McKinsey & Company, a prominent management consulting firm based in New York, has agreed to pay $650 million to settle criminal and civil investigations related to its work with Purdue Pharma L.P., the manufacturer of OxyContin. The settlement involves McKinsey's advice on sales and marketing strategies for the opioid drug, including efforts to "turbocharge" sales.
This resolution is notable as it marks the first instance where a management consulting firm has been held criminally accountable for advisory roles leading to client misconduct. The settlement includes a five-year deferred prosecution agreement with McKinsey U.S., involving charges of document destruction and conspiracy related to misbranding prescription drugs.
Martin E. Elling, a former senior partner at McKinsey involved in Purdue matters, faces obstruction of justice charges for allegedly destroying documents pertinent to the investigation. Elling has agreed to plead guilty and will appear in federal court for sentencing.
As part of the settlement, McKinsey will pay over $231 million in penalties, more than $93 million in forfeiture reflecting payments from Purdue between 2004 and 2019, and $2 million to Virginia's Medicaid Fraud Control Unit. Additionally, McKinsey will pay over $323 million under the False Claims Act for allegedly causing false claims submissions to federal healthcare programs due to its advice on OxyContin prescriptions.
The resolution requires McKinsey to implement a compliance program focusing on high-risk client engagements and prohibits involvement in controlled substances' marketing during the DPA term. The firm's Managing Partner must annually certify compliance with these obligations.
U.S. Attorney Christopher R. Kavanaugh stated that this is a historic moment where both a consulting firm and an executive are held accountable for their roles in the opioid crisis. Principal Deputy Assistant Attorney General Brian M. Boynton emphasized that consulting firms cannot evade responsibility when advising clients unlawfully.
The case highlights McKinsey's role in advising Purdue on increasing OxyContin sales through targeted marketing strategies despite rising concerns about opioid abuse. This included encouraging intensified marketing efforts towards High Value Prescribers who were already prescribing large quantities of opioids.
Elling's obstruction charge stems from his alleged actions following news of legal actions against Purdue board members, suggesting document elimination as a response strategy.
The civil settlement also addresses allegations that McKinsey misled the FDA by assigning consultants concurrently working on projects for both FDA and Purdue without disclosing conflicts of interest.
Assistant U.S. Attorneys Randy Ramseyer, Amanda P. Masselam Strachan, William B. Brady, Senior Trial Counsel Kristen M. Echemendia, Trial Attorneys Jessica Harvey and Steven R. Scott are prosecuting the case against Elling and McKinsey.
The investigation was conducted by multiple agencies including the FDA Office of Criminal Investigations, FBI, Department of Health and Human Services Office of Inspector General among others.
All defendants remain presumed innocent until proven guilty beyond reasonable doubt in court proceedings.