A Blemish on McKinsey

When I was in business school, I remember first hearing about McKinsey & Company – a management consulting firm – that charges a lot of money to solve problems for corporations, government, and non-profits (surprisingly many non-profits – especially in healthcare and eduction – can afford McKinsey).

Back then – about 35 years ago – I didn’t understand why major companies (engaged in financial services, media, asset management, telecommunications, technology, healthcare, energy, consumer goods, pharmaceuticals, insurance, and more) whose executives are paid millions would pay McKinsey millions to solve problems that their executives were paid to solve.  It never made sense to me even though the McKinsey employees were reputed to be the best and the brightest (McKinsey had the reputation of recruiting the top 1 or 2 male students from the top business schools back then.  I’m guessing they still recruit the top students but don’t know how close they have come to gender parity) but the executives in these multinational corporations are also the best and brightest in their field.

If a multinational pharmaceutical corporation wants to increase sales of a drug, how could they not figure out how to do this since this is what they do every single day?  Apparently, three major drugmakers – Perdue, Endo International and Mallinckrodt – used McKinsey for consulting advice on how to increase sales of opioids.  When these companies imploded (Chapter 11) after facing suits alleging they sold drugs through misleading marketing practices that fueled the addiction crisis, litigants decided to dig deeper to determine if McKinsey exacerbated the problem in advising these companies how to increase drug sales.

McKinsey made two (2) key settlements in the past 3 years totaling nearly $1 billion without admitting wrongdoing:

• In 2021, McKinsey reached a settlement with 50 states, 5 US territories, and Washington, DC to pay $642 million to settle civil opioid-related litigation, and
• In 2023, McKinsey reached a settlement with Native American tribes, public school districts, insurance companies, and municipal governments to pay $347 million to settle opioid-related litigation.

So, the question that has to be asked is:  Why would McKinsey settle these suits for nearly $1 billion if they were innocent?  McKinsey says they “chose to be part of the solution to a complex public health crisis,” according to the WSJ. Really. How altruistic of McKinsey.

The Wall Street Journal (WSJ) recently reported that consultants from McKinsey sent a memo to executives at Perdue in 2013 with 20 recommendations to boost sales of OxyContin by more than $100 million annually.  Specifically,

McKinsey advised Perdue that there was significant opportunity to shift sales calls to the highest volume prescribers, who as a group wrote 25 times as many OxyContin prescriptions on average than their peers.

So, now McKinsey is faced with a criminal inquiry by the Department of Justice related to the consulting company’s role in advising companies how to increase sales of opioids and whether McKinsey or its employees have obstructed justice in relation to records of the consulting services provided to these companies, according to the WSJ.

I don’t know what perplexes me more:  that Perdue couldn’t figure out who their largest prescribers were, that McKinsey had to tell them, or the McKinsey has not admitted any wrongdoing.

Click to read the WSJ article “McKinsey Hit With Criminal Inquiry”