Pennsylvania will get nearly $26 million from McKinsey opioid settlement

The powerhouse consulting firm McKinsey & Company built its business by charging for advice. Now the consultancy is paying for advice it gave to allegedly help opioid manufacturer Purdue Pharma boost sales and fend off oversight during a nationwide drug epidemic.

McKinsey entered a $573 million settlement over those allegations Thursday with 47 state attorneys general, including Pennsylvania A.G. Josh Shapiro. Pennsylvania’s share comes to $25,755,365, and will go toward abating “opioid-related problems,” Shapiro’s office said.

New Jersey will receive about $16 million from the settlement, the office of Attorney General Gurbir Grewal said. McKinsey did not admit wrongdoing in its settlement agreements with the states.

About 450,000 people have died from overdoses involving opioids since 1999, according to the U.S. Centers for Disease Control and Prevention. Pennsylvania had one of the highest rates of death from drug overdose in the country in 2018, the most recent CDC figures available. Of those overdose fatalities in the state, 65% — or 2,866 deaths — involved opioids

As Pennsylvania and other states have spent years investigating, suing, and negotiating potential settlements with opioid manufacturers and distributors, the agreement with the consulting firm represents a milestone of sorts. It is the “first multi-state opioid settlement to result in substantial payment to the states to address the epidemic,” the attorney general’s office said.

In a 15-year business relationship with Purdue, McKinsey allegedly provided guidance on how to target doctors and how to sell more high-strength, high-profit doses. The state prosecutors said it also counseled the firm on how to push back on regulatory pressure from the U.S. Food and Drug Administration.

“We deeply regret that we did not adequately acknowledge the tragic consequences of the epidemic unfolding in our communities,” said Kevin Sneader, McKinsey’s global managing partner.

In a statement, Shapiro said the firm “ cared only about making money at the expense of the most vulnerable while every community in Pennsylvania suffered.… This is one piece of our broader work to hold these opioid companies accountable, and I promise – there will be more to come.”

Money from the settlement will go to the Pennsylvania Department of Drug and Alcohol Programs to address treatment and prevention, Shapiro said in an interview. He said he has also been leading negotiations with the major prescription drug distributors for a settlement potentially worth billions to states.

The opioid crisis was created “in the board rooms of pharmaceutical companies,” Shapiro said. The McKinsey settlement goes to show “there were many parties involved in the manner in which Purdue was bringing these poisons into our communities.”

Shapiro brought a suit against OxyContin maker Purdue in May 2019. Months later, in September 2019, Purdue filed for bankruptcy, which paused lawsuits against the company and the family of its founders, the Sacklers.

In all, states are seeking a total of $2.2 trillion claim in the bankruptcy, according to a spokesperson for Shapiro’s office. Purdue is expected to disclose its proposed reorganization plan by Feb. 15.

In the meantime, Purdue reached an $8.3 billion opioid settlement with the U.S. Department of Justice in October, and pleaded guilty to criminal charges. Filings in the settlement outlined Purdue’s work with a “consulting company” on “turbocharging sales.” That company is McKinsey, Shapiro’s office said Thursday in a civil complaint filed and resolved as part of the settlement.

McKinsey “sold its ideas” to Purdue starting in 2004, and continuing after Purdue pleaded guilty to felony misbranding of its drugs in 2007, Shapiro’s suit says.

In 2008, McKinsey advised Purdue on how to “defend against strict treatment by the FDA,” the complaint says, and ultimately high-dose OxyContin got the “same oversight as lower-dose opioids.”

Then, in 2013, McKinsey “laid out new plans to increase sales of OxyContin,” according to the complaint, with a focus on targeting sales to high-volume prescribers, and marketing “higher, more lucrative” doses of painkillers. This was the “turbocharge” plan, operating under the name “Evolve 2 Excellence,” or E2E, and it worked, the complaint says.

“McKinsey worked side by side with Purdue,” Shapiro’s complaint alleges, “and helped Purdue plan and implement E2E, assisting with sales representative training, productivity, messaging, and call plans, IT systems, promotional strategies, and market forecasting.”

The firm’s opioid consulting work extended to other companies in the region, according to the suit: “McKinsey collected millions of dollars designing and implementing marketing programs for the country’s largest opioid manufacturers, including Johnson & Johnson and Endo, increasing the sale and use of opioids in Pennsylvania.”

A spokesperson for Endo, which has its U.S. headquarters in Malvern, said the company did not have a comment.

Johnson & Johnson did not immediately respond to a request for comment Thursday. McKinsey’s consulting for J&J came up in an Oklahoma opioid suit against the pharmaceutical giant in 2019. A judge ordered J&J to pay $465 million in that case.

The Pennsylvania complaint against McKinsey says that while the firm was working for opioid companies, it was also consulting with governments and nonprofits trying to tame the opioid crisis.

And the suit notes “indications” that McKinsey employees “considered destroying” documents about work for Purdue.

McKinsey, in a statement issued Thursday, said it stopped all opioid-related work in 2019, and fired two partners who “communicated about document deletion.” The new settlement requires McKinsey to disclose thousands of internal documents related to its opioid consulting to be posted online, a move reminiscent of the tobacco industry marketing and research materials housed in an online archive.