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Explained: The US opioid crisis and McKinsey’s $600 million settlement deal

McKinsey was being investigated for its work with US-based drugmaker Purdue Pharma to “turbocharge” the sales of OxyContin, an addictive pain killer manufactured by the company.

By: Explained Desk | New Delhi |
Updated: February 6, 2021 1:40:22 pm
The documents showed that McKinsey advised Purdue to focus sales calls to doctors known to be high prescribers. (Representational)

Prominent global consultancy firm McKinsey & Co has agreed to pay nearly $600 million (around Rs 4,400 crore) to settle claims by 49 US states, five territories and the District of Columbia relating to its role in exacerbating the opioid crisis in the country.

In a statement released Thursday, McKinsey said it will pay the money “which the states will use to address the impact of the opioid epidemic in their communities,” and “reaffirmed” its 2019 promise of not doing consultancy work for opioid-related businesses.

McKinsey was being investigated for its work with US-based drugmaker Purdue Pharma to “turbocharge” the sales of OxyContin, an addictive pain killer manufactured by the company.

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America’s opioid crisis

The US is currently going through an opioid overdose epidemic, with over 130 people dying each day from opioid-related drug overdoses.

The misuse and addiction to opioids, including prescription pain relievers, heroin, and synthetic opioids such as fentanyl, has caused a national health crisis that has affected public health as well as social and economic welfare, according to the National Institute on Drug Use (NIDU).

As per the Centers for Disease Control and Prevention (CDC), the misuse of prescription opioids alone is estimated to cost the US $78.5 billion each year, including the costs of healthcare, lost productivity, addiction treatment, and criminal justice involvement.

The crisis began in the late 1990s, when pharmaceutical companies in the country aggressively marketed prescription opioid painkillers, while reassuring doctors that their patients would not get addicted to them. As rates of prescription soared, so did the diversion and misuse of drugs, making it clear that they were highly addictive.

Since 2000, prescription opioids, heroin and fentanyl have been linked to the death of over 4.7 lakh Americans. In 2017, an estimated 1.7 million people suffered from substance use disorders related to prescription opioid pain relievers, and 652,000 suffered from a heroin use disorder (not mutually exclusive), according to NIDU.

In July 2017, former President Donald Trump declared the opioid crisis a “national emergency”.

What McKinsey was accused of doing

Over the past few years, state and local governments in the US began filing lawsuits against pharmaceutical companies making and selling opioid drugs for their role in causing the addiction epidemic. Currently, over 3,200 cases are pending against drugmakers, distributors and pharmacies accused of deceptively marketing opioid drugs and ignoring red flags, as per Reuters.

The consulting firm McKinsey came under scrutiny for its advising work for Purdue Pharma, whose painkiller drug OxyContin authorities said was among those that fuelled the opioid crisis. Prosecutors accused McKinsey of advising the Sacklers, the wealthy family that owns Purdue Pharma, on how to “turbocharge” opioid sales, even as the fallout of the opioid epidemic had become clear.

The relationship between McKinsey and Purdue Pharma was revealed in legal documents that the pharmaceutical company made public as part of efforts to settle claims against it through bankruptcy court, according to DW.

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The documents showed that McKinsey advised Purdue to focus sales calls to doctors known to be high prescribers, and to try and move patients to more potent doses of OxyContin. Purdue was also advised to “band together” with other opioid makers to circumvent “strict treatment” by regulatory authorities, according to the New York Times.

According to the NYT report, McKinsey also worked with Purdue in finding ways “to counter the emotional messages from mothers with teenagers that overdosed” on OxyContin.

Prosecutors said that McKinsey discussed deleting documents related to their work with Purdue Pharma, which lasted from 2004 to 2019– over 10 years after the drugmaker pleaded guilty to misrepresenting the risks of OxyContin.

Settlement and reactions

As part of one settlement, McKinsey will pay $573 million to resolve probes by 47 states, five territories and the District of Columbia. There are two separate settlements, worth $13.5 million and $10 million, with Washington and West Virginia states respectively.

Payments under the multi-state deal are expected to come in the next two months, and will be used by local authorities to tackle the opioid crisis.

Many, however, have expressed scathing criticism of McKinsey. New York Attorney General Letitia James said, “McKinsey’s cynical and calculated marketing tactics helped fuel the opioid crisis by helping Purdue Pharma target those doctors they knew would overprescribe opioids. They knew where the money was coming from and zeroed in on it.”

Arizona Attorney General Mark Brnovich said, “Even though no amount of money can bring back the lives lost, I hope our settlement provides funding for programs to help those battling opioid addiction”.

In its statement, McKinsey said, “We chose to resolve this matter in order to provide fast, meaningful support to communities across the United States. We deeply regret that we did not adequately acknowledge the tragic consequences of the epidemic unfolding in our communities.”

The firm, however, said it believed its past work was “lawful” and that the settlement agreements “themselves contain no admission of wrongdoing or liability.”

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