By Nate Raymond (NS:) and Mike Spector
BOSTON (Reuters) – McKinsey & Co has reached a settlement of $650 million to address allegations regarding its advice to Purdue Pharma on boosting sales of the addictive painkiller OxyContin, as announced by the U.S. Department of Justice on Friday.
The consulting firm has entered into a five-year deferred prosecution agreement filed in federal court in Abingdon, Virginia, to resolve criminal charges related to its involvement in the marketing of addictive painkillers that contributed to the U.S. opioid epidemic.
A former senior McKinsey partner, Martin Elling, has also agreed to plead guilty to obstructing justice by destroying records related to McKinsey’s work for Purdue. He is scheduled to plead guilty on Jan. 10 and could face up to a year in prison as per the plea agreement. His lawyer declined to provide any comments.
Prosecutors highlighted this case as the first instance of a management consulting firm being held criminally accountable for advice that led to a client committing a crime, serving as a cautionary tale for the consulting industry as a whole.
“We will hold you accountable for your actions if you engage in criminal misconduct, regardless of how polished your presentations may be,” said U.S. Attorney Joshua Levy of Massachusetts during a press conference in Boston.
This case is part of ongoing litigation and investigations into the role of major drugmakers, distributors, pharmacies, and corporations in fueling the opioid crisis, which has claimed the lives of nearly 727,000 individuals in the U.S. from 1999 to 2022, according to the U.S. Centers for Disease Control and Prevention.
The charges against McKinsey followed Purdue’s own guilty plea in 2020 for various misconduct, including defrauding U.S. officials and engaging in illegal kickback schemes with doctors and a healthcare records vendor.
Moving forward, Purdue is engaged in court-mediated negotiations to revise a multibillion-dollar civil settlement with states, local governments, and other parties in bankruptcy proceedings after its initial agreement was rejected by the U.S. Supreme Court. The company stated its intention to utilize the settlement funds for opioid abatement efforts and victim compensation.
Prosecutors revealed that, with McKinsey’s advice, Purdue had obtained approval in 2010 for a reformulated, abuse-deterrent version of OxyContin following a prior criminal case over the drug’s marketing. Subsequently, McKinsey developed a sales strategy in 2013 to boost OxyContin sales by targeting high-value prescribers, some of whom were prescribing opioids for illegitimate purposes.
“McKinsey’s strategy led to unsafe and unnecessary prescriptions of OxyContin, which were often diverted and lacked a legitimate medical purpose,” stated U.S. Attorney Christopher Kavanaugh of the Western District of Virginia.
McKinsey faced charges of conspiracy to misbrand a drug and obstruction of justice, which would be dismissed if the terms of the agreement are adhered to for five years. Additionally, McKinsey agreed to settle civil claims under the False Claims Act.
In a statement, McKinsey expressed deep regret for its involvement in opioid-related businesses and stated that it ceased such advisory work in 2019. The firm acknowledged that its work with opioid manufacturers would always be a source of profound remorse.
Previously, McKinsey had reached agreements totaling nearly $1 billion to resolve numerous lawsuits and legal actions alleging its contribution to the opioid crisis through its work with Purdue Pharma and other drug manufacturers.
Another former McKinsey partner, Arnab Ghatak, who was terminated for alleged document deletion, stated his plans to pursue legal action against the firm, claiming wrongful termination and defamation.
U.S. Attorney Levy emphasized that while prosecutors are open to further information regarding the McKinsey case, they believe that the current resolution brings the matter to a close.
