FOREIGN MARKETS: Drug Donations; HMOs in Latin America

      The Philadelphia Inquirer reports that "well-intended U.S. tax laws encourage drug companies to make charitable donations that offer relief to their own bottom lines but can endanger patients, create surpluses of unneeded or outdated medicines, and undermine local drug makers and doctors." For example, Novartis Pharmaceuticals Corp. recently donated $2 million of arthritis painkiller Voltaren to refugees in Kosovo. But the drug is largely outdated and was sent to Kosovo in a dosage three times stronger than people in that country are used to taking -- raising the specter of dangerous overdose. Regardless of the specifics, Novartis can still deduct $4 million -- twice the value of the drug -- for donating a drug it likely would have had trouble selling in the U.S. The Inquirer notes that drug companies make good use of U.S. tax law through such techniques as "inventory purging" and "venture philanthropy" -- in which companies flood a foreign country with "free samples" to develop a new market. Thanks largely to foreign drug donations, Merck & Co., Johnson & Johnson, Pfizer Inc. and Eli Lilly & Co. were among the top five "most generous corporations" in the U.S. last year, claiming $463 million in donations (Greve, 6/16).

South of the Rio Grande
      The New York Times reports that for-profit health insurers are targeting emerging markets in Latin America, where countries are spending an increasing percentage of their income on health costs. Chile, Columbia and Brazil "have lowered the bars that had kept out foreign-owned health companies," and Argentina and Mexico appear to be on the verge of doing so. Companies like Aetna and Cigna have scored tidy profits by applying the lessons of managed care -- a term assiduously avoided -- to inefficient foreign markets. The Times reports that "relatively easy savings -- what health care consultants call the low-hanging fruit -- are still there to pick." But the American health plans' arrivals have provoked some concern that they may not live up to their social contract. The Harvard School of Public Health's William Hsiao said, "The negative part of the picture, is that the private health plans in these countries compete by selecting the best risks." And Brazilian physician and member of Congress Antonio Palocci said, "It is natural for the private sector to move into the health system because public resources are so scarce. But I worry about foreign groups coming in, because they might view health care more as a business than a basic service" (Freudenheim/Krauss, 6/16).