[ad_1]
McKinsey & Company, the consultant to blue-chip corporations and governments around the world, has agreed to pay $573 million to settle investigations into its role in helping “turbocharge” opioid sales, a rare instance of it being held publicly accountable for its work with clients.
The firm has reached the agreement with attorneys general in 47 states, the District of Columbia and five territories, according to five people familiar with the negotiations. The settlement comes after lawsuits unearthed a trove of documents showing how McKinsey worked to drive sales of Purdue Pharma’s OxyContin painkiller amid an opioid epidemic in the United States that has contributed to the deaths of more than 450,000 people over the past two decades.
McKinsey’s extensive work with Purdue included advising it to focus on selling lucrative high-dose pills, the documents show, even after the drugmaker pleaded guilty in 2007 to federal criminal charges that it had misled doctors and regulators about OxyContin’s risks. The firm also worked with a number of opioid makers to band together to “defend against strict treatment” by the Food and Drug Administration.
McKinsey will not admit wrongdoing in the settlement, to be filed in state courts on Thursday, but it will agree to court-ordered restrictions on its work with some types of addictive narcotics, according to those familiar with the arrangement. McKinsey will also retain emails for five years and disclose potential conflicts of interest when bidding for state contracts. And in a move similar to the tobacco industry settlements decades ago, it will put tens of thousands of pages of documents related to its opioid-related work onto a publicly available database.
States will use the civil penalties — $478 million of which must be paid within 60 days — for opioid treatment, prevention and recovery programs, the people said. It will be the first money states will see after Purdue Pharma in October agreed to plead guilty to federal criminal charges over its marketing of OxyContin and to pay $8.3 billion. Purdue declared bankruptcy, meaning the states party to that agreement will have to line up with other creditors.
The amount McKinsey is paying is also substantially more than it earned from opioid-related work with Purdue or Johnson & Johnson, Endo International and Mallinckrodt Pharmaceuticals, its other opioid-maker clients, one of the people said. In contrast, members of the Sackler family, which owns Purdue, agreed to pay $225 million in civil penalties, only a small fraction of the billions they drew from the company over the years.
Many states were dissatisfied with the October deal, which the Trump administration’s Justice Department reached only days before the former president was defeated in November’s election.
A spokesman for McKinsey did not immediately respond to requests for comment.
For decades, McKinsey has successfully kept a distance between the advice it gives companies and the consequences of those companies actually acting on it. The consultants only make recommendations, but the decision to follow that advice is up to the client, McKinsey has said.
One former McKinsey partner called the settlement hugely significant because it shatters the distance McKinsey puts between its advice and its clients’ actions. In the past, McKinsey avoided legal liability for high-profile failures of some clients, including the energy company Enron and Swissair, Switzerland’s defunct national airline. The former partner asked for anonymity because former McKinsey employees are bound by confidentiality agreements.
Making McKinsey and its competitors even more vulnerable is the fact that in recent years they have aggressively moved into a new line of work, not only offering management advice but also helping companies implement their suggestions.
The McKinsey materials released in litigation over the last two years go back as far as 2004 and are as recent as 2019.
The records highlight McKinsey’s close relationship with Purdue over many years. In 2009, the firm wrote a report for Purdue saying that new sales tactics would increase sales of OxyContin by as much as $400 million annually and “suggested sales ‘drivers’ based on the idea that opioids reduce stress and make patients more optimistic and less isolated,” according to a lawsuit filed in 2018 by Massachusetts. McKinsey worked with Purdue executives in finding ways “to counter the emotional messages from mothers with teenagers that overdosed” on the drug.
In 2013, the federal government reached a settlement with Walgreens, the pharmacy chain, to crack down on illegal opioid prescriptions. Sales to Walgreens began to fall. According to the Massachusetts lawsuit, McKinsey recommended that Purdue “lobby Walgreens’ leaders to loosen up.”
And in a 2017 slide presentation, McKinsey laid out several options to shore up sales. One was to give Purdue’s distributors a rebate for every OxyContin overdose attributable to pills they sold. The slides are notable for their granular detail. For example, McKinsey estimated that 2,484 CVS customers would overdose or develop an opioid use disorder in 2019 from taking OxyContin. CVS said the plan was never implemented.
By 2018, senior executives at McKinsey were becoming aware that they may face liability for their opioid work. After Massachusetts sued Purdue, Martin Elling, a leader in the firm’s pharmaceutical practice, wrote to another partner, Arnab Ghatak: “It probably makes sense to have a quick conversation with the risk committee to see if we should be doing anything” other than “eliminating all our documents and emails. Suspect not but as things get tougher there someone might turn to us.”
Both men were put on administrative leave pending the results of an outside investigation into whether any material was destroyed, McKinsey’s North America managing partner, Liz Hilton Segel, said in a letter to Congress in December. That month, McKinsey issued a rare public apology for its work on opioids.
“As we look back at our client service during the opioid crisis, we recognize that we did not adequately acknowledge the epidemic unfolding in our communities or the terrible impact of opioid abuse and addiction on millions of families across the country,” the company said in a statement. The firm later changed the statement to read “misuse” instead of “abuse.”
The agreement with the 47 states — Nevada, Washington and West Virginia weren’t party to it — doesn’t preclude the Biden administration from also seeking legal action against McKinsey. Additionally, 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.
[ad_2]
Source link
