CHARLESTON – McKinsey & Co. has agreed to pay $650 million to resolve charges it provided Purdue Pharma advice on how to boost sales of OxyContin.
On December 13, the U.S. Department of Justice announced that the firm has entered a five-year deferred prosecution agreement to resolve the criminal charges related to the marketing of painkillers that resulted in the nation’s opioid epidemic.
Martin Elling, a former senior partner with McKinsey also has agreed to plead guilty to obstructing justice by destroying records concerning McKinsey’s work for Purdue. He is scheduled to plead guilty next month. He could be sentenced to up to a year in prison under a plea agreement.
Forbes
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Federal prosecutors said the case marked the first time a management consulting firm had been held criminally responsible for advice that it had given that resulted in a client committing a crime and should be a warning to the rest of the consulting sector.
The case was the latest to emerge from years of litigation and investigations into the extent that major drugmakers, drug distributors, pharmacies and corporations contributed to the epidemic. Nearly 727,000 people in the U.S. have died from opioid overdoses from 1999 to 2022, according to the U.S. Centers for Disease Control and Prevention.
The agreement could affect two cases with local interest.
The first one is a federal Multi-District Litigation case in California involving a few Charleston attorneys regarding Neonatal Abstinence Syndrome claims against a management consulting company involving claims of some West Virginia children. Those attorneys represent hundreds of West Virginia children who are suffering the effects of NAS as a result of opioid exposure during pregnancy.
Earlier this year in that case, Senior U.S. District Judge Charles R. Breyer granted McKinsey’s motions to dismiss fraud-based and nuisance-based claims as well as conspiracy claims brought against it by one Nevada plaintiff in the hundreds of Multi-District Litigation cases before him.
But Breyer, the younger brother of former U.S. Supreme Court Justice Stephen Breyer, denied the motion to dismiss the claims entirely. He ruled that the negligence and failure to warn claims can proceed, saying the company can be held liable because of precedent establishing McKinsey or their conspirators inflicted injury on the public.
In addition to the cases filed in the federal MDL in San Francisco, the Charleston attorneys have other cases pending in West Virginia’s Mass Litigation Panel. McKinsey is one of the defendants in the state MLP cases as well, but the panel has granted defense motions to dismiss. The West Virginia MLP cases currently are on appeal in the Intermediate Court of Appeals. The plaintiffs are asking the ICA to reverse the MLP ruling to dismiss the claims and allow them to file amended complaints similarly to what was allowed before Breyer.
McKinsey’s agreement last week should affect both of those cases because the Statement of Facts documents in the agreement admit to the conspiracy. Attorneys likely will file the Statement of Facts in both the California MDL and the West Virginia case now pending before the ICA.
Two Charleston attorneys – L. Dante diTrapano and Jesse Forbes – who are part of the legal team handling those cases declined further comment on the issue.
“The impacts that children with NAS suffer on a daily basis are devastating and affect them for the rest of their lives,” diTrapano previously told The West Virginia Record. “We have continued to pursue these claims through these forums and are extremely appreciative at the recognition that the children’s claims are viable and that they should have their day in court.
“The opioid epidemic has devastated communities throughout the country, but West Virginia children have unfortunately been on the front lines of this crisis. It is time that those responsible are held accountable and that is precisely what we intend to do through this litigation.”
“No child deserves to be born into this world with this kind of suffering,” Forbes previously told The Record. “These are innocent babies that were horrifically attacked in the womb by opioids and we look forward to holding all those responsible to account. These are children suffering from developmental delays, seizures, vision problems and other serious medical conditions that should have never happened. Unfortunately, these children will spend the rest of their lives dealing with these issues.
“Injustices such as Neonatal Abstinence Syndrome caused by the opioid epidemic should never happen and these children deserve to be recognized in this litigation. We look forward to the next steps in these and all of the cases that will hopefully bring some relief to these innocents and provide civil justice for all of the young children that are suffering from Neonatal Abstinence Syndrome.”
The West Virginia plaintiffs are being represented by diTrapano and Alex McLaughlin of Calwell Luce diTrapano, Forbes of Forbes Law Offices in Charleston, Rodney Jackson of Charleton, Steve New of Stephen New & Associates in Beckley, Kevin Thompson and David Barney of Thompson Barney in Charleston and by Booth Goodwin, Benjamin Ware and Stephanie Daly of Goodwin & Goodwin in Charleston. Tony Majestro of Powell & Majestro presented the argument at a hearing earlier this in California before Breyer.
The case against McKinsey followed Purdue’s own guilty plea in 2020 to charges covering widespread misconduct regarding its handling of prescription painkillers, including conspiring to defraud U.S. officials and pay illegal kickbacks to both doctors and an electronic healthcare records vendor.
Purdue is currently involved in court-ordered mediation to rework a multibillion-dollar civil settlement with states, local governments and others in bankruptcy proceedings after the U.S. Supreme Court turned aside its initial deal. The company on Friday said it aims to use settlement proceeds for opioid abatement and to compensate victims.
Prosecutors said Purdue in the wake of an earlier criminal case against the drugmaker over its marketing of OxyContin had obtained approval in 2010 with McKinsey’s advice for a new, reformulated version of the drug with abuse-deterrent properties.
When sales of OxyContin plummeted following its release, Purdue turned to McKinsey, which in 2013 crafted a strategy to “turbocharge” sales that involved targeting “high-value” prescribers in the medical field -- including one who prescribed opioids for illegitimate uses, prosecutors said.
“McKinsey’s strategy resulted in prescriptions for OxyContin that were unsafe, medically unnecessary, and lacked a legitimate purpose and were often diverted,” U.S. Attorney Christopher Kavanaugh of the Western District of Virginia said.
McKinsey was charged with conspiring to misbrand a drug and obstruction of justice. Those charges would be dismissed if it abides by the terms of the agreement for five years. It also agreed to resolve civil claims under the False Claims Act.
McKinsey in a statement said it was “deeply sorry.” It ceased advising clients on opioid-related businesses in 2019, and said its work for opioid manufacturers “will always be a source of profound regret for our firm.”
McKinsey previously reached agreements totaling nearly $1 billion to settle widespread lawsuits and other legal actions alleging the company helped fuel the opioid epidemic through its work advising OxyContin maker Purdue Pharma and other drugmakers.
“We should have appreciated the harm opioids were causing in our society and we should not have undertaken sales and marketing work for Purdue Pharma,” McKinsey said in a statement.