“This was not hypothetical.” Christopher Kavanaugh, the U.S. Attorney for the Western District of Virginia, said that at a news conference in Boston on Friday, December 13, 2024, as the Justice Department unveiled a $650 million settlement with McKinsey & Company. He called the firm’s work for Purdue Pharma a strategy that was executed and that worked.
The money buys McKinsey a way out of a criminal case. Under a deferred prosecution agreement filed in court in Virginia, prosecutors will hold off on charges of conspiring to misbrand a drug and obstructing justice. The firm has to meet the conditions for five years, including no work on the sale, marketing or promotion of controlled substances. If it does, prosecutors can move to dismiss the charges.
What prosecutors say McKinsey did
Purdue paid McKinsey more than $93 million over 15 years for work on several products, among them ways to lift revenue from OxyContin. Prosecutors say the firm knew the risks and knew Purdue executives had earlier pleaded guilty to crimes tied to promoting the drug, yet took the work anyway.
In 2013, after Purdue’s business dropped, McKinsey set out to “turbocharge” sales. Consultants rode along with Purdue sales representatives on visits to prescribers and pharmacies. One consultant noted that a pharmacist had a gun “and was shaking; abuse is definitely a huge issue.” The court papers say one task was to pinpoint which prescribers would write the most extra prescriptions if sales staff focused on them. In 2014, McKinsey spotted small clinics writing more opioid prescriptions than entire hospital systems and suggested they be targeted for more sales.
The filing says many of the resulting prescriptions were unsafe, ineffective and medically unnecessary, and were often diverted to uses with no legitimate medical purpose. The government also said McKinsey tried to help Purdue gain a say in federal rules meant to weigh the benefits of addictive drugs against their risks. Prosecutors say the outcome was that high-dose OxyContin fell under the same oversight as lower-dose opioids and that prescriber training became voluntary instead of mandatory.
The obstruction count
Martin Elling, a former McKinsey senior partner, has agreed to plead guilty to obstruction of justice. According to the filings, he deleted documents from his laptop after learning of investigations into Purdue. His lawyer declined to comment.
McKinsey’s response
The firm said in a statement that it is “deeply sorry” for its work. “We should have appreciated the harm opioids were causing in our society and we should not have undertaken sales and marketing work for Purdue Pharma,” it said.
This is not McKinsey’s first payout. Since 2021 it has agreed to pay state and local governments about $765 million, and last year it agreed to pay $78 million to health care funds and insurance companies. The BBC put its earlier lawsuit settlements over Purdue and other drug companies at nearly $1 billion.
Federal authorities say this is the first time a management consulting firm has been held to account for advising a client to break the law. Joshua Levy, the U.S. Attorney for Massachusetts, said that if a consulting firm conspires with a client in criminal conduct, being an outside consultant will not protect it.
Purdue itself pleaded guilty to criminal charges in 2020 and agreed to $8.3 billion in penalties and forfeitures, most of which will be waived if it completes a settlement through bankruptcy court. Opioids have been linked to more than 80,000 deaths a year in some recent years. The BBC reported that 97,000 people died of overdoses in the year to June 2024, a 14% drop from the year before.
Sources
- McKinsey & Company agrees to pay $650M for helping boost opioid sales
- McKinsey to pay $650m to settle opioid charges
