McKinsey Guided Companies at the Center of the Opioid Crisis - The New York Times
▻https://www.nytimes.com/2022/06/29/business/mckinsey-opioid-crisis-opana.html
https://static01.nyt.com/images/2022/06/28/multimedia/mckinsey-top/mckinsey-top-facebookJumbo-v2.png In patches of rural Appalachia and the Rust Belt, the health authorities were sounding alarms that a powerful painkiller called Opana had become the drug of choice among people abusing prescription pills.
It was twice as potent as OxyContin, the painkiller widely blamed for sparking the opioid crisis, and was relatively easy to dissolve and inject. By 2015, government investigations and scientific publications had linked its misuse to clusters of disease, including a rare and life-threatening blood disorder and an H.I.V. outbreak in Indiana.
Opana’s manufacturer, the pharmaceutical company Endo, had scaled back promotion of the drug. But months later, the company abruptly changed course, refocusing resources on the drug by assigning more sales representatives.
The push was known internally as the Sales Force Blitz — and it was conducted with consultants at McKinsey & Company, who had been hired by Endo to provide marketing advice about its chronic-pain medicines and other products.
The newly released McKinsey records include more than 15 years of emails, slide presentations, spreadsheets, proposals and other documents. They provide a sweeping and detailed depiction of a firm that became a trusted adviser to companies at the core of an epidemic that has claimed half a million American lives.
While the firm held remarkable sway at Purdue, it also advised the largest manufacturer of generic opioids, Mallinckrodt. It worked with Endo on marketing Opana and helped it grow into a leading generics manufacturer. It advised Johnson & Johnson, whose subsidiary Tasmanian Alkaloids was the largest supplier of the raw materials extracted from poppies used to make many top-selling opioids. Then, as the full brunt of the epidemic became apparent, it counseled government agencies on how to address the fallout.
McKinsey’s opioid clients already wanted to grow their businesses. What the firm offered was know-how and sophistication, the documents show, and, as it noted in one presentation, “in-depth experience in narcotics.”
And when opioid prescriptions began to decrease during a government crackdown, the records show, McKinsey devised new approaches to drive sales.
McKinsey agreed to provide the documents to the attorneys general last year as part of a nearly $600 million settlement in which it admitted no wrongdoing. The firm has since apologized for its advice to opioid makers but, in a statement on Wednesday, suggested that its work with companies other than Purdue was “much more limited” and that it “did not counsel or recommend to Endo that it promote Opana more aggressively.”
“We recognize the terrible consequences of the opioid epidemic and have acknowledged our role in serving opioid manufacturers,” said a McKinsey spokesman. “We stopped that work in 2019, have apologized for it and have been focused on being part of the solution.”
The tangled path that led to Opana’s rise illustrates McKinsey’s deep involvement in the opioid business, with its work for one client rippling out with consequences for others.
Years earlier, the firm had helped usher the drug onto the market, advising Endo’s partner, Penwest Pharmaceuticals, on its launch in 2006. Two years later, the documents show, McKinsey performed a project for Purdue that paved the way for Endo to extend Opana’s reach.
Purdue was seeking approval from the Food and Drug Administration for a new version of OxyContin that would be more difficult to snort or inject. After the F.D.A. denied its application in 2008, Purdue enlisted McKinsey’s help. The consultants interviewed a former drug dealer about OxyContin abuse, oversaw scientific studies, prepared regulatory documents and coached company officials on how to deal with the F.D.A., which had been a McKinsey client. The agency gave its approval in 2010, and later allowed Purdue to claim the new pills were resistant to abuse.
Soon, OxyContin sales declined — while Opana sales rose. In an internal document, Endo attributed the uptick in part to “patient dissatisfaction with new OxyContin formulation.” Data on abuse showed similar trends: a decline for OxyContin and a rise for Opana.
As concerns about Opana grew, Endo hired a new chief executive in 2013: Rajiv De Silva, a former leader within McKinsey’s pharmaceutical practice who soon tapped the firm to help chart a growth strategy.
A few months after Mr. De Silva took over, McKinsey helped Endo execute a complicated maneuver known as a “tax inversion” — a legal form of tax avoidance that the Obama administration would decry as an “abuse” of the system. For tax purposes, the Pennsylvania company was now based in Ireland, where the rate was substantially lower.
The production of pills by companies like Endo and Purdue depended on a complex and tightly regulated global supply chain stretching from the fields of Tasmania to factories in the American heartland.
Here, too, was McKinsey.
Long before a patient in the United States filled a prescription for OxyContin, a farmer on another continent harvested a poppy rich in a substance called thebaine. Tasmanian Alkaloids, the Johnson & Johnson subsidiary, controlled the majority of this market.
From far-flung fields and extraction facilities, the raw materials made their way to American processing plants. The top U.S. producers at this stage were another Johnson & Johnson subsidiary, Noramco, and Mallinckrodt, the big generics manufacturer.
The documents reveal McKinsey’s work advising them behind the scenes. By the firm’s own account, it had deep expertise in the international trade of legal narcotics. “We serve the majority of the leading players,” the consultants wrote in a 2009 memo.
In 2009, the firm recommended a technique known as segmentation. The best marketing campaigns — whether for food, cars or electronics — divided consumers into segments based on how they acted and thought, then developed tailored messages to win them over, the consultants said.
In Purdue’s case, the customer was a physician with a license to prescribe controlled substances, and the product was OxyContin.
The consultants interviewed dozens of physicians and solicited the views of hundreds more in a survey. Four groups of doctors emerged, each with a distinct profile. The consultants then developed messages to appeal to each group’s practical and emotional needs.
Another McKinsey approach, known as targeting, tried to identify doctors who would provide the greatest return on sales representatives’ time.
Purdue, dissatisfied with dipping OxyContin sales in 2013, had enlisted McKinsey’s help. Revenues were down, the consultants advised, in large part because of government actions to tamp down the opioid epidemic. Doctors were writing prescriptions for fewer tablets and lower doses, and wholesalers and pharmacies were imposing new controls.
McKinsey recommended a more aggressive response than the one Purdue’s vice president for sales and marketing, Russell Gasdia, had been pursuing. Mr. Gasdia had accepted that OxyContin revenue was dropping in part “due to less abuse,” one McKinsey consultant wrote, and he was focused on promoting a less potent opioid.
In 2019, around the time of the Philadelphia project, McKinsey decided to stop advising companies on opioids — after the firm’s 15-year relationship with Purdue became public as part of a court filing by the Massachusetts attorney general’s office. Since Mr. Latkovic’s 2017 speech, McKinsey had collected $7.8 million in fees from Purdue, the documents show.
The disclosure that McKinsey had advised Purdue led to debate within the firm. “We may not have done anything wrong, but did we ask ourselves what the negative consequences of the work we were doing was, and how it could be minimized?” one consultant wrote.
Dr. Ghatak, a driving force behind McKinsey’s work for Purdue and Endo, found himself in the spotlight. Much as he had done for pharmaceutical executives, he crafted talking points, this time for himself.
Some of McKinsey’s former clients faced potentially crushing damages in court. Purdue filed for bankruptcy protection in 2019, and Mallinckrodt did the same the following year. Johnson & Johnson had previously sold its narcotics business to a private investment firm and has settled a number of lawsuits related to its marketing of opioids, which the company said in a statement was “appropriate and responsible.”
Endo has also floated the possibility of bankruptcy amid a wave of litigation over its marketing of opioids, especially Opana. The company said in a regulatory filing that it had received a subpoena in 2020 from the U.S. attorney’s office for the Western District of Virginia, which years earlier had won guilty pleas from Purdue executives. This time, according to Endo’s disclosure, the office wanted information on McKinsey.