McKinsey will pay nearly $ 574 million in four years to settle US states’ claims that their advice to pharmaceutical companies contributed to the country’s deadly opioid crisis, according to an agreement announced Thursday.
According to the settlement with the attorneys general of 49 states, the District of Columbia, and several U.S. territories, the consultancy has admitted no wrongdoing or liability.
Instead, states recognized their “good faith and responsible corporate citizenship” in reaching a settlement in which they agreed to retain records related to their opioid work and to adopt new policies for disclosing conflicts of interest between companies and government customers.
“We deeply regret that we have not sufficiently recognized the tragic consequences of the epidemic unfolding in our communities,” said Kevin Sneader, McKinsey’s global managing partner. The company stressed that it believed its work had been legal.
McKinsey will pay nearly $ 559 million to the states over four years to fund opioid prevention, treatment, and recovery programs, and an additional $ 15 million to the National Association of Attorneys General to cover the states’ research costs and a document repository to fund.
“This is the first multi-state opioid settlement that results in substantial payments to the states to deal with the epidemic,” the Massachusetts Attorney General’s office said in a statement announcing the settlement.
Authorities had filed the civil claims after details of McKinsey’s advice to Purdue Pharma, owned by members of the billionaire Sackler family, emerged on how to boost sales of OxyContin, the powerful prescription opioid.
Purdue’s advisers had urged Purdue executives to consider whether they would “ turbocharger the sales engine, ” according to a lawsuit filed by the Massachusetts attorney general urging them to visit direct sales representatives to to visit physicians with a track record of prescribing large amounts and pitching opioids as patients “the best possible chance to live a full and active life”.
In a July 2019 email disclosed in the lawsuit, a McKinsey partner revealed a conversation with his risk committee about “eliminating all of our documents and emails.”
In December, McKinsey pushed back on the idea that it had tried to aggravate the public health crisis, but admitted that it “fell short” in its responsibility to consider the potential consequences of his work.
The consultancy has long established itself as a trusted advisor to the world’s largest companies, several of which are run by McKinsey alumni.
His reputation has been dealt a series of costly blows over unrelated engagements prompting him to enact a new code of conduct, strengthen internal controls and consider how to choose which customers to hire.
The settlement failed to satisfy several critics. Tom Peters, the management writer who left McKinsey in 1981, wrote on Twitter that he believed the directors of the consulting firm should donate three-quarters of their net worth to “opioid curative causes.”
Purdue agreed to pay more than $ 8 billion in a criminal and civil settlement with the United States Department of Justice last October. The company is negotiating with various states, provinces and cities. Sackler’s relatives agreed to pay $ 225 million while denying the charges against them.
McKinsey has also come under fire for his previous advice to other drug manufacturers, including Johnson & Johnson, which previously made opioids and owned a maker of opioid ingredients.
The consultancy had already stopped working on “any opioid-specific company” in 2019. Thursday’s settlement prevents it from advising companies on “potentially dangerous Schedule II and III narcotics.”
“With this agreement, we hope to be part of the solution to the opioid crisis in the US,” Sneader said.
In a letter to employees, Mr. Sneader said the settlement had avoided a lengthy legal process and marked “an important step in accepting the ramifications of a chapter in our company’s story that I am not proud of”.
McKinsey had terminated two partners who violated the standards, he said, but the company still needed to set higher standards for itself and for its profession.
According to the US Centers for Disease Control and Prevention, the number of deaths per year from prescription opioid overdoses quadrupled between 1999 and 2018. More than 232,000 Americans died of prescription opioid overdoses during that time.