Saturday, September 16, 2023

"Lobbying’s Secret Frontier: Corporate Philanthropy"

More Chicago, this time from the University of Chicago's Booth School Of Business' Chicago Booth Review, August 21:

US corporations are making allies through their charitable giving—and the systemic impact could be huge.

In April 2014, during the second wave of the opioid crisis sweeping the United States, the commissioner of the Food and Drug Administration appeared at a summit on prescription-drug abuse and gave a speech in which she sought to justify the agency’s controversial decision to approve Zohydro ER, a powerful opioid. On the one hand, drug overdose deaths were devastating families and communities, said then-commissioner Margaret Hamburg, but on the other hand, many Americans were suffering and needed painkillers. FDA drug-approval decisions balanced the risks of opioid “misuse, abuse, addiction, and overdose” with the impulse to help “the estimated 100 million Americans living with severe chronic pain or coping with pain at the end of life.”

Hamburg’s use of “100 million” was revisited this year by the New York Times. Two months before her speech, a scientist whose research had led to the figure clarified that only a quarter of the adult population at most was “substantially impaired by chronic pain,” and only 10–15 percent were disabled by it. While still a lot of people, it’s far fewer than 100 million. That estimate had been disseminated in a 2011 report put out by the Institute of Medicine (now called the National Academy of Medicine), which is part of the National Academies of Sciences, Engineering, and Medicine, a respected trio of nongovernmental organizations often sought out by policy makers for independent opinions on matters that are sometimes complex and controversial.

But it seemed the Institute of Medicine was doing little to communicate the clarification. The National Institutes of Health cited the 100 million figure again that September in the first line of a report on opioids, which said one-third of the US population was affected. The American Society of Anesthesiologists is just one of many organizations quoting it on their website today.

What the Times added to the conversation this spring was that, as the figure was introduced and spread, members of the Sackler family—owners of Purdue Pharma, the now-excoriated and bankrupt maker of OxyContin—donated a total of $19 million to the National Academies between 2000 and 2021. What’s more, two of the experts the Institute of Medicine selected to compile the 2011 report on pain were leaders of organizations that had reportedly received grants of nearly $1 million each from Purdue Pharma.

A National Academies spokesperson declined to comment, referring Chicago Booth Review to a statement the academies issued this past April that said the Sackler funds were disclosed, “never used to support an advisory study” on chronic pain or opioids, and frozen in 2019 “as the scale of the opioid epidemic in this country became clear.”

It’s hard to prove influence peddling definitively, and even harder to measure its extent, although such behavior permeates many industries. Harvard’s Susan Crawford wrote a book a decade ago on how telecommunications groups used various means, including charitable giving, to get monopolistic mergers approved in the US. Sunlight didn’t necessarily lead to reform. “I’m afraid I’ve moved away from this policy area. Nothing was changing,” Crawford says.

But data-mining techniques and economic modeling are offering something new to the conversation. “Political charitable giving” in the US represents 2.5 times what companies spend on their investments in political action committees—a third of all federal lobbying dollars, write Chicago Booth’s Marianne Bertrand, University of California at Berkeley’s Matilde Bombardini, Boston University’s Raymond Fisman, and UC Berkeley’s Francesco Trebbi. They’re among the researchers probing how donations might influence policy, providing a growing understanding of the impact of corporate philanthropy on rulemaking and regulatory systems as a whole.

Putting mouths where the money is
Companies give philanthropically for a number of reasons, including tax incentives and public relations. When a grocery store funds a local community garden, for example, it might lose some sales as potential customers grow rather than buy their own produce—but it can gain valuable goodwill from neighbors and elected officials.

Some gifts might be motivated by policy priorities. In 2015, press reports revealed that the Coca-Cola Company was funding a nonprofit that was downplaying the role of diet in the obesity crisis. (The nonprofit then shut down.) In 2019, the Energy and Policy Institute, funded by charities supporting environmental conservation and climate action, published 10 case studies of utilities that had used philanthropy to “manipulate politics, policies, and regulation.”

But it can be hard to recognize if and when companies are using philanthropy to gain influence. Starting next year, a new anti-money-laundering law will require most public and private companies to disclose their beneficial owners, but charities and nonprofits will be exempt. Bertrand, Bombardini, Fisman, University of Western Ontario’s Brad Hackinen, and Trebbi describe charitable grants as “virtually undetectable by private citizens and civil servants without access to detailed tax returns information.” This opacity, they argue, adds to the appeal for companies of using nonprofits as lobbying allies: “Independent arms-length organizations may extend the credibility of the positions held by special interests,” they write....