Consulting firm McKinsey & Co has agreed to put $125 million into Purdue Pharma’s bankruptcy settlement, resolving potential claims tied to its earlier advice to the maker of OxyContin, a court filing showed late Wednesday. The contribution addresses allegations that McKinsey consulted on strategies to "turbocharge" sales of the powerful opioid.
Purdue won bankruptcy court approval last November for a $7.4 billion restructuring plan. The new $125 million from McKinsey will be added to the pool of funds used to compensate creditors who contend the company helped drive the U.S. opioid crisis through aggressive marketing and sales tactics for OxyContin.
The bankruptcy agreement had left open the possibility that Purdue could pursue legal claims against McKinsey over the marketing counsel that was linked to the company’s decline. In the filing, McKinsey did not admit wrongdoing in connection with its contribution to the Purdue settlement.
McKinsey previously agreed to pay $1.6 billion in separate settlements with the U.S. Department of Justice, as well as with state and local governments, related to its role in the opioid crisis. The firm has said it stopped advising clients on opioid-related businesses in 2019 and has expressed regret over its prior work for opioid manufacturers, calling that work a source of profound regret for the firm.
Neither Purdue nor McKinsey immediately provided comments in response to requests for comment on the court filing.
According to court documents, the McKinsey payment increases the amount available to individuals harmed by the opioid crisis by $50 million. Prior to this addition, that group had been expected to receive approximately $865 million under the settlement framework.
Under the terms of Purdue’s broader settlement, the majority of funds will be directed to states and local governments. Those jurisdictions have agreed to allocate the proceeds toward opioid abatement efforts such as addiction treatment programs.
Purdue’s owners, members of the Sackler family, are contributing at least $6.5 billion to support the bankruptcy settlement. The company itself has twice pleaded guilty to federal criminal charges accusing it of falsely marketing OxyContin. In those pleas, the company acknowledged it misled regulators, physicians and patients about addiction risks and engaged in unlawful practices aimed at boosting opioid sales.
Purdue is slated for sentencing on its second guilty plea on April 21. The bankruptcy plan also envisions converting Purdue into a nonprofit entity named Knoa Pharma, which is to focus on developing and distributing medications for opioid overdose reversal and addiction treatment.
The settlement still requires final approval from a U.S. bankruptcy judge. Purdue intends to seek court approval of the agreement at a hearing scheduled for April 30 in White Plains, New York.
Key points
- McKinsey will contribute $125 million to the Purdue Pharma bankruptcy settlement, per a court filing.
- The payment adds $50 million to the recovery expected for individuals harmed by the opioid crisis, who had been slated to receive about $865 million.
- Most settlement funds are designated for states and local governments to use for opioid abatement efforts; the Sackler family is contributing at least $6.5 billion.
Risks and uncertainties
- The settlement must be approved by a U.S. bankruptcy judge before it becomes final; judicial approval is an open procedural step that could affect timing and distribution.
- Potential legal actions between Purdue and McKinsey were left unresolved until McKinsey's contribution; past litigation risks and claims could still influence outcomes for creditors and affected parties.
- Sentencing for Purdue related to its second guilty plea is scheduled for April 21, an event that could have bearing on the company's legal and financial posture ahead of the bankruptcy hearing.