McKinsey & Company, the advisor to blue chip companies and governments around the world, has agreed to pay $ 573 million to settle investigations into its role in helping turbocharged opioid sales. This is a rare example of the company being publicly held accountable for its clients.
According to five people familiar with the negotiations, the firm has reached an agreement with attorneys general in 47 states, the District of Columbia and five territories. The settlement was reached after numerous documents uncovered in legal proceedings revealing how McKinsey drove Purdue Pharma’s OxyContin pain reliever sales in an opioid epidemic in the US that resulted in more than two deaths in the past two decades 450,000 people contributed.
McKinsey’s extensive work with Purdue included recommending that people focus on selling lucrative high-dose pills, as the documents show, even after the drug maker pleaded guilty in 2007 to misleading doctors and regulators about the risks of OxyContin. The company also worked with a number of opioid manufacturers to band together to defend “against harsh treatment” by the Food and Drug Administration.
McKinsey won’t admit any wrongdoing in the settlement due to be filed in state courts Thursday, but it will agree to legal restrictions on its work with some types of addictive substances, according to those familiar with the agreement. McKinsey will also retain emails for five years and disclose potential conflicts of interest in applying for government contracts. And similar to the tobacco industry settlements decades ago, tens of thousands of pages of documents relating to working with opioids are placed in a publicly accessible database.
States will use the civil penalties – $ 478 million of which must be paid within 60 days – for opioid treatment, prevention and recovery programs, People said. It will be the first money states will see after Purdue Pharma agreed in October to plead guilty and pay $ 8.3 billion over the commercialization of OxyContin. Purdue has filed for bankruptcy, which means that the state party has to coordinate with other creditors.
The amount McKinsey pays is also significantly higher than what it made from opioid-related work with Purdue or Johnson & Johnson, Endo International and Mallinckrodt Pharmaceuticals, its other customers who manufacture opioids, one respondent said. In contrast, members of the Sackler family, who owned Purdue, agreed to pay $ 225 million in civil fines, just a small fraction of the billions they’d pulled from the company over the years.
Many states were dissatisfied with the Trump administration’s October deal The Justice Department reached just days before the former president was defeated in the November election.
A McKinsey spokesman did not immediately respond to requests for comment.
For decades, McKinsey has successfully kept a distance between the advice of companies and the consequences of the companies that actually respond to it. The counselors only make recommendations, but the decision to follow that advice is to the customer, McKinsey said.
A former McKinsey partner called the deal extremely significant as it shattered the distance McKinsey has between its advice and the actions of its clients. In the past, McKinsey has avoided legal liability for high profile defaults by some customers, including energy company Enron and Swissair, Switzerland’s defunct national airline. The former partner asked for anonymity as former McKinsey employees are bound by confidentiality agreements.
McKinsey and its competitors are becoming even more vulnerable because they have aggressively entered a new industry in recent years and not only offer management advice, but also help companies implement their proposals.
McKinsey materials published in litigation over the past two years date back to 2004 and are current until 2019.
The records show McKinsey’s close relationship with Purdue for many years. In 2009, the company penned a report for Purdue stating that new sales tactics would increase OxyContin’s sales by up to $ 400 million a year and suggested “sales drivers” based on the idea that Opioids Reduce Stress and Make Patients More Optimistic and Less Isolated, “According to a 2018 Massachusetts lawsuit. McKinsey worked with Purdue executives to find ways to” counteract the emotional messages sent by mothers with overdosed teenagers. “
In 2013 the federal government reached an agreement with Walgreens, the pharmacy chain, to take action against illegal opioid regulations. Sales to Walgreens began to decline. According to the Massachusetts lawsuit, McKinsey recommended Purdue “enticing Walgreens leaders to loosen up”.
In a 2017 presentation, McKinsey presented various options to support sales. One was to give Purdue dealers a discount for every OxyContin overdose attributable to the pills they sold. The foils are characterized by detailed details. For example, McKinsey estimated that 2,484 CVS customers would develop an overdose or an opioid use disorder from taking OxyContin in 2019. CVS said the plan was never implemented.
By 2018, McKinsey executives became aware that they might be held liable for their opioid work. After Massachusetts sued Purdue, Martin Elling, a leader in the company’s pharmaceutical practice, wrote to another partner, Arnab Ghatak, “It probably makes sense to have a quick chat with the Risk Committee to see if we can do anything else should do as “Eliminate all of our documents and emails. Don’t suspect, but if things get harder there someone could contact us. “
Both men have been taken on administrative leave pending the results of an external investigation into the destruction of materials, Liz Hilton Segel, managing partner of McKinsey in North America, said in a letter to Congress in December. That month, McKinsey rarely apologized publicly for his opioid work.
“When we look back on our customer service during the opioid crisis, we find that we have not adequately recognized the epidemic in our communities or the dire effects of opioid abuse and addiction on millions of families across the country,” the company said in a statement . The company later changed the statement to read “abuse” instead of “abuse”.
The agreement with the 47 states – Nevada, Washington and West Virginia were not parties – does not prevent the Biden administration from also taking legal action against McKinsey. In addition, several counties and cities across the country – including Mingo County in West Virginia, one of the states hardest hit by the opioid crisis – have sued McKinsey in recent days.