McKinsey Settles for Practically $600 Million Over Position in Opioid Disaster

McKinsey & Company, the advisor to blue-chip companies and governments around the world, has agreed to pay nearly $ 600 million to settle investigations into its role in supporting turbocharged opioid sales. This is a rare example of the company being publicly held accountable for its work with customers.

The firm reached a $ 573 million agreement with attorneys general in 47 states, the District of Columbia and five territories, according to a lawsuit in Massachusetts on Thursday. Separate deals for $ 13 million and West Virginia for $ 10 million were announced in Washington State. Nevada, which is not a party to the agreements, will continue its opioid investigation, according to the Attorney General’s office.

The settlements came after numerous documents were found in legal proceedings showing how McKinsey drove Purdue Pharma’s OxyContin pain reliever sales in an opioid crisis in the US that resulted in the deaths of more than 450,000 people in the past two decades has contributed.

McKinsey’s extensive work with Purdue included recommending that people focus on selling lucrative high-dose pills, as the records show, even after the drug maker pleaded guilty in 2007 to misleading doctors and regulators about the risks of OxyContin. The company also announced to Purdue that it could “partner” with other opioid manufacturers to prevent “harsh treatment” from the Food and Drug Administration.

Maura Healey, the Massachusetts attorney general, said the company’s investigation included a review of “thousands and thousands of documents and emails” that collectively told “the story of McKinsey’s wrongdoing.”

“It has always been about holding accountable those who caused and benefited from the opioid epidemic,” she said. Ms. Healey was the first attorney general to investigate McKinsey’s business relationships with Purdue.

According to the multistate comparison, the consulting firm will not admit any wrongdoing, but will agree on legal restrictions on its work with some types of addictive substances. McKinsey will also retain emails for five years and disclose potential conflicts of interest in applying for government contracts. And in a similar move to the tobacco industry’s settlements decades ago, tens of thousands of pages of documents relating to his opioid work are being placed in a publicly accessible database.

States will use the civil sanctions – of which $ 478 million must be paid within 60 days – for opioid treatment, prevention and recovery programs, the settlement document says. It will be the first money states will see after Purdue Pharma agreed to pay $ 8.3 billion in October and plead guilty for the commercialization of OxyContin. Purdue has filed for bankruptcy, which means that the state party has to coordinate with other creditors.

Additionally, members of the Sackler family, who own Purdue, agreed last fall to pay the federal government civil fines of $ 225 million and are in talks with other litigants to pay $ 3 billion.

Massachusetts and many other states were unhappy with the October deal, which the Trump administration’s Justice Department reached just days before the former president was defeated in the November election.

The amount McKinsey pays is significantly more than what it made from opioid-related work with Purdue or Johnson & Johnson, Endo International and Mallinckrodt Pharmaceuticals, its other opioid manufacturers, said a person involved in the settlement negotiations.

McKinsey could face even more claims in the coming months. In some states, the agreements don’t stop local governments from filing lawsuits, and Mingo County, West Virginia, one of the hardest-hit states in the country, filed a lawsuit against McKinsey last week. The Biden administration could also take action against the company.

In a statement Thursday, McKinsey said he believed “his previous work was lawful and has denied allegations to the contrary”.

However, Kevin Sneader, the company’s global managing partner, said, “We deeply regret that we have not adequately recognized the tragic consequences of the epidemic in our communities. With this agreement we hope to be part of the solution to the opioid crisis in the US. “

A former partner described the settlements as extremely significant as it undermines the distance between McKinsey, who argues that he only makes recommendations, between his advice and the actions of his clients. For decades, the company has been avoiding legal liability for high-profile defaults by some customers, including the 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.

That happened to McKinsey in Purdue, said Phil Weiser, the Colorado attorney general. Two senior McKinsey partners led the company’s efforts to implement sales growth plans, worked with members of the Sackler family, and even outvoted Purdue executives, Weiser said.

“When you see the actions of these McKinsey partners, they almost acted as executives for the company,” Weiser said.

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 wrote a report for Purdue that new sales tactics would increase OxyContin sales by up to $ 400 million per year and suggested “sales drivers” based on the idea that opioids reduce stress and reduce patients more optimistic and less isolating, ”reads a 2018 lawsuit filed by Massachusetts. 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 slide show for Purdue, McKinsey put forward various options to support sales. One was to give retailers 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.

On Thursday, a McKinsey spokesman said the two men had been fired.

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