McKinsey part 2 – from tobacco and opioids to health care

The blog has written about the PR campaigns to cast doubt on all sorts of things – from climate change to tobacco.

Hill & Knowlton were early advisers in the tobacco wars but McKinsey was at their side working with Phillip Morris, R.J. Reynolds, Lorillard, Brown and Williamson, British American Tobacco and Japan Tobacco International. It also worked on campaigns to boost cigarette sales in Germany and Latin America.

The authors of When McKinsey came to Town say there is no evidence that McKinsey played a role in the industry-led disinformation campaign “but for a company so deeply involved in Philip Morris’s business it strains credibility to believe the consultant were not aware of it.”

Meanwhile the company was also “advising hospitals and government agencies on how to reduce healthcare costs while their tobacco clients were filling hospital rooms with the sick and the dying”.

It also earnt more than $US11 million from the Food and Drug Agency (FDA) advising on regulating tobacco advertising and reorganising FDA offices on regulating tobacco.

But the most publicised McKinsey consulting projects have been its work in pushing opioid sales.

Like many consulting firms, except with a much more systematic approach, McKinsey encourages staff to publish think pieces on issues, trends and ideas. One was an analysis of how drug companies could generate more sales by better analysis of prescription data. The lead author was Martin Elling who could be regarded as one of the fathers of the opioid crisis.

The article said that companies were relying on “the ‘pinball wizard’ sales model.”

“When a patient fills a prescription, the order is stored in a data base that can be matched for drug, producer and physician.” It then went on to explain that the information could be used “to target physicians who are most likely to prescribe more of a given drug over time, no matter how much or how little they prescribe at the moment”.

Purdue Pharma noticed the article and, Bogdanich and Forsythe say: “From 2004 to 2019 paid McKinsey $83.7 million in fees for marketing advice that made its billionaire owners even richer by stoking the nation’s appetite for the painkilling drug OxyContin.”

The devastation across America was horrendous. In the end Elling and a medical doctor were sacked by McKinsey after discussing purging records to hide the firm’s involvement.

750,000 people died in an epidemic kick started by OxyContin, the deaths are continuing and the chapter in the book is a brilliant short account of an American tragedy and can be read in context with Deaths of Despair by Anne Case and Angus Deaton – a brilliant overall  account of why so many working class Americans are dying from drug abuse and suicide.

McKinsey agreed to pay $US600 million although it denied any wrong-doing. Purdue filed for bankruptcy after agreeing to pay $US 8billion compensation and the firm filed for bankruptcy. Sadly, bankruptcy or being on the brink of bankruptcy, seems to be a something of a problem with some McKinsey clients – not only Enron and Purdue but also almost Swiss Air (once thought to be as reliable as a Swiss watch) went to the brink of bankruptcy after implementing a business plan developed by McKinsey.

The book also has a chapter on McKinsey’s work from the 1990s with insurance companies starting with All state. This involved how companies could better refuse or delay payments on policies. Allstate ended up in the courts and thousands of pages of PowerPoint slides and other materials about how policy holders were dudded becoming public.

McKinsey spoke with pride of their decisions to refuse work in South Africa in the apartheid years.  It is doubtful that they speak with pride of their post-apartheid work which included work with the infamous Gupta brothers; the Transnet port and rail authority; Eskom the power company; and South African Airways.

Working with South African partners McKinsey missed the transfer of millions of rands in laundered payments to the Guptas and others.

As Bogdanich and Forsythe say the firm claimed they knew nothing about these payments “but McKinsey’s denials called to mind Claude Rains in the Movie Casablanca : ‘I’m shocked, shocked to find that gambling is going on in here’.” They call this chapter: “Clubbing seals”.