The Middletown Press (Middletown, CT)
CT among 47 states to reach $573M opioid settlement with McKinsey
“The scale of the addition crisis is massive. Purdue is one piece of it, the Sacklers are one piece of it and McKinsey is one piece of it.” William Tong, CT attorney general
Global consulting firm McKinsey & Co. has reached a $573 million settlement with a 47-state coalition, including Connecticut, resolving their investigations that the firm allegedly contributed to the opioid crisis by trying to boost the pain-drug sales of pharmaceutical companies, including Stamford-based OxyContin maker Purdue Pharma.
Announced Thursday, the agreement was hailed by state attorneys general, including Connecticut’s William Tong, as a breakthrough in the current round of litigation that will send direct payments to the states for efforts to tackle the opioid epidemic. Connecticut will receive $7.5 million, including an initial payment of $6.2 million during the next year.
“It’s a big step forward in holding wrongdoers accountable for their role in the opioid and addiction crisis,” Tong said in an interview. “And it’s a big step forward to helping victims and their families in Connecticut with treatment, prevention and addiction science. It puts vital resources behind all that we’re trying to confront in the opioid crisis.”
Despite the agreement, McKinsey is not admitting any wrongdoing or liability.
The company said in its own announcement that it “believes its past work was lawful and has denied allegations to the contrary.”
“We chose to resolve this matter in order to provide fast, meaningful support to communities across the United States,” Kevin Sneader, global managing partner of McKinsey, said in a statement. “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 U.S.”
McKinsey issued a similar public apology in December about its work with Purdue.
Purdue declined to comment on the settlement.
Among other settlement terms, McKinsey agreed to continue investigating allegations that two of its partners tried to destroy documents in response to probes of Purdue, implement an ethics code to which all its partners must agree each year and stop advising companies on “potentially dangerous” Schedule II and Schedule III narcotics, according to Tong’s office.
The agreement also calls for McKinsey to prepare for online public disclosure of tens of thousands of internal documents outlining its work for Purdue and other pharmaceutical firms. The firm has also agreed to adopt a document-retention plan.
Connecticut was part of a 10-state executive committee that negotiated the settlement.
“We always could use more (funds),” Tong said. “But this is a negotiated share, and once you divide $573 million between 47 states, five territories and the District of Columbia, this is what you end up with.”
Other members of the executive committee included the attorneys general of New York and Massachusetts.
“McKinsey’s cynical and calculated marketing tactics helped fuel the opioid crisis by helping Purdue Pharma target those doctors they knew would overprescribe opioids,” New York Attorney General Letitia James said in a statement. “They knew where the money was coming from and zeroed in on it. Under the terms of today’s agreement, the company will finally end its illegal conduct, deliver more than half a billion dollars into communities across the nation and will never be able to help perpetrate this type of fraud and deception again.”
Five U.S. territories and the District of Columbia are also included in the settlement. Nevada, West Virginia and Washington were the only states not listed in the announcement from Tong’s office.
The agreement is separate from the approximately $8 billion settlement that Purdue reached last October with the U.S. Department of Justice. That deal also involved the company pleading guilty to criminal charges of defrauding the government and violating anti-kickback laws. At the same time, the Sackler family members who own Purdue reached their own $225 million settlement with the department.
Extensive allegations
New court filings connected to the settlement outline the states’ allegations that McKinsey helped to stoke the opioid crisis by selling marketing schemes and consulting services to opioid manufacturers, including Purdue, for more than a decade.
Another trove of related records was submitted last November as part of Purdue’s bankruptcy proceedings. Those filings built on allegations in Massachusetts’ lawsuit against Purdue that McKinsey urged Sackler members to decide whether to “turbocharge the sales engine.”
One McKinsey proposal, which was developed in 2017, suggested paying rebates to insurance companies for each patient who overdosed or developed opioid-use disorder, according to the November filings.
McKinsey also has faced strident criticism of its work with Purdue from lawmakers on both sides of the aisle, including U.S. Sen. Richard Blumenthal, D-Conn.
Blumenthal was Connecticut attorney general when the state and 25 others reached in 2007 a nearly $20 million settlement with Purdue related to allegations that the company failed to properly disclose
the risks of abusing OxyContin. The same year, Purdue and three former executives pleaded guilty to criminal charges related to OxyContin marketing as part of a $635 million settlement with the Justice Department.
In a series of tweets Thursday, Blumenthal praised the states’ “worthy steps” against McKinsey, but also called for further action.
“Our successful legal action against Purdue Pharma in 2007 failed to stop them from addicting and killing people in part because McKinsey was advising how to do it more adroitly. McKinsey has horrifying culpability for Purdue’s criminality,” Blumenthal said. “Individuals at McKinsey are not — but should be — held accountable for their deadly advice. They may have aided and abetted Purdue’s admitted criminal lawbreaking. Federal prosecutors must investigate.”
Bankruptcy case carries on
Meanwhile, Purdue is still trying to reach through its bankruptcy a comprehensive settlement of several thousand lawsuits filed by local and state governments alleging that the company fueled the opioid crisis by fraudulently marketing OxyContin.
The company and the Sacklers have denied the allegations, but they have proposed a settlement that they value at more than $10 billion for efforts to combat the opioid epidemic.
A settlement does not appear imminent because 24 “non-consenting” states, including Connecticut, have rejected Purdue and the Sacklers’ offer because they see it as insufficient.
“I don’t believe that the Sacklers have reckoned with their responsibility,” Tong said. “As far as I can tell, they have not offered any potential settlement or resolution that meets their obligation to pay for the damage that they’ve caused.” A message left for a Sackler spokesperson seeking their response to Tong was not immediately returned.
Legal experts see the McKinsey settlement as potentially strengthening the negotiating position of the non-consenting states.
“It gives a kind of benchmark that the attorneys general are going to use. It shows the breadth and depth of the liability,” said Robert Bird, a professor of business law at the University of Connecticut. “It’s yet another warning shot across the bow that Purdue Pharma is exposed to a substantial monetary liability.”
Tong’s office said it is also pursuing and investigating claims against some of the country’s largest pharmaceutical distributors, which it has accused of flooding the market with pain drugs far above levels needed for legitimate prescriptions.
In the past few years, opioids have been involved in more than 90 percent of fatal drug overdoses in Connecticut. In 2019, 1,127 people in the state died from opioid-involved overdoses, up 19 percent from 2018, according to the state Office of the Chief Medical Examiner. In the first six months of 2020, 635 died from opioid-involved overdoses.
“The scale of the addition crisis is massive,” Tong said. “Purdue is one piece of it, the Sacklers are one piece of it and McKinsey is one piece of it. But there is so much more than that.”