McKinsey to pay $650 million in opioid settlement with Justice Department

McKinsey & Co. has agreed to pay $650 million to settle a Justice Department investigation of its work with opioid maker Purdue Pharma. A former senior partner, Martin Elling, has also agreed to plead guilty to obstruction of justice for destroying internal company records in connection with that work.

At the center of the government’s case was the global consulting giant’s recommendation that Purdue Pharma “turbocharge” sales of Purdue’s flagship OxyContin painkiller in the midst of an opioid addiction epidemic that was killing hundreds of thousands of Americans.

The settlement and the government’s findings were presented at a news conference in Boston on Friday. According to prosecutors, McKinsey “knew the risks and dangers associated with OxyContin” as well as the fact that top Purdue Pharma executives had pleaded guilty to federal crimes relating to sales of the drug. Yet the consulting company chose to continue working with the drugmaker to boost sales of the opioid.

More than two dozen McKinsey partners consulted for Purdue over roughly 15 years, earning the firm $93 million.

The settlement, which the government said ended its investigation of McKinsey, stemmed from charges brought by the U.S. attorney’s offices in Massachusetts and the Western District of Virginia. The case is unrelated to Purdue Pharma’s multibillion-dollar bankruptcy plan, now in legal limbo, that would have offered compensation to tens of thousands of families. Still, the McKinsey settlement brings closure to one strand of a broad legal effort to grapple with the industry behind the opioid epidemic.

McKinsey is widely regarded as the world’s most prestigious management consulting firm, with offices around the globe from which it advises most of the Fortune 500 companies as well as government agencies, including those in authoritarian nations such as China and Saudi Arabia.

In recent years, McKinsey has settled government investigations in the United States and overseas by paying hundreds of millions of dollars while not admitting any wrongdoing. That is no longer true.

McKinsey issued a statement Friday apologizing for its work with the opioid maker.

“We are deeply sorry for our past client service to Purdue Pharma and the actions of a former partner who deleted documents related to his work for that client,” the consulting firm wrote. “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. This terrible public health crisis and our past work for opioid manufacturers will always be a source of profound regret for our firm.”

In court papers released Friday, federal prosecutors traced the arc of McKinsey’s work with the opioid maker.

In July 2009, McKinsey wrote that Purdue Pharma’s “top priority” should be “driving a more impactful OxyContin franchise.”

In subsequent years, as the opioid crisis grew, McKinsey continued to formulate new ways for the drugmaker to increase profits, including targeting “opioid naive” patients, a term used to describe individuals not currently using the drug or those who had used it only once.

“McKinsey understood that part of its role was to empower those within Purdue Pharma’s senior management who favored a more aggressive approach to sales,” federal prosecutors said.

Reporting in The New York Times has documented how McKinsey pushed ethical boundaries by advising drug and cigarette makers while also consulting for their federal regulators, who never publicly questioned these arrangements.

Congress held hearings in 2022 focusing on the firm’s simultaneous work with opioid makers and the Food and Drug Administration after reports in the Times and elsewhere. A congressional report found that since 2010 at least 22 of the firm’s consultants had worked for both Purdue and the FDA, sometimes at the same time.

McKinsey’s marketing pitch to drugmakers included touting its work with the FDA. “We serve the broadest range of stakeholders that matter for Purdue,” one senior partner at the time, Rob Rosiello, wrote in a 2014 email to Purdue’s chief executive. While it is company policy not to identify clients, Rosiello wrote, “one client we can disclose is the F.D.A., who we have supported for over five years.”

The guilty plea by the former senior partner, Martin Elling, stems from internal communications in 2018, after Massachusetts sued Purdue over its opioid marketing. Two of the firm’s leading partners who oversaw the Purdue account, Elling and Arnab Ghatak, discussed how to handle it.

In an email to Ghatak, Elling wrote: “It probably makes sense to have a quick conversation with the risk committee to see if we should be doing anything” other than “eliminating all our documents and emails. Suspect not but as things get tougher there someone might turn to us.” The following month, Elling wrote an email to himself that said “delete old pur documents from laptop.”

Both men were fired after the Times first wrote about their communications in late 2020.

In a statement, Ghatak said he felt “vindicated” by Elling’s guilty plea, adding that he had “never engaged in improper deletion and McKinsey behaved unconscionably in scapegoating and defaming me repeatedly.”

Elling is scheduled to appear in court to enter his plea Jan. 10.

The plea follows an announcement this month by federal prosecutors that another former McKinsey senior partner, Vikas Sagar, pleaded guilty to conspiring to violate the Foreign Corrupt Practices Act in connection with paying bribes to secure South African government contracts for the firm. McKinsey had earlier fired Sagar.

To settle that case, McKinsey agreed to pay a fine of more than $122 million, and said it “will continue to cooperate” with South African and U.S. authorities in other investigations. The firm had already agreed to pay about $1 billion to states, cities and other plaintiffs to end investigations into their work with Purdue and other opioid makers.

For the federal prosecutors in Virginia, Friday’s announcement is the latest in a long series of investigations of Purdue Pharma that began two decades ago, spearheaded by an assistant U.S. attorney, Randy Ramseyer.

In 2007, Ramseyer and his colleagues secured guilty pleas from Purdue Pharma and three of its executives. The company also agreed to pay $600 million in fines and other payments for misleading doctors, regulators and patients about the risk posed by OxyContin.

This article originally appeared in The New York Times.

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