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Bob Meyer

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Businesses Barter To Solve Array Of Problems

If a company experiences a marketing snafu, or a logo change prevents a perfectly decent product from being sold through the normal channels of distribution, the affected assets can be saved through a creative barter deal.

Such was the case after the catastrophic December 2004 tsunami, when a pharmaceutical company had 48 million prescription paid-relief and anti-inflammatory pills on hand. The drug company had bought pills manufactured by another company that doctors commonly prescribed along with theirs. The idea was to sell both drugs in tandem under a new name. (But physicians persisted in prescribing the drugs as they previously had, not remembering the new product’s name.)

A Connecticut-based corporate barter company was called upon to brainstorm, and came up with a solution: They paid the pharmaceutical company $7.5 million in cash for the medicine. (The pharmaceutical company had other options rather than the sale: they could have destroyed the medicine, sold it to another company for remarketing, or donated it.)

The barter company did in fact donate it, to AmeriCares, a charitable organization that supplies humanitarian aid and disaster relief, which used the medicine in the Pacific Rim as part of its relief efforts after the tsunami. (At the barter company’s request, the Food and Drug Administration certified the drugs’ viability in a letter to AmeriCares.)

The pharmaceutical company, besides receiving the cash, was able to take credit for the donation. And the barter company received a charitable tax deduction for its cash purchase of the medicine.

Why did the corporate barter company lay out $7.5 million to the pharmaceutical company for the supplies? Because the pharmaceutical company committed to buy $52 million of media advertising through them over the next three years. (The ads would be purchased in any event by the pharmaceutical company, so it made sense to move the problem inventory as described.)

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