McKinsey to pay almost $600m to settle claims for its role in opioid crisis

The deal will avert civil lawsuits that states could bring against the consulting firm

Consulting firm McKinsey has agreed to a $573m settlement over its role in the opioid crisis. AP Photo

Global consultancy McKinsey & Company has agreed to pay nearly $600 million to settle claims by US states that the company contributed to the opioid crisis in the country by advising drug makers to market the painkillers aggressively.

The settlement with 49 states, the District of Columbia and five territories was announced on Thursday. It would avert civil lawsuits that attorneys general could bring against McKinsey, the Wall Street Journal reported.

The consulting firm allegedly suggested ways to “turbocharge” sales of Purdue Pharma’s OxyContin painkiller at a time when the legal market for the opioid-based medicine was shrinking due to a wave of negative publicity, Bloomberg cited the Massachusetts Attorney General as saying.

However, McKinsey said its work for Purdue was to support the legal use of opioids even as state and local governments sue companies involved in every part of the opioid supply chain.

At least 400,000 people have died in the US from overdoses of legal and illegal opioids since 1999, according to federal government data.

While some companies have reached deals with individual states to avoid trials, the McKinsey settlement marks the first nationwide opioid pact to emerge out of the flood of litigation that began in 2017. A larger $26 billion deal with three drug distributors and Johnson & Johnson has been in the works for more than a year but is still being negotiated, according to the WSJ report.

New York-based McKinsey will pay about 80 per cent of the money immediately to beef up treatment programmes and bolster police budgets strained by excessive abuse of the addictive painkillers. The rest of the amount will be paid over a period of four years, Bloomberg reported.

The consultancy company said that the Attorneys General of the states recognised McKinsey's "good faith and responsible corporate citizenship in reaching this resolution."

Kevin Sneader, Global Managing Partner of McKinsey, said: "We chose to resolve this matter in order to provide fast, meaningful support to communities across the United States. We deeply regret that we did not adequately acknowledge the tragic consequences of the epidemic unfolding in our communities. With this agreement, we hope to be part of the solution to the opioid crisis in the US."

McKinsey will retain emails for five years and disclose potential conflicts of interest when bidding for state contracts. In a move similar to the tobacco industry settlements decades ago, it will put tens of thousands of pages of documents related to its opioid work onto a publicly available database, the New York Times reported.

More than 3,000 state and local governments have targeted opioid makers and distributors in hopes of recouping billions in tax dollars spent dealing with the fallout of the US opioid epidemic. Many of the municipalities’ suits have been consolidated before a federal judge in Cleveland.

In December, McKinsey officials issued a formal apology for their work with opioid makers and distributors. “We recognise that we did not adequately acknowledge the epidemic unfolding in our communities or the terrible impact of opioid misuse,” McKinsey said on its website.

The amount McKinsey is paying is substantially more than it earned from opioid-related work with Purdue or Johnson & Johnson, Endo International and Mallinckrodt Pharmaceuticals, its other opioid-maker clients, according to the New York Times report

The settlement is hugely significant because it shatters the distance that McKinsey – which argues that it only makes recommendations – puts between its advice and its clients’ actions. For decades, the firm has avoided legal liability for high-profile failures of some clients, the paper cited a former partner at the firm, as saying.

McKinsey is the 35th-largest private company in the US with revenue worth $10.5bn in 2019, Forbes estimates. It has offices in more than 130 cities and 65 countries, according to its website.