McKinsey to Pay $650M for Aiding Purdue Pharma’s Opioid Sales

McKinsey to Pay $650M for Aiding Purdue Pharma’s Opioid Sales

Introduction

McKinsey & Company has agreed to a $650 million settlement with the U.S. Justice Department to resolve a federal investigation into its role in helping Purdue Pharma boost sales of the addictive painkiller OxyContin, according to court documents filed in Virginia.

Mckinsey's role as part of the agreement

As part of the agreement, McKinsey will avoid criminal prosecution by paying the settlement amount and adhering to specific conditions over the next five years, including halting any work related to the sale, marketing, or promotion of controlled substances.

McKinsey's senior partner's involvement

A former senior partner at McKinsey has also agreed to plead guilty to obstruction of justice for deleting documents from his laptop after learning of investigations into Purdue Pharma, a long-time McKinsey client. The partner’s lawyer declined to comment.

What did the McKinsey's say?

In a statement, McKinsey expressed regret for its involvement with Purdue. “We deeply regret our work with Purdue Pharma. We should have recognized the harm opioids were causing in society and should never have engaged in sales and marketing efforts for Purdue,” the firm stated. “This public health crisis and our role in it will remain a source of profound regret for our firm.”

Prescription opioids as main drivers of the crisis

This settlement represents another step by federal prosecutors to hold companies accountable for their roles in the opioid epidemic, which has contributed to over 80,000 overdose deaths annually in recent years. While illicit fentanyl has been the primary cause of deaths in recent years, prescription opioids like OxyContin were the main drivers earlier in the crisis. Over the past eight years, pharmaceutical companies, distributors, and pharmacies have reached settlements totaling approximately $50 billion with governments. Most of these funds are earmarked for combating the opioid crisis.

Mckinsey continues to work with Purdue despite warnings

Between 2004 and 2019, Purdue Pharma paid McKinsey over $93 million for consulting services, including strategies to maximize OxyContin revenues. Prosecutors allege McKinsey was aware of the risks and dangers of OxyContin and knew Purdue executives had previously pleaded guilty to crimes related to its promotion. Nevertheless, McKinsey continued to work with Purdue, providing strategies that included targeting prescribers likely to increase OxyContin prescriptions.

According to court filings, McKinsey’s work resulted in prescriptions that were unsafe, medically unnecessary, or diverted for illegitimate uses. U.S. Attorney Christopher Kavanaugh said in a news conference, “This was not just marketing. It was a deliberate strategy that was executed and succeeded.”

Crisis & 2013 proceedings

In 2013, after Purdue experienced declining sales, McKinsey consultants collaborated with Purdue representatives on visits to prescribers and pharmacies to collect information. In one instance, a McKinsey consultant noted a pharmacist who was visibly shaken and armed, commenting, “Abuse is definitely a huge issue.” Despite this, McKinsey continued to explore methods to increase OxyContin sales.

Court filings revealed that in 2014, McKinsey identified small clinics prescribing opioids at rates exceeding those of entire hospital systems and recommended targeting these clinics to drive sales. The firm also attempted to influence federal regulations, advising Purdue on how to minimize oversight of high-dose OxyContin and make prescriber training voluntary instead of mandatory.

Mckinsey's $765 million settlement

Since 2021, McKinsey has agreed to pay $765 million in settlements to state and local governments for its role in advising companies on opioid sales strategies. Additionally, the firm paid $78 million last year to healthcare funds and insurance companies. This settlement marks the first instance of a management consulting firm being held legally accountable for advising a client engaged in criminal activity. “If a consulting firm conspires with a client to engage in criminal conduct, being an outside consultant does not provide immunity,” stated the U.S. Attorney for Massachusetts.

Conclusion

The opioid crisis, which many attribute to the introduction of OxyContin in 1996, has had devastating consequences. In 2007, Purdue executives pleaded guilty to misbranding charges, and the company agreed to pay a fine. In 2020, Purdue pleaded guilty to additional criminal charges and agreed to $8.3 billion in penalties, most of which will be waived if the company finalizes a bankruptcy settlement currently under review.

McKinsey’s role in shaping Purdue’s sales and marketing strategies highlights the broader responsibilities of consulting firms in ensuring ethical practices and prioritizing public health over profit-driven motives.