Joshua Levy (00:16):
Ready to go? Good afternoon everyone. My name is Joshua Levy. I'm the United States Attorney for the District of Massachusetts. We are here today to announce a groundbreaking criminal and civil enforcement action against McKinsey & Company, the global management consulting firm for its role in the opioid crisis that has ravaged this country. As you can see from the big team we have up here, this was a significant effort on behalf of the federal government and the Virginia State's Attorney General's Office. I'd like to turn it over to my friend Chris Kavanaugh to kick us off today. Chris?
Chris Kavanaugh (00:48):
Thank you. Good afternoon. My name is Chris Kavanaugh and I'm the United States Attorney for the Western District of Virginia. This morning we filed documents in United States District Court in the Western District of Virginia, specifically in Abingdon, Virginia, demonstrating the Justice Department's continued commitment and ongoing effort to hold accountable those companies and individuals who played a role in our nation's opioid crisis. For the past few years, the United States Attorney's Office for the Western District of Virginia, the United States Attorney's Office for the District of Massachusetts and the Justice Department's Civil Division have been leading an investigation into whether McKinsey & Company, a global management consulting firm, which provides consulting advice to CEOs and boardrooms across the globe had committed criminal or civil violations of federal law in their consulting engagements with Purdue Pharma. To provide you with a little bit of background, in 2007 in federal court in Western District of Virginia, a Purdue Pharma affiliate pleaded guilty to criminal misbranding for falsely marketing OxyContin as less addictive, less subject to abuse, and less likely to cause dependence and withdrawal than other pain medications.
(02:05)
In the aftermath of that guilty plea, Purdue Pharma was under a corporate integrity agreement during which Purdue Pharma obtained FDA approval for a new version, a reformulated version of OxyContin with abuse deterrence properties. In other words, a new formula that makes it less likely to be abused by individuals. After the introduction of this new product, OxyContin sales plummeted. The reason for the drop in sales in large part was due to the drop in prescription for those who were abusing the drug, as well as regulatory safeguards that put in place roadblocks, making it harder to prescribe OxyContin when it was medically unnecessary. Enter McKinsey & Company. After the corporate integrity agreement expired, Purdue specifically engaged McKinsey & Company to develop a strategy to recover these lost OxyContin sales. After the corporate integrity agreement expired, this new effort would be called the Evolve to Excellence program or the E2E program, and included McKinsey advising Purdue on how to turbocharge, a term used by McKinsey consultants, the sales pipeline for OxyContin.
(03:20)
As part of this effort, McKinsey conducted a rapid assessment of the drop in sales and sought to identify opportunities to get those sales back. In this assessment, McKinsey learned of the increasing reluctance of doctors, pharmacists and pharmacy chains to fill prescriptions of OxyContin out of concerns that it was being abused. According to the strategy devised by McKinsey and ultimately provided to Purdue to turbocharge those sales McKinsey advised and Purdue followed the targeting of high-value prescribers, including those who were prescribing opioids for uses that were unsafe, ineffective and medically unnecessary, and that often led to abuse and diversion. This was not hypothetical, this was not just marketing. It was a strategy. It was executed and it worked. McKinsey's strategy resulted in prescriptions for OxyContin that were unsafe, medically unnecessary and lacked a legitimate purpose and were often diverted. Purdue Pharma implemented this strategy up until 2018 when they stopped selling opioids and was later held accountable for this conduct in a criminal and civil resolution in 2020 for the same conduct.
(04:41)
What our investigation also revealed was that a McKinsey senior partner at the time, now former, who was serving as the Director of Client Services for many of McKinsey's engagements with Purdue Pharma and held a senior relationship-focused role on the engagement with Purdue became aware of litigation involving Purdue Pharma after which, and as a result, he personally deleted various Purdue-related electronic materials from his McKinsey-issued laptop with the intent to obstruct future investigations. This was later confirmed by our forensic examination of that McKinsey-issued laptop, as well as emails that our team received during our investigation. For his conduct, today, also in the Western District of Virginia. This individual by the name of Martin Elling was charged in the United States District Court with one felony count of obstruction of justice for knowingly destroying those documents with the intent to impede, obstruct and influence the investigation and proper administration of a matter within the jurisdiction of the Justice Department. He has agreed to plead guilty and is expected to appear in federal court in the Western District of Virginia to enter that plea in the very near future.
(05:57)
Moreover, McKinsey & Company has agreed to pay $650 million in penalties to resolve criminal and civil investigations into their consulting work with Purdue Pharma as part of a five-year deferred prosecution agreement. In connection with that agreement today, we filed a two-count criminal information in Western District of Virginia against McKinsey, United States charging one felony count of obstruction of justice and one misdemeanor count of knowingly and intentionally conspiring with Purdue and others to aid and abet the misbranding of prescription drugs. This resolution marks the first time a management consulting firm has been held criminally responsible for advice that it has given resulting in the commission of a crime by a client. It also marks the first time that a management consulting firm is held accountable for its role and helping to fuel the opioid crisis.
(06:54)
You are going to hear many numbers today as we go through that resolution in detail. However, there is one number that I want you to keep in mind, and that number is 85. That $650 million figure that I mentioned is not double, it is not triple, it is over 85 times the amount of money that McKinsey made on the turbocharge engagement that forms the central basis for the criminal charge that we are discussing today. We believe that it sends a powerful message to the consulting industry going forward as they consider future engagements. In addition to these monetary penalties, the agreement also includes robust compliance procedures and terms that McKinsey and McKinsey U.S. will implement to reform their compliance practices to include consideration of legal, ethical and social responsibility aspects of engagements as well as a corporate integrity agreement. This agreement in combination with reforms that McKinsey has already implemented during the course of our investigation will likely set a standard for the management consulting industry for compliance and accountability going forward.
(07:56)
Last, McKinsey has also agreed that it will not do any work relating to the marketing, the sale, the promotion, or the distribution of any controlled substance for the five-year term of the deferred prosecution agreement. We all continue to deal with the fallout of our nation's opioid crisis. It has deeply affected so many Americans in their families, my own included, as I have previously lived what happens when a family member becomes arrested by opioid addiction from a medically dubious prescription and to sort through how that we can move forward. We can witness and we can be grateful about the positive nationwide trend and the decline in overdose deaths linked to opioids, but we cannot become complacent and we recognize that we have more work to do. Today marks another day that shows that the men and women of the Justice Department will continue to do their part to investigate and hold accountable. Those who have profited from violations of federal law and the U.S. attorney's office for the Western District of Virginia, the District of Massachusetts and the Civil Division will continue to take a leading role in that effort.
(09:08)
And on that note, I want to personally thank and extend my gratitude to Assistant United States Attorneys, Randy Ramseyer of the Western District of Virginia, Amanda Masselam Strachan and Bill Brady of the District of Massachusetts, trial attorneys, Kristin Echemendia, Jessica Harvey and Steven Scott of the Justice Department Civil Division and Assistant Attorney Generals Kristin Gray and Kimberly Bolton of the Virginia Attorney General's Office. Last and finally, I also note and appreciate that I'm a U.S. attorney from Virginia who is appearing here in Boston, and although we're filing these matters in Virginia, that is in recognition of and in representative of the partnership between these two United States attorney's offices as they continue to take a leading role in engaging in novel and aggressive actions like the one we have announced here today. Thank you for your time. Now I'd like to turn it over to United States Attorney Levy.
Joshua Levy (10:07):
Thanks, Chris. I want to highlight a few aspects of this agreement, but first and foremost, at bottom, this is a case about real people. This is a case about the thousands and thousands of people who've lost their lives to opioid addiction over the last many years and the family members that leaving their wake who every day, including today, have to deal with grief and the despair and the guilt that comes with that. The opioid crisis is one of the single biggest and defining public health crises of our generation more than twice as many people die of addiction every year than in car accidents. Just this week right down the hall, I sat with a father in his late seventies who was stealing himself to go down a sentencing proceeding and tell the judge in one of those cavernous courtrooms about his beloved son who he lost, and that pain was still so raw for him many years later.
(11:01)
That's why the Department of Justice with our federal law enforcement partners, our state partners have brought thousands and thousands of criminal and civil enforcement actions to combat the opioid crisis. We have charged manufacturers, we have charged distributors, we have charged pharmacy chains, pharmacists, doctors, pill mills. Our drug unit is taking down international cartels and street-level organizations that are pumping this poison on our streets. We have brought cases against the money launderers who are the lifeblood of the fentanyl scourge in our community. We've brought cases against healthcare providers who, because of their own addiction, have diverted pain medication away from patients to feed their addiction, and we brought cases to enforce the civil rights of people who are suffering from opioid use disorder to make sure they get the treatment they need. It's been a full court press for years. It will continue to be a full court press.
(11:57)
And today is one further step in that, in holding management consulting firm McKinsey criminally responsible because of the way that it worked, handing glove with Purdue and engaged in criminal conduct that further the opioid crisis. Management consulting firms and other professional services firms should take note, as Chris said, of this first of its kind resolution. If a consulting firm conspires with a client to engage in criminal conduct, the fact that you're an outside consultant will not protect you. We will cut through the slick power points and the consultant speak and hold you accountable for your conduct if you engage in criminal violations. The robust and forward compliance program that's a part of this resolution should be a road map for professional services firms and consulting firms so they don't find themselves where McKinsey found itself today, and I encourage everyone to take a look at those terms. It includes implementing a compliance program at professional services firms to make sure that you're not breaking the law or assisting a clients in doing so.
(13:06)
It includes risk assessments of new clients and new engagements and examining the enforcement history in that area. It includes implementing risk mitigation steps to protect yourselves from engaging in criminal conduct, training requirements for all client facing employees, record retention policies to make sure that your efforts in the compliance area are documented. Independent auditing of the compliance programs. It is a full infrastructure of what professional services firms are expected to do to make sure they don't end up in this situation, and we've built mechanisms in this settlement agreement to hold McKinsey accountable for enforcing and implementing these compliance programs. That includes starting with this year a five-year reporting relationship with the Department of Justice where they have to certify at the highest levels of the company that they're complying with the requirements that the compliance program.
(14:02)
And we recognize that McKinsey has been proactive in implementing a number of these measures already during the course of the investigation, and they've been responsible in implementing these remedial measures. Lastly, I'll just say that we recognize imposing huge fines and corporate compliance programs, and that's not going to bring one life back, but it is we hope, going to prevent this conduct from happening again, whether it's in the opioid space or some other next threat to public safety. And lastly, I want to underscore Chris's comments and I want to praise the members of the investigative team, the lawyers and all the agents at these agencies. It's their tenacity, it's their skill that brought us to today and they deserve the credit for what happened today. Thank you, and I'll turn it over now to Brian Boynton from the Civil Division.
Brian Boynton (14:56):
Good afternoon. My name is Brian Boynton. I'm the Principal Deputy Assistant Attorney General for the Civil Division. In that role I serve as the head of the Civil Division. I'm excited to be here from Washington D.C. to join my U.S. Attorney Office colleagues in announcing this very significant resolution. In the Civil Division, we investigate and pursue civil and criminal violations of the Food, Drug, and Cosmetic Act through the Consumer Protection Branch of our office, and we investigate and pursue civil violations of the False Claims Act through the fraud section of the Commercial Litigation Branch. We've used these civil and criminal tools to hold accountable a wide range of actors who played a role in fueling the opioid crisis in this country. The resolution we're announcing today with McKinsey is part of the Civil Division's broader commitment to combating that crisis. As Chris already discussed, this resolution addresses McKinsey's liability for various criminal violations.
(16:03)
We were honored to partner with Chris and Josh's offices and the agencies on that aspect of the agreement. But the resolution we're announcing today also addresses McKinsey's potential civil liability under the False Claims Act, and I want to add a few words about that aspect of the resolution. The False Claims Act is the government's primary civil tool for holding accountable those who defraud American taxpayers by submitting or causing the submission of false claims to federal healthcare programs and to other federal programs. McKinsey U.S. has agreed to pay over $323 million to resolve the allegations that had violated the False Claims Act in two distinct ways. First, the United States contends that McKinsey caused the submission of false claims to federal healthcare programs by advising Purdue Pharma to turbocharge its marketing of Purdue's highly addictive opioid drug, OxyContin. As Chris previously described, McKinsey U.S. advised Purdue to target healthcare providers who are already prescribing very large quantities of OxyContin, including prescribers who are writing opioid prescriptions for medically unnecessary uses. Notably, McKinsey U.S. provided this advice without regard for the significant abuse and diversion that would result.
(17:40)
Today's civil resolution addresses the United States' allegations that by means of this conduct, McKinsey U.S knowingly caused the submission of false and fraudulent claims for OxyContin. Second, the civil resolution resolves allegations that McKinsey U.S. knowingly misled the FDA by assigning consultants to work concurrently on both FDA projects and competitively sensitive projects for Purdue Pharma. In the course of seeking a contract from the FDA, McKinsey U.S. represented that it had a conflict of interest policy in place that would prevent its consultants that were serving the FDA from being assigned to another competitively sensitive project for a significant period of time following the FDA assignment. The FDA then awarded McKinsey U.S. the first in a series of contracts relating to an FDA safety monitoring project. Despite its conflict of interest policy, McKinsey nevertheless assigned the consultants working on the FDA matter to various Purdue projects around the same time. McKinsey has admitted that did not disclose these facts to FDA. The United States alleged that by means of this conduct, McKinsey knowingly submitted false claims to the FDA.
(19:14)
Today's landmark resolution would not have been possible without the exceptional talent and dedication of a team of public servants. From the Civil Division's Consumer Protection Branch and fraud section, from the U.S. Attorney's Offices in Massachusetts and the Western District of Virginia from the Medicaid Fraud Control Unit of the Virginia Office of the Attorney General. I'm also grateful for the outstanding support of the investigative team from our partners at the FDA, the FBI, the Justice Department's Computer Crimes & Intellectual Property Section, Cybercrime Lab. In the offices of the Inspector General, for the Department of Health and Human Services, the Department of Veterans Affairs and the Office of Personnel Management. And last but not least, I want to thank Chris and Josh for their partnership and for their leadership on this matter. Thank you very much.
Jodi Cohen (20:15):
Good afternoon. I'm Jodi Cohen, the Special Agent in charge of FBI Boston. No amount of money can make up for a devastating impact of the heartbreaking loss of life the opioid crisis has inflicted on the people of Massachusetts and this nation. But today's settlement is a reminder that if you capitalize on a crisis by putting profits over patient safety and then try to obstruct a federal investigation, you will pay a hefty price. McKinsey is now being held criminally and financially accountable with a staggering $650 million penalty for its role in this elaborate years long swindle of our healthcare system. There is no question their greed and recklessness put Americans at significant risk of addiction and even death. It started with this global management consulting firm making a deal with Purdue Pharma to help combat the declining sales of OxyContin. They came up with an aggressive marketing strategy that was in reality a road map to boost sales based on fraud.
(21:19)
Amid a raging opioid crisis, McKinsey conspired with Purdue to turbocharge sales OxyContin by targeting prolific prescribers, many of whom dispense OxyContin like it was candy. Their actions resulted in a powerful prescription painkiller being doled out more often than not for uses that were unsafe, ineffective and medically necessary. McKinsey consultants were so bold that they even went on ride-alongs with Purdue sales reps to pay personal visits to pharmacists and high volume prescribers to coax them into running even more scripts. Essentially, they were no better than street level dealers reaping a profit from addiction and misery of others. In closing, I'd like to extend my sincere gratitude to everyone has worked so hard on this investigation. Specifically, the agents and analysts on FBI Boston's health care fraud task force, our partners at the U.S. Department of Health and Human Service, Office of the Inspector-General, the FDA's Office of Inspector General and the VA's Office of Inspector General, and of course, both U.S. Attorney's Office here in Massachusetts and the Western District of Virginia. I'm going to hand it off to HHS-OIGs.
Speaker 6 (22:32):
Thank you and good afternoon. The conduct that's fueled the opioid epidemic in this country has taken many forms. Inactions such as those alleged in today's filings have been part of that problem. Over a hundred thousand Americans died just last year from drug overdose, and millions of people are affected by opioid addiction, communities, families, and countless lives have been destroyed. Today marks another important step in the process of holding bad actors accountable for their role in contributing to this terrible epidemic, but our work doesn't end here. As part of this criminal and civil resolution, HHS-OIG has entered into a five-year corporate integrity agreement with McKinsey, with the goal of ensuring compliance with the applicable statutes, regulations, and directives of Medicare, Medicaid, and other federal healthcare programs.
(23:31)
Today's result would not have been possible without the strong partnerships of the agencies that are up here today. I want to personally thank all these agencies for their partnership, and I'd also like to thank the talented team of investigators, analysts, and attorneys whose mission it is to fight fraud, waste, and abuse in public healthcare programs each and every day. We cannot let the quest for illicit profit drive healthcare decisions and we're committed to doing everything we can to ensure that patients and their needs remain the primary focus of our nation's healthcare system. Thank you.
Speaker 4 (24:08):
Take some questions?
Speaker 7 (24:08):
Do you know what the 650 million will be used for?
Joshua Levy (24:15):
The 650 million goes to a variety of places. The criminal fine goes to the Treasury. Some of that goes to crime victim funds. Some of the money's reimbursed to agencies on the False Claims Act side, so it goes to different places. Some of it is returned to law enforcement agencies to further investigative efforts. To also note there was separately over $600 million settlement with the state attorney generals that McKinsey entered into that dispersed money to communities.
Nate (24:41):
This is the second criminal case against McKinsey by the Justice Department in the last couple of weeks. Both of them were resolving with prosecution agreements instead of guilty pleas or go to trial. I was just wondering if you comment on why this formal resolution was appropriate as opposed to trying to seek a conviction of the company?
Joshua Levy (25:06):
Yeah, so there was a case earlier this month in the Southern District of New York. It was a Foreign Court Practice Act case by a different entity at McKinsey relating to conduct in Africa. The two cases they involved conduct from roughly the 2012 to 2017, 18 time period, they're not exactly overlapping, so they were concurrent, the investigations were concurrent, and that's why we measured them each on their own merits and felt that this was the most appropriate outcome here. This is unlike a situation where a company has a resolution, is sanctioned through a DPA or some other sanction, and then goes on to engage in additional criminal conduct. So it's not a corporate recidivism type situation because the conduct was both happening at the same time.
Chris Kavanaugh (25:57):
What I'd like to add too is that I really invite you to take a look at the deferred prosecution agreement and some of the details here, is that bringing you back to that number? We obviously considered the additional outcomes of what would happen if we brought charges, but when we look at the robust compliance measures that the new standard that we think is going to be set here, the agreement in which McKinsey had said that they wouldn't engage in engagements involving the sale, the distribution, the promotion, the marketing of any controlled substance going forward, that is a huge outcome, all of us across the board that we think is ultimately something that the department and everyone should be very proud of.
Speaker 9 (26:35):
In a way, you've answered this, but I guess your message to some family members, loved ones, a lot of them want to see these people in jail, and I wondered if there is a message for them about this settlement to them. Obviously 650 million, right? But they just want their loved ones back.
Chris Kavanaugh (26:56):
I'll say that in every criminal corporate investigation that we engage in, at the very center of it is the desire to hold individuals accountable and where the facts in the law show that an individual committed a crime, we will in fact charge that person, and that's precisely what we've done so here. At the end of this investigation, we were able to show that the senior partner at McKinsey had committed a crime for the obstruction of justice and for the deletion of those documents, and that's precisely why we have at least one individual being held accountable as far as a criminal conviction at the end of this.
Nate (27:34):
Is there any prospect of any additional individual being charged in this? I ask because McKinsey had the two partners [inaudible 00:27:38] intentional conductance.
Joshua Levy (27:40):
I think I'd say on that, Nate, that this is an investigation that's been going on for quite some time. This is the resolution of the investigation that we have at this time, and we're always open to receive new information, but we think that brings this matter to a conclusion.
Speaker 4 (28:01):
Anyone else? Okay. Thank you.