrastructure to use them appropriately.

Demand driven

Kelsall says he is aware of these concerns but feels they can be mitigated if charities follow the WHO guidelines, particularly the rule that donations should be demand driven from the host country.

There are exceptions, he says. Sometimes HPIC has tried to place nearly expired drugs or ones that may seem too sophisticated for a Third World country, but only if the host country first agrees to it.

"Companies have the right to offer us the drugs they don't need anymore," he says. "But we turn down about a million dollars worth every year" and HPIC has only destroyed a fairly small amount of its own inventory in recent years.

The $1.5 million medical shipment that is being sent off early next week to Kabul is typical of how HPIC likes to act. American health officials at the Kabul hospital sent a shopping list of what they needed and HPIC went off to its group of over 80 donor companies and asked them to help fill it.

The result — antibiotics, analgesics, steroid creams, diabetes meds, dressings, sutures, needles and obstetric equipment — is exactly what's needed in a country with high wound rates, orthopaedic problems and birthing traumas. It's also "exactly what you'd be able to buy in the best drug stores or hospital pharmacies here in Canada," Kelsall says.

What's more, it's the result of an interesting back channel.

The Christian connection

HPIC's interest in helping out in Afghanistan goes back some years. In 2004, with CIDA's help, it sent $2.3 million worth of donated medicine and health equipment to Kabul, and the donations were particularly well received.

Until then, local medical officials were used to dealing with certain restrictions. International aid money came with strings: Buy generic and buy as locally as possible, with the result that some of the quality was iffy. The Canadian meds, by contrast, worked as they were supposed to and local officials took notice.

To expand the pipeline, Kelsall went looking for other partners. He met Mark Petersen, executive director of the Bridgeway Foundation, a family charity in Cambridge, Ont., who put him in touch with CURE International, a U.S. non-profit group that builds hospitals in the Third World.

Both Bridgeway and CURE describe themselves as faith-based Christian groups. HPIC does not but Kelsall says "we do operate out of the Christian ethos," and he himself is quite devout.

In any event, CURE won the contract to operate one of only three hospitals in Kabul, this one a facility that had been set up by the U.S. military. It had already been operating an obstetric and child-care clinic in the troubled region of Kandahar and has set up small working hospitals or in the Dominican Republic, Egypt, Ethiopia, Haiti, Honduras and Kenya, among other places, to which it sends young, idealistic doctors and nurses.

CURE needed quality meds for its new 115-bed Kabul facility (it is to have 26 doctors and 29 nurses) and Bridgeway was willing to pay the transportation and some other costs (roughly $366,885 over two years). So the three groups struck a deal to send up to $3 million in donated pharmaceuticals and medical equipment to the Kabul facility over these next two years. This current shipment is the first instalment.

HPIC estimates that as many as 113,000 Afghans may be helped by these Canadian meds, many of them mothers and high-risk infants because they are among the groups CURE focuses on.

It is hard to see this need diminishing in the near future. The next challenge will be keeping this pipeline flowing.