Monday, November 28, 2011

Will the Freeze of the Global Fund Finally Put Health Care Corruption on the Agenda?

In February, 2011, we posted about problems with corruption affecting the Global Fund to Fight AIDS, Tuberculosis and Malaria. At the time, the Fund promised to better detect fraud and corruption affecting its grants programs. We later posted about how after an internal debate, the Fund promised to make more information public about any losses to fraud and corruption.

Now it has made more such information public, but it also appears that further problems with corruption have lead to the freezing of the Fund.

The New Findings of Corruption

First, as reported by Bloomberg on 1 November,
A $22 billion disease-fighting fund backed by Microsoft Corp. (MSFT) founder Bill Gates found that money intended for people with life-threatening illnesses was used for home renovations in India and diverted to a person linked with money laundering and so-called blood diamonds in Nigeria.

The Global Fund to Fight AIDS, Tuberculosis and Malaria is seeking to recover as much as $19.2 million from grants in eight countries, the Geneva-based organization said in a set of reports today. As much as $1.3 million was misused by the head of a non-governmental AIDS organization in India to buy a car and renovate his apartment, one report said. In Nigeria, money was siphoned to a person arrested in 2003 for money-laundering and smuggling diamonds that are mined and sold to support war.

This amount was in addition to previous amounts disclosed before:
The organization said last year it was seeking the recovery of $44.2 million in four nations for 'grave misuse of funds.'

It is not clear how much money the Fund has lost to corruption in total. According to an AP report, via CBS News,
Earlier probes by the fund's internal watchdog, the inspector general's office, had detected about $53 million in losses, according to fund documents, some unpublished, provided by senior officials.

The fund's board chairman Simon Bland told The Associated Press it has now reviewed about one-seventh of $14 billion in grants disbursed.
Whether similar amounts of corruption affected the other six sevenths of grants is unclear.

The Freeze on Grants

This week, several reports that the Fund would stop funding new grants appeared in the media. As reported by BusinessWeek,
The world’s biggest disease-fighting fund canceled its next round of grants as the global financial crisis crimps donations and threatens its ability to curb the spread of the world’s deadliest infections.

The Global Fund to Fight AIDS, Tuberculosis and Malaria, which has spent or committed to spending $22 billion since 2002 on preventing and treating disease, will only have enough money to pay for essential services for existing programs through the end of 2013, the Geneva-based fund said in a statement today. It will not make new grants until 2014,...

The reason for this freeze on grant making was,
The fund faces 'accelerating deterioration' in its finances for the next three years because of economic distress in donor nations, combined with corruption in some of the poor countries it helps,...

A NY Times article implied that one reason for the financial shortfall was that some donor nations withheld money due to their concerns about corruption:
Several countries, including Djibouti, Mali, Mauritania and Zambia, lost their grants or had new safeguards put in place after officials were accused of stealing. The Global Fund’s own inspector general exposed the fraud and earlier this month was trying to recover about $20 million that had been stolen; that amount is less than 1 percent of the $13 billion that has been disbursed.

There have been reports of friction between Dr. Kazatchkine and the inspector general, John Parsons. They each report separately to the board.

Some major donors, including Germany and Sweden, expressed their dismay by freezing their donations.

Also, CBS News reported,
Germany, the European Commission and Denmark withheld hundreds of millions of euros in funding pending reviews of the fund's internal controls. Germany — the fund's fourth-largest donor- has since restored its funding.

Summary and Comment
In summary, the uncovering of specific instances of corruption that wasted the assets of the Global Fund, and the concerns of international donors about the effects of corruption on the Fund have been some of the causes of a freeze in funding that will preclude new initiatives at least until 2014. This is a dramatic illustration of how corruption can undermine health care.

We wondered previously whether the realization that corruption was subverting the Fund's activities would lead the Fund to actively address corruption.  In fact, the Fund seems to have investigated previous corruption affecting its work more aggressively than have many other health care organizations.  However, the Fund did not appear to have instituted any initiatives to prevent, forestall, or challenge corruption.  In that, it is typical of nearly every health care organization in the world.

Transparency International defines corruption as "abuse of entrusted power for private gain."  By that definition, many of the cases discussed on Health Care Renewal are about corruption.  For example, if a pharmaceutical company pays physicians as part of a deceptive marketing campaign that exaggerates the benefits or minimizes the harms of a drug, and that campaign increases sales and hence executive compensation, one could argue that the case involves corruption of both of physicians and of company management.  We have discussed many such cases on Health Care Renewal.  One striking example was the stealth marketing campaign for Neurontin as described in posts here, here, here and here.

Thus, there are many examples of corruption affecting health care professionals and academics, and all sorts of health care organizations, hospitals, health care insurers, pharmaceutical and device companies, health care information technology companies, medical education and communication companies, contract research organizations, etc, etc, etc  In 2006, Transparency International's Global Corruption Report asserted in its executive summary, " the scale of corruption is vast in both rich and poor countries."  As we summarized here, the report discussed the scale and diversity of health care corruption, and the severity of its adverse effects.

However, at least for a generation, there has been almost no opposition to such corruption.  In fact, as we have noted, health care corruption, and the problems and leadership and governance that lead to it, have been nearly anechoic.  Specifically, there is almost no teaching or research on corruption in health care academics (including medical and public health schools, and programs in health care research and policy.)  There is almost no mention of corruption by health care professional associations.  There are almost no initiatives to fight corruption on the part of health care charities and donors.  There is almost no interest in corruption among patient advocacy organizations.  (See previous discussion here.)

Why do they all ignore such a huge problem?  Most likely it is because of institutional and individual conflicts of interests.  Most of the these organizations are substantially funded by health care corporations, including corporations most involved in corruption, (and parenthetically, by financial firms whose corruption was likely a major cause of the global financial collapse / great recession, the other ostensible cause of the freeze of Global Fund grants.)  Many prominent health professionals and academics, and health care organizational leaders themselves have individual financial relationships with such companies.  For example, a majority of US medical school department chairs have significant financial relationships with health care corporations (see post here).  We have shown how top medical school leaders may simultaneously serve on the boards of directors of health care corporations (see post here).  People who are personally profiting from relationships with health care corporations are unlikely to question such relationships.  The leaders of organizations which depend on funding from such corporations are unlikely to question whether conflicts of interest might lead to corruption.  People whose colleagues, friends, family members, or supervisors are personally benefiting from conflicts of interest may hesitate to challenge such relationships.

So will the freeze of new grants at the Global Fund at least get health care corruption on the agenda?  One can only hope.  I personally hope that there are enough honest and unconflicted people remaining who will raise their voices above a murmur, even if that might discomfit those around them.

Of course, one reason we started Health Care Renewal was to make these issues less anechoic. So hear we go again.

PS - If anyone in our vast audience does know about any additional anti-corruption or conflict of interest, or pro-accountability, integrity, transparency, honesty and ethics initiatives, courses, meetings relevant to health care, please let me know and I will do my best to disseminate the information.


Bill Savedoff said...

I'm glad you've picked up this issue and given it some visibility.

To me, the biggest irony of the situation is that the Global Fund's investigation office is being serious about the rhetoric from politicians in donor countries about not tolerating corruption and being transparent. Then, countries like Sweden and Germany start pulling out because they are "shocked" to find that money is being diverted - while ignoring that similar things are probably occurring in other global health programs that are less serious about investigation. I've heard some claims that these countries are also using this as an excuse to cut funding given the current problems with austerity. To its credit, the US appears to be standing behind the investigation efforts. I talked about the problem of overrreaction in the media in this blog (

At the same time, I'm concerned that the Global Fund may go too far in the investigation and control direction. Managing an international fund for endeavors as complicated as providing health care in low-income countries is really tricky if you try to apply the same audit-trail standards that are supposed to work in rich countries. Hopefully, they'll make the risk of getting caught high enough to deter corruption without making the costs of control too high to get in the way of delivering services.

On your point about institutional reasons for corruption in these programs, I agree. But I think the kind of corruption you generally discuss in this blog and that occurs in universities, hospitals, and among medical researchers (dependent on health care companies for grants) is structurally different from the kind that occurs in international aid agencies like the Global Fund (relying primarily on national governments and to some extent private philanthropies). The corruption in Global Fund projects is institutional but the institutional dynamic is different – they are judged by the amount of money they disburse rather than the amount of health benefits they generate. As long as the appearance of auditing and control systems make it possible for national governments and philanthropies to claim that the money is reaching its intended participants, everyone is happy. The thing only falls apart when someone rips back the curtain and shows that some of the money isn’t doing what it’s supposed to. The Global Fund also gets pressures from pharmaceutical companies to buy their products but it doesn’t get funding from them and so I think the conflict of interest issue is less likely to be the explanation.

Roy M. Poses MD said...

Prof Savedoff -

Thanks. Great comments!

I agree that there is a certain irony in the Global Fund being made a poster child for the effects of corruption, given that the Fund seems to have made more of an effort to look for corruption than have many other donors (although that effort appears to be post-hoc.)

My point above, though, was to use this case to question why the many kinds of organizations that one might think ought to be addressing corruption are not. The donors to the global fund may be among that group of organizations.

Afraid said...

The competition in NGO charities is often about "people served." Look at the revelations on the Second Mile program related to the Penn State fiaso, some of the people served were children who simply received informational pamphlets or packs of trading cards. Is that really service?

And it extends to the biggest (and probably? most honest) of them all, the Salvarion Army. I saw a claim on a TV add tonight claiming 30 Million were 'served.'

At a service cost of 100 dollars that's $3 billion, around their total budget.

They equated "service" to "lives changed" in the ad. Even in an undeveloped country, can $100 really change a life that much?