McKinsey also worked for other companies that profited from opioids, including Johnson & Johnson and Endo, according to the legal filings, with the consultants earning millions of dollars designing and implementing marketing programs for the companies.
“Today’s agreement sets a new standard for accountability in one of the most devastating crises of our time,” Massachusetts Attorney General Maura Healey said in a statement. “As a result, our communities will receive substantial resources for treatment, prevention, and recovery services, and families who have seen their loved ones hurt and killed by the opioid epidemic will have the truth exposed” about McKinsey’s partnership with Purdue Pharma.
In the settlement agreement, McKinsey does not admit wrongdoing. In a statement, Kevin Sneader, the global managing partner of McKinsey, edged toward an apology.
“We chose to resolve this matter in order to provide fast, meaningful support to communities across the United States,” Sneader’s statement said. “We deeply regret that we did not adequately acknowledge the tragic consequences of the epidemic unfolding in our communities. With this agreement, we hope to be part of the solution to the opioid crisis in the U.S.”
Purdue Pharma declined to comment.
The settlement is another humbling setback for a prestigious firm that bills itself as “the trusted advisor and counselor to many of the world’s most influential businesses and institutions.”
In other prominent cases where its clients have stumbled, McKinsey has been able to distance itself from the trouble.
The consulting firm was a major force at the energy-trading firm Enron, itself the creation of Jeff Skilling, a former McKinsey consultant of 21 years, before Enron’s accounting scandal and downfall. McKinsey also devised an ill-fated expansion program for Swissair before that company’s 2002 bankruptcy.
More recently, McKinsey developed a nine-page report measuring the public’s response to economic austerity measures instituted by the Saudi government in 2015, according to a New York Times story. The McKinsey report on the public response, which was obtained by the Times, found that the responses on social media were primarily negative and that three people were driving the conversation on Twitter. Afterward, one of the three people was arrested, and the brothers of one of the others were arrested, according to human rights groups.
In response, McKinsey said the report on the Saudi economic program was an internal document and was not prepared for any government entity.
“We are horrified by the possibility, however remote, that it could have been misused,” a McKinsey spokesman said in a statement at the time. “We have seen no evidence to suggest that it was misused, but we are urgently investigating how and with whom the document was shared.”
In these cases, McKinsey has escaped significant legal ramifications. But the opioid settlement makes clear the consulting firm must remedy its conduct and dictates procedures for doing so.
Evidence obtained in the investigation showed that McKinsey senior executives in 2018 discussed destroying documents relating to the firm’s opioid work. The settlement requires the company to create a centralized document storage system that will contain client files.
Other evidence in the case showed that at the same time that McKinsey was working with opioid companies to boost their sales, it was advising governments and nonprofit groups on how to abate the crisis. The settlement requires McKinsey to disclose any potential conflicts of interest to government clients.
The company said it has fired the two executives who discussed destroying documents and instituted a new code of conduct.
The Massachusetts lawsuit, filed Thursday along with the settlement agreement, lays out the extent to which McKinsey consultants worked with top management and members of the Sackler family, who led and owned the company, in the effort to boost Purdue opioid sales.
McKinsey partners were part of an “Executive Oversight Team and Project Management Office, reporting to Purdue’s Executive Committee, the Purdue board, and with the Sacklers, individually,” according to the lawsuit. McKinsey conducted market research, attended ride-alongs with Purdue sales representatives promoting OxyContin and monitored Purdue sales representatives.
“Early in their relationship, McKinsey advised Purdue that it could increase OxyContin sales through physician targeting and specific messaging to prescribers,” the lawsuit alleges. “These McKinsey strategies formed the pillars of Purdue’s sales tactics for the next fifteen years.”
The states’ lawsuits allege that McKinsey helped Purdue with multiple efforts over the years: In 2008, McKinsey advised Purdue to “band together” with other opioid manufacturers to defend against strict treatment by the FDA. In 2009, after Purdue hired McKinsey to increase “brand loyalty” to OxyContin, it recommended the targeting of specific patients, including patients new to opioids. And in 2013, in its effort to “turbocharge” sales, McKinsey recommended several initiatives, including focusing sales calls on high-volume opioid prescribers, pushing higher, more lucrative dosages and trying to distribute OxyContin directly to patients and pharmacies to address the “product access” problem.
The company that would become Purdue Pharma was purchased by three brothers in 1952. One of the brothers, Arthur Sackler, died years before the company launched OxyContin.
The family of another brother, the late Mortimer Sackler, declined through a spokesman to comment. That side of the family said in a Purdue Pharma bankruptcy court filing that executive management of Purdue hired McKinsey, not the board of directors. It said the board “never adopted McKinsey’s recommendations or told management to do so.”
A lawyer for the family of the late Raymond Sackler, the third brother, said the board relied on McKinsey for advice, citing a 2013 memorandum from McKinsey to the company.
“McKinsey told Purdue that all recommendations were ‘industry best practices,’ saying in a July 18, 2013 report to Purdue’s Board: ‘These ideas are primarily about implementing industry best practices in execution. These best practices can be adapted for Purdue and rolled out quickly.’ The board took McKinsey, a top consulting firm, at its word,” said the lawyer, Daniel S. Connolly.
Purdue Pharma filed for bankruptcy in 2019 as part of a proposed settlement that will remove the Sackler family from ownership. As part of the potential settlement, the Sacklers are offering to pay $3 billion to settle scores of lawsuits. About half the state attorneys general have so far rejected the settlement and seek to extract more of the family’s fortune for the deal.
Last October, the company entered a $8.3 billion criminal and civil settlement with the U.S. Department of Justice that included a guilty plea by the company to three felonies of defrauding the United States and violating anti-kickback statutes for for improper marketing of its addictive painkiller. The financial terms were largely symbolic as Purdue Pharma’s bankruptcy has put it deeply in debt and its earnings from OxyContin have plunged. As part of the Department of Justice deal, the Sackler family agreed to pay $225 million in a civil settlement. The family denied criminal and civil culpability.
“McKinsey was using its immense talents to help Purdue Pharma sell more pills, and it worked,” North Carolina Attorney General Josh Stein, one of the leaders of the settlement, said in an interview. “The number of pills prescribed, Purdue’s profits and McKinsey’s fees all skyrocketed, but so did the number of people addicted, the number of people overdosing, and the number of lives lost.”
The company now pledges improvement.
“As I have said previously, we are determined to take the steps necessary to strengthen our firm’s risk management policies and culture,” Sneader said in a statement. “We will build on the steps we have already taken to learn from past mistakes, and ensure we consistently meet the high standards our firm has always aspired to.”