Oversight Committee Launches Investigation into McKinsey & Company’s Consulting Practices, Conflicts of Interest
Washington, D.C. (November 5, 2021)— Today, Rep. Carolyn B. Maloney, the Chairwoman of the Committee on Oversight and Reform, sent a letter to Mr. Bob Sternfels, Global Managing Partner at McKinsey & Company, seeking documents and information regarding McKinsey’s consulting services on behalf of the opioid and pharmaceutical industries, the company’s conflicts of interests, and its apparent failure to monitor and prevent harmful practices.
“Over the last decade, McKinsey & Company—one of the largest consulting companies in the world and a major U.S. government contractor—has engaged in a pattern of conduct that raises serious concerns about its business practices, conflicts of interest, and management standards,” wrote Chairwoman Maloney. “The company’s support for drug companies pushing addictive opioid painkillers and raising prices for life-saving medications, even as McKinsey also advised the federal agency regulating their conduct, may have had a significant negative impact on Americans’ health. McKinsey’s investments through an internal hedge fund—including in companies benefiting from opioid sales—also raise significant concerns about conflicts of interest.”
The Committee’s investigation into Purdue Pharma, the maker of the pain medication OxyContin, found that McKinsey played a decades-long role in the opioid epidemic, recommending strategies to “Turbocharge Purdue’s Sales Engine.” Documents show that McKinsey proposed that Purdue offer “rebates” to insurers and pharmacy benefit managers for opioid overdoses attributable to OxyContin. McKinsey’s advice helped drive sales of addictive painkillers even as the death toll mounted in communities across America.
Purdue Pharma’s records show that McKinsey was advising the Food and Drug Administration (FDA) while also advising Purdue on how to lobby the FDA, creating a potential conflict of interest. Another FDA contract called on McKinsey to consult with private sector stakeholders on regulation. Despite these serious potential conflicts, FDA has stated that McKinsey never informed the agency of its private sector relationships with opioid manufacturers.
Today, the Committee also released documents obtained from drug maker AbbVie during the Committee’s drug pricing investigation, which show how McKinsey consultants advised the pharmaceutical giant to take action to block low-cost competition to its blockbuster drug Humira—competition that would have saved American consumers, and taxpayers, billions of dollars. These documents emphasize the firm’s expertise gained working for “key regulatory agencies,” raising further questions about McKinsey’s potential conflicts of interest in its performance of contracts for FDA, including for the Office of Generic Drugs.
In addition to its consulting business, McKinsey maintains a $12 billion internal hedge fund, McKinsey Investment Office Partners (MIO), which manages the money of McKinsey employees and makes investments in industries or entities that are also the subject of the firm’s consulting practice. For example, while McKinsey helped opioid manufacturers spur sales, MIO “held stakes in companies that profited from increased usage,” including addiction treatment centers and the maker of overdose treatment products. Even today, McKinsey could benefit from its $573 million settlement with the states for its role in the opioid epidemic because of MIO’s indirect ownership stakes in companies that provide treatment for substance use disorders.
“MIO’s opaque financial holdings raise the question of whether a consulting firm should be allowed to advise companies, governments, and individuals while maintaining a hedge fund with financial interests related to that advice, without disclosing potential conflicts of interest,” Chairwoman Maloney added. “McKinsey’s unique relationship with MIO may indicate the need for reforms to enhance disclosure and prevent certain conflicts of interest.”
Today’s letter requests that McKinsey produce documents and information about all these issues by November 19, 2021.
Click here to read today’s letter.