By Nate Raymond (NS:) and Mike Spector
BOSTON (Reuters) – McKinsey & Co. has agreed to pay $650 million to settle charges over advice it provided Purdue Pharma on how to boost sales of its addictive painkiller OxyContin, the U.S. Justice Department said on Friday.
The consulting firm entered into a five-year deferred prosecution agreement filed in federal court in Abingdon, Virginia, to resolve criminal charges brought as part of the companies' latest trial in connection with the marketing of addictive painkillers that helped fuel the deadly opioid epidemic in the United States.
Martin Elling, a former senior partner at McKinsey, also agreed to plead guilty to obstruction of justice by destroying records related to McKinsey's work for Purdue. He is scheduled to plead guilty on Jan. 10 and faces up to a year in prison under the plea agreement. His lawyer declined to comment.
Prosecutors said this case represents the first time a management consulting firm has been held criminally liable for advice it provided that led to a client committing a crime and should serve as a warning to the rest of the consulting sector.
“We're going to go beyond the nice PowerPoint presentations and the counsel will speak and hold you accountable for your conduct if you engage in criminal violations,” U.S. Attorney Joshua Levy of Massachusetts said at a news conference in Boston.
The case was the latest to emerge after years of lawsuits and investigations into the extent to which major drug makers, drug distributors, pharmacies and companies contributed to the epidemic. Nearly 727,000 people in the United States died from opioid overdoses from 1999 to 2022, according to the US Centers for Disease Control and Prevention.
The case against McKenzie followed Purdue's guilty plea in 2020 to charges covering widespread misconduct related to its handling of prescription painkillers, including conspiring to defraud U.S. officials and paying illegal kickbacks to both doctors and a vendor of health care records. Electronic.
Purdue is currently participating in court-ordered mediation to rework a multibillion-dollar civil settlement with states, local governments and others in bankruptcy proceedings after the U.S. Supreme Court voided its initial deal. The company said Friday that it aims to use settlement proceeds to reduce opioid abuse and compensate victims.
Purdue, following a previous criminal case against the drugmaker over its marketing of OxyContin, received approval in 2010 on McKinsey's advice for a new, reformulated version of the drug with abuse-deterrent properties, prosecutors said.
When sales of OxyContin declined after its launch, Purdue turned to McKinsey, which in 2013 formulated a strategy to stimulate sales that included targeting “high-value” prescription prescribers in the medical field — including someone who prescribed opioids for illicit uses, and prosecutors. He said.
“McKinsey’s strategy resulted in prescriptions for OxyContin that were unsafe, medically unnecessary, lacked a legitimate purpose and were often diverted,” said US Attorney Christopher Kavanaugh of the Western District of Virginia.
McKenzie was charged with conspiracy to defame Agar and obstruction of justice. These charges will be dismissed if the terms of the five-year agreement are adhered to. It also agreed to resolve civil claims under the False Claims Act.
MacKenzie said in a statement that she was “deeply sorry.” She stopped advising clients on opioid-related companies in 2019, and said her work for opioid manufacturers “will always be a source of deep regret to our company.”
McKinsey previously reached agreements totaling nearly $1 billion to settle wide-ranging lawsuits and other legal actions alleging the firm helped fuel the opioid epidemic through its work advising OxyContin maker Purdue Pharma and other drugmakers.
“We should have recognized the harm opioids are causing in our community, and we should not have been doing the sales and marketing work for Purdue Pharma,” McKenzie said in a statement.
Another former McKinsey partner, accused of communicating the deletion of documents and fired by McKinsey, said Friday that he plans to pursue a lawsuit against his former employer. McKinsey said the termination was appropriate and represented serious violations of its professional standards.
“I feel innocent,” another former partner, Arnab Ghatak, said in a statement. “As I have always said, I have never engaged in an inappropriate deletion and McKinsey has acted unreasonably in scapegoating me and repeatedly defaming me.”
Although prosecutors are open to receiving more information about the McKenzie case, we believe this brings this matter to a conclusion, said Levy, the U.S. Attorney in Massachusetts.
