McKinsey settles with US states for $573 million in opioid crisis
Consultancy giant McKinsey & Company has reached a settlement with 47 US states for its advisory role in the country’s opioid crisis. The consulting firm has agreed to pay $573 million to avoid the possibility of a civil suit.
Last year, Purdue Pharma already settled for more than $8 billion for its own role in the opioid case. Purdue Pharma is the manufacturer of OxyContin, an addictive pain reliever. The drug (which contains the oxycodone ingredient) is seen by many as the drug that kickstarted an American addiction crisis.
According to estimates by the US government, tens of million of Americans are currently addicted pain relievers. This addition crisis has several adverse health effects for users, costs the health sector millions in costs, and to make matters worse, also leads to loss of life.
In the late 1990s, pharmaceutical companies reassured the medical community that patients would not become addicted to opioid pain relievers, something which caused healthcare providers to prescribe them at greater rates. Between 1999 and 2018, nearly half a million Americans died from overdoses of legal or illegal painkillers, according to the US Health Service CDC. These include morphine-like substances such as oxycodone and fentanyl.
One such opioid, OxyContin, was a painkiller introduced in 1996 for legitimate medical purposes, but according to the US justice department, misleading marketing from Purdue Pharma saw it quickly overprescribed by doctors. McKinsey was one of Purdue Pharma’s key strategic advisors during the years that the pharmaceutical company launched OxyContin.
The consultants helped Purdue Pharma successfully launch the painkiller and establish an incentive system for doctors. According to the US court, Purdue Pharma and McKinsey knew in advance that this system would incite doctors to overprescribe the opiates.
“McKinsey's cynical and calculated marketing tactics helped fuel the opioid crisis by helping Purdue Pharma target those doctors they knew would overprescribe opioids,” said New York Attorney General Letitia James. “They knew where the money was coming from and zeroed in on it.”
McKinsey has not pleaded guilty to the case and therefore does not admit liability. According to CEO Kevin Sneader, the company has “acted according to the law”. Meaning: valuable advice for its client, however without paying sufficient attention to the social consequences of its advices.
However, after already apologising for its role, McKinsey has also decided to settle the case for $573 million, in order to avoid a lengthy and costly legal battle. According to the Financial Times, the settlement amount is much higher than the fees McKinsey received for its advice at the time; though globally, the privately-held strategy giant generates revenues of around $11 billion, so will likely be able to accommodate the cost on this occasion.
To avoid further such hits in the future, under Sneader’s leadership McKinsey has taken numerous steps to keep such ethical conundrums at arm's length, including letting go of some client accounts. In a letter to all of McKinsey’s 30,000 employees worldwide, the CEO called the settlement “an important step in accepting the consequences of a chapter in the history of our company that I am not proud of.”
Meanwhile, Purdue itself still faces thousands of pending civil cases, something which last year saw the pharmaceuticals firm file for bankruptcy protection. Using the US' Chapter 11 bankruptcy procedure, the company is continuing its operations, while clearing the lawsuits.
