$573 Million McKinsey Opioid Settlement Reveals Compliance Best Practices for Life Sciences Companies
8 min read
On February 4, 2021, McKinsey & Company, the global consulting firm, announced a $573 million settlement with attorneys general in 47 states, the District of Columbia, and 5 territories based upon the advice it had given Purdue Pharma, the maker of OxyContin, and other pharmaceutical companies on marketing and sales strategies for opioid products.1 Companies would do well to consider the implications this big-ticket settlement may have for their compliance programs.2
While the McKinsey settlement is a direct outgrowth of the national opioid epidemic, it presents important lessons for pharmaceutical and medical device companies, and their consultants, going well beyond opioids. The settlement is particularly noteworthy in that it signals a willingness on the part of the government to pursue not only manufacturers, but also those who provide them professional services—in this case, consulting services.3
Also notable are the specific allegations against McKinsey, which, in part, target marketing behavior and advice that many would view as commonplace across the life sciences industry. The theory of harm the various state complaints detail is essentially that McKinsey helped Purdue and other companies sell more opioids, and the states then bore a substantial part of the cost (financial and otherwise) of widespread opioid addiction. While one might view the settlement as unique to the particular context of opioids, it raises the question of whether governmental concern over particular marketing strategies is a sign of enforcement efforts to come.4
The settlement also mandates public disclosure of all non-privileged documents McKinsey has in its possession relating to its opioid marketing advice, including documents containing communications with McKinsey's pharmaceutical clients.
In this alert, we highlight five best practices for companies—both manufacturers and consultants—to consider.
1. Clearly Tie Sales Messaging and Marketing to Medical Necessity
The Massachusetts complaint against McKinsey, for example, alleged that McKinsey counseled Purdue to focus its messaging “to titrate to higher, more lucrative dosages.”5 The implication, of course, is that marketing strategy should follow medical necessity and not the other way around. Companies (and their consultants) would benefit from documenting how they tailor sales and marketing messaging to respond to the medical needs patients face rather than pushing sales in a way that is divorced from medical necessity. A company should be particularly attentive to such documentation if it plans to undertake a marketing campaign recommending the usage of higher doses.
2. Develop Monitoring Systems Regarding Potential Red Flags for High-Volume Prescribers
The attorneys general also took issue with the fact that McKinsey allegedly advised Purdue that it should focus calls from its sales representatives on “high-volume opioid prescribers” and allegedly caused a significant increase in the number of sales visits to such prescribers.6 Such physician targeting is pharma-marketing 101. It is common sense for a company to focus its sales attention on customers likely to buy its products in high volume. The concern here seems to be that Purdue, at McKinsey's behest, may have been targeting high-volume prescribers even in situations where sales reps or others had reason to believe particular physicians were prescribing irresponsibly (or potentially illegally).
In this light, it is worth considering compliance systems to identify possible red flags with high-volume prescribers. Simply put, it is helpful if manufacturers have some knowledge of their highest-volume customers, including any potentially concerning financial relationships or conflicts of interest, but also any purchasing patterns that might indicate inappropriate (or outlier) use of the product. It is always useful for a company to know its data and know its customers so it can flag and address any possible problems before the government comes knocking.7
3. Carefully Document Any Need to Target Specific Patients
The government lawyers also flagged that McKinsey allegedly recommended that Purdue develop brand loyalty through targeting specific patients, including patients who had never used opioids before.8 In the context of a drug like OxyContin with abuse risk, companies should approach attempts to increase brand loyalty, especially overtures to new patients, quite cautiously. It may be best to avoid such approaches altogether.
There may be other products, such as drugs designed for treatment of a rare disease, where specific targeting of patients is necessary. Here, best practices counsel that companies document the need to target specific patients and the inadequacy of alternative marketing strategies, erect guardrails to ensure that specific targeting will not lead to inappropriate use of the drug, and scrupulously adhere to patient privacy rules.
4. Pay Heed to Relationships with Patient Advocacy Groups
McKinsey allegedly counseled Purdue to organize patient advocacy groups to lobby against dispensing limits on opioids.9 Nothing appears overtly illegal about such conduct (though, as with much of the alleged conduct, it may show a lack of good judgment under the circumstances).
Given the attention paid to McKinsey's advice regarding relationships with patient advocacy groups, companies should take care that such relationships rest entirely on evidence that their products will help the patients for which a particular group advocates. Companies should use language both privately and publicly to show that they do not enter into relationships with patient advocacy groups to make more money at the expense of the very patients the advocacy groups represent.
Relatedly, while by no means should companies avoid advocating for alternatives to overly burdensome regulation of their products, they should make certain that their arguments and proposals to government regulators emphasize that their key consideration is achieving a level of regulation that will best benefit the patients they serve.
5. Insist Upon Strict Document Separation Protocols and Mind the Profit Motive
As part of the settlement, McKinsey agreed to the public disclosure of all its relevant non-privileged documents, including both internal and external documents concerning communications with Purdue and its other pharmaceutical clients regarding the sale and marketing of opioids.10 This public disclosure provision resembles public disclosure requirements of the Big Tobacco settlements.11
Such disclosure provides a reminder for companies to insist that their consultants employ strict document separation protocols to guard against release of a company's confidential information through a consultant intermingling materials from various clients and one of those clients becoming the subject of a disclosure order.
The prospect of public disclosure also should underscore for companies that—generally—both regulators and juries dislike the profit motive. Internal communications should reflect this knowledge and refrain from any appearance that the company is in business to profit off people's pain.
Conclusion
The McKinsey settlement signals that government enforcers may now look twice at marketing strategies that manufacturers and consultants previously may have considered business as usual. While such marketing practices may be perfectly defensible in litigation, both companies and consultants would do well to recognize the lessons from this settlement and reduce their risk exposure accordingly. Such action need not require root and branch reform, but rather the implementation of select best practices. These best practices include ensuring that medical necessity remains central in marketing strategy, that external relationships with patient advocacy groups, as well as internal communications, reflect that patients come first, and that any efforts to oppose overregulation emphasize in good faith that a lighter regulatory touch will benefit patients.
1 See AG's Office Secures $573 Million Settlement with McKinsey for 'Turbocharging' Opioid Sales and Profiting From the Epidemic, Office of Attorney General Maura Healey (February 4, 2021), https://www.mass.gov/news/ags-office-secures-573-million-settlement-with-mckinsey-for-turbocharging-opioid-sales-and; see also Assented to Motion for Entry of Judgment, Commonwealth of Massachusetts v. McKinsey & Company, Inc. United States, § V. Payment, https://www.mass.gov/doc/massachusetts-mckinsey-consent-judgment/download.
2 The June 2020 updated U.S. Department of Justice compliance guidance specifically notes that prosecutors will evaluate whether companies learn lessons from their own issues, as well as issues that other companies within their industry experience. See U.S. Department of Justice Criminal Division, Evaluation of Corporate Compliance Programs (updated June 2020), pg. 3 (“Lessons Learned – Does the company have a process for tracking and incorporating into its periodic risk assessment lessons learned either from the company's own prior issues or from those of other companies operating in the same industry and/or geographical region?”), https://www.justice.gov/criminal-fraud/page/file/937501/download.
3 Note that prior to the McKinsey settlement, the U.S. Department of Justice settled criminal and civil claims against Purdue for its marketing and sales of opioids for $8.3 billion on October 21, 2020. See Justice Department Announces Global Resolution of Criminal and Civil Investigations with Opioid Manufacturer Purdue Pharma and Civil Settlement with Members of the Sackler Family, Department of Justice Office of Public Affairs (October 21, 2020), https://www.justice.gov/opa/pr/justice-department-announces-global-resolution-criminal-and-civil-investigations-opioid. In addition to the settlement with Purdue, members of the Sackler family, the owners of Purdue, settled civil claims against them for $225 million. See id.
4 While this settlement is an instance of enforcement on the state level, and significant healthcare enforcement happens at the federal level, there is commonly some degree of interplay in areas of concern by state and federal regulators.
5 See Complaint, Commonwealth of Massachusetts v. McKinsey & Company, Inc. United States, 15c, accessible at https://www.mass.gov/doc/massachusetts-mckinsey-complaint/download.
6 See id., 15a and 15d. The Massachusetts complaint, for example, also notes that McKinsey recommended the removal of sales rep discretion in targeting prescribers. See id., 15b.
7 If a company implements such a red flag program, it should, of course, design it to be effective. Purdue, for instance, had a red flag program, which it called its “Abuse and Diversion Detection” (“ADD”) program, but ADD had numerous shortcomings. For example, under ADD, even if a sales rep reported a prescriber, the company might not add the prescriber to a do not contact list until the prescriber had lost the ability to prescribe entirely through legal or medical board action. See Purdue Settlement Agreement, 126-143, https://www.justice.gov/opa/press-release/file/1329571/download.
8 See, e.g., Massachusetts Complaint 13.
9 See id., 19.
10 See Entry of Judgment, § IV. Public Access to McKinsey Documents.
11 See Michael Forsythe and Walt Bogdanich, McKinsey Settles for Nearly $600 Million Over Role in Opioid Crisis, NY Times (February 3, 2021), https://www.nytimes.com/2021/02/03/business/mckinsey-opioids-settlement.html
Samuel Feigenbaum (White & Case, Associate, Boston) contributed to the development of this publication.
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