McKinsey pays out another $230mn to settle opioid cases

McKinsey will pay another $230mn to settle most of the remaining claims relating to its work to “turbocharge” opioid sales, bringing the total it has paid out for its alleged part in the US overdose epidemic to more than $870mn.

The agreement with a host of cities, counties and school districts, must be approved by a court in the coming months. It follows similar agreements in February and March 2021 with all 50 US states, which cost the consultancy $641.5mn.

McKinsey said it had also reached an agreement to resolve opioid claims brought by Native American tribes and had an agreement in principle to settle claims from third-party payers, which reimburse patients’ healthcare expenses, but did not say what these might cost.

As with its earlier settlements, McKinsey admitted no liability or wrongdoing. “As we have stated previously, we continue to believe that our past work was lawful and deny allegations to the contrary,” it said in a statement.

Thousands of lawsuits from municipalities, school districts, tribes, parents and others were consolidated into a class action complaint heard in the federal court for the Northern District of California.

Plaintiffs alleged McKinsey’s advice to clients such as Purdue Pharma, the maker of OxyContin, had directly contributed to the opioid crisis. US drug overdose deaths involving prescription opioids rose fivefold between 1999 and 2017, according to the National Institute on Drug Abuse. 

The plaintiffs drew on documents disclosed in earlier litigation which showed McKinsey consultants urging Purdue directors to consider whether to “turbocharge the sales engine”. The documents said consultants encouraged directors to steer sales representatives towards doctors with records of prescribing large amounts of opioids.

The litigation has further tarnished the reputation of the firm, which has also been caught in a South African corruption scandal and faced criticism for its work for clients ranging from Saudi Arabia to fossil fuel companies. The cost of its legal settlements, which cut into the profit pool shared by partners, was cited by some insiders as one reason why former managing partner Kevin Sneader did not win a second three-year term in 2021.

Bob Sternfels, Sneader’s successor, told the Financial Times this year that he wanted to be “more humble” about the firm’s past mistakes. “We’ve put in place new policies and protocols to make sure those kinds of things don’t happen again,” he said.

Sternfels signalled in July that he would stand for a second term. The firm’s roughly 800 senior partners are expected to begin the triennial election process early next year.

In its statement on Tuesday, McKinsey noted that it had agreed in 2019 to stop advising clients on any opioid-related business. It had also tightened its client selection policy and invested nearly $700mn since 2018 to strengthen its risk management, it said.