Prosecutors label $650mn McKinsey opioid pact a warning to consultants
Former senior partner also agrees guilty plea in connection with consulting firm’s work for Purdue Pharma and others
McKinsey has agreed to pay $650mn to settle a US criminal investigation into its work for opioid manufacturers, and a former senior partner has admitted obstructing the investigation by destroying documents, according to court filings on Friday.
According to the deferred prosecution agreement with the US Department of Justice, McKinsey accepted responsibility for its actions, which prosecutors said included “knowingly and intentionally conspiring with Purdue Pharma and others to aid and abet misbranding of prescription drugs”.
McKinsey’s advice on how to boost sales of opioids came at a time of a spiralling addiction crisis that has claimed hundreds of thousands of lives in the US. It has previously paid about $1bn in civil settlements over the work, which it ceased in 2019.
Martin Elling, a former senior partner who advised Purdue Pharma, the maker of OxyContin, has also agreed to plead guilty to one count of knowingly destroying documents with the intent to obstruct justice. He faces a sentence of up to 12 months in prison under the agreement with prosecutors, according to court documents.
In 2018, shortly after the Financial Times reported a state attorney-general was investigating Purdue Pharma, Elling deleted more than 100 files relating to the work, according to court documents. After reading another story in the New York Times about the DoJ’s opioid investigation, “he emailed himself an apparent to-do list with the subject line, ‘When home’. The items listed included: ‘delete old pur [Purdue Pharma] documents from laptop’,” according to the document.
Elling was involved in securing for McKinsey a particular engagement with Purdue Pharma that became known as “Evolve to Excellence”, which included proposals by McKinsey to “turbocharge” Purdue Pharma’s OxyContin sales including by focusing on the highest prescribers, court documents showed.
McKinsey was paid $94mn by Purdue Pharma across 75 engagements over 15 years, according to court documents.
“McKinsey knew the risks and dangers associated with OxyContin, a powerful and addictive opioid,” prosecutors said in the filings. But it “chose to continue working with Purdue Pharma to improve sales” of the drug.
The company crafted a strategy to target OxyContin users who would produce the highest number of additional prescriptions, resulting in “reformulated” prescriptions for uses that were “unsafe, ineffective, and medically unnecessary”, the US justice department said.
In explaining why it was deferring prosecution, the DoJ said McKinsey had implemented “extensive remedial measures,” including firing Elling and another senior partner who communicated about deleting material and voluntarily ending work on opioid matters. The firm has also agreed to implement further client screening processes, risk management measures and training programmes.
McKinsey said its opioid work was a source of “profound regret” for the firm. “Since these issues first arose, we have significantly enhanced our risk management processes to ensure we never find ourselves in this situation again, including by introducing industry-leading client service policies and a revised code of conduct that leaves no doubt about the expectations of every one of our colleagues.”
A lawyer for Elling said he had no comment.
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This reminds me of on old joke: A shepherd is tending his flock in a remote pasture when suddenly a shiny red BMW appears.
The driver is a young man in an Armani suit, Ferragamo shoes and Polarized sunglasses. He sticks his head out the window and asks the shepherd, “Hey! If I can tell you how many sheep you have in your flock, will you give me one?” The shepherd looks at him, and agrees. The driver plugs his cell phone into a laptop and connects it to a GPS and starts a remote body-heat scan of the area.
During the process he sends some e-mails. After receiving the answers, he prints a 100 page report on the portable printer in his glove compartment, and proudly announces to the shepherd: “You have exactly 1,478 sheep.” To which the shepherd answers: “Impressive. You can choose one sheep out of my flock”. He observes the man pick up an animal and load it into his car.
Then the shepherd says: “If I can tell you exactly what your business is, will you give me back my animal?” “You’re on.” the young man answers.
“You are a Mckinsey consultant,” says the shepherd promptly. “You are right! How could you possibly guess?” says the man, visibly surprised. “It wasn’t a guess,” the shepherd replies. “You drive into my field uninvited. You want me to pay you for a piece of information I already know, you answer questions I haven’t asked, and you know nothing about my business. Now give me back my dog.”
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