Consulting giant McKinsey & Co. has reached a $ 573 million settlement with states over its work, advising OxyContin maker Purdue Pharma LP and other drug manufacturers to aggressively market opioid painkillers, according to people familiar with the matter.
The deal, which was reached with 47 states and the District of Columbia and is expected to be announced publicly Thursday, would prevent civil suits that attorneys general could file against McKinsey, the people said. Most of the money will be paid in advance, the rest will be paid out in four-yearly payments from 2022.
McKinsey said last week that it is working with government agencies on cases related to previous work with opioid manufacturers, as state and local governments sue companies in the opioid supply chain. According to federal data, at least 400,000 people have died in the US since 1999 from legal and illegal opioid overdoses.
The consulting firm retired from opioid-related work in 2019, saying in December that its work for Purdue was to support the legal use of opioids and help patients with legitimate medical needs.
While some companies have entered into agreements with individual states to avoid lawsuits, the McKinsey settlement is the first nationwide opioid pact to emerge from the flood of lawsuits that began in 2017. A much larger $ 26 billion deal with three drug distributors and Johnson & Johnson has been more than a year in the works, but is still under negotiation.
The Wall Street Journal reported last week that McKinsey was close to a settlement with states and that a deal could be worth hundreds of millions of dollars. The negotiations took place when hundreds of exhibits describing McKinsey’s work to boost OxyContin sales were made public in recent months during Purdue’s Chapter 11 bankruptcy case in White Plains, NY.
Memos that McKinsey sent to Purdue executives in 2013, which were made public in bankruptcy courts, contained recommendations that the company’s sales team target healthcare providers who knew to write the largest volumes of OxyContin prescriptions and move away from lower volume. McKinsey’s work became a Purdue initiative called “Evolve to Excellence,” which the US Department of Justice described in newspapers published last year in connection with a plea deal with Purdue as an aggressive marketing and sales campaign of OxyContin.
In 2013, according to bankruptcy courts, McKinsey sent recommendations to Purdue that advisers said would increase annual sales by more than $ 100 million. McKinsey recommended ways Purdue could better target what it described as higher value prescribers and take other steps to undertake “Turbocharge Purdue’s Sales Engine.”
Stamford, Conn.-based Purdue pleaded guilty to three felonies in November, including paying illegal kickbacks and misleading drug enforcement officials. The drugmaker filed for Chapter 11 protection in 2019 to address thousands of opioid-related lawsuits against him. Purdue said in a lawsuit against its insurers last week that creditors have filed hundreds of thousands of claims in the bankruptcy case and are collectively seeking trillions of dollars in damages.
McKinsey also advised other opioid makers on sales initiatives. The company’s work for Johnson & Johnson was highlighted in a 2019 lawsuit in an Oklahoma lawsuit brought against the drug company for contributing to the state’s opioid crisis through aggressive marketing of prescription painkillers. The trial ended with a $ 572 million verdict against Johnson & Johnson, which was later reduced to $ 465 million and is still on appeal.
The vast majority of the money McKinsey will pay in the settlement will be divided among the participating states, with $ 15 million going to the National Association of Attorneys General to cover the costs of the investigation, one of the people confessed. are with the deal. .
The settlement also includes some non-monetary provisions, such as demanding that McKinsey create a repository of documents related to his work for opioid makers, the person said.
The procrastination states include Nevada, which said Wednesday evening that the investigation into the advisory giant is continuing “and we are in talks with McKinsey about our concerns.”
Purdue has been negotiating with creditors, including states, since filing for bankruptcy, but the closing of a deal has been delayed due to demands from some states that the owners of the company, members of the Sackler family, contribute more than the $ 3 billion with which they are agreed.
States are keen to ensure that all settlement funds from the opioid disputes are used to help mitigate the impact of the crisis, including by strengthening treatment programs and overburdening law enforcement. The states are trying to avoid the outcome of the 1990s tobacco disputes, when a $ 206 billion settlement was often issued to close holes in the government budget. According to McKinsey’s settlement documents, the money is for reduction, the person familiar with the deal said, although state laws differ widely on how settlement funds can be set aside.
Write to Sara Randazzo at [email protected] and Jonathan Randles at [email protected]
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