When McKinsey Comes to Town: The Hidden Influence of the World's Most Powerful Consulting Firm

by Walt Bogdanich

“Kevin Sneader is based in Hong Kong,” the consultant said. “In one instance he can speak passionately about racial justice, but aren’t there folks outside his front door who could also benefit from the same forthrightness?”

No longer would the debate over smoking center just on whether cigarettes caused heart disease or cancer—an attack manufacturers parried by saying if adults knew the risks and still smoked, that was their choice. New disclosures raised questions about whether smokers really had a choice. What if manufacturers manipulated an addictive drug in cigarettes—nicotine—to keep people smoking?

Witnesses accused cigarette companies of essentially dosing their product with enough nicotine to ensure addiction. Ammonia was added to enhance the drug’s impact. High-nicotine tobacco plants were grown, and different leaves were blended to achieve desired nicotine levels. One major cigarette manufacturer wrote that it was in the company’s long-term interest “to be able to control and effectively utilize every pound of nicotine we purchase.”

McKinsey & Company watched this rising tide of condemnation, knowing full well that for decades the firm’s consultants had been helping the biggest tobacco companies sell more cigarettes. It was handled in typical McKinsey fashion—in secret. McKinsey’s name did not figure in the congressional hearings on tobacco, or in two major books totaling fourteen hundred pages, or in media investigations of the industry.

But the report also did something else: it foreshadowed the industry’s transformation from selling a largely agricultural product into one that scientifically engineered cigarettes through chemistry, nicotine manipulation, and smoke analysis. McKinsey cited, for example, the introduction of “reconstituted tobacco,” a process that turns tobacco scraps into paper-like sheets, which are then chopped up and added to the cigarette. Along the way, nicotine is removed with other substances. But, significantly, nicotine is later added to achieve the desired nicotine content.

The firm also lapsed into well-worn McKinsey-speak, offering to dip into its “robust tool kit of innovative ideas,” including an unexplained “killer idea approach,” a phrase either ill-advised or perfect for a cigarette company.

A full ten years after the court’s devastating takedown of the industry, McKinsey was still trying to help Philip Morris, now called Altria, to sell more cigarettes, according to internal company documents. “We are one team, working side-by-side,” McKinsey said in a business proposal. As a tobacco teammate, McKinsey expressed its “deep commitment” to deliver “a pragmatic, actionable loyalty program that works for Altria”—in other words, a program that rewards customers for buying more of their cigarettes, including the company’s iconic Marlboro brand.

McKinsey is also a teammate of the FDA, which since 2009 has had the authority to regulate tobacco products, including Altria. In other words, McKinsey plays both offense and defense, a dubious practice that has long remained secret. Since 2009, the FDA has awarded McKinsey more than $11 million for advice on regulating tobacco and for organizing the FDA office that includes tobacco regulation. During much of that time, McKinsey also consulted for the world’s biggest cigarette companies without disclosing this potential conflict of interest to the FDA, two senior former officials of that agency said.

As of 2019, McKinsey’s tobacco clients included Altria, Philip Morris International, Imperial Tobacco Group, British American Tobacco, and Japan Tobacco Inc. For Altria alone, McKinsey billed more than $30 million in 2018 and 2019. Serving the regulator and the regulated has been part an...

“We have served the FDA on over 30 initiatives,” McKinsey wrote in winning $1.1 million in contracts to advise the agency’s Center for Tobacco Products. McKinsey’s tasks included “risk identification and mitigation” as well as “influencing the behaviors, opinions, and practices that are contrary to the goals and object...

It wasn’t until 2015 that a new product solved the technical problems and in the process transformed the industry. It was called Juul. With a sleek design, and a battery that could be recharged in a computer portal, Juul became known as the iPhone of vaping. This high-tech product appealed to millennials and even younger potential customers. It was also powerful, delivering some of the highest nicotine yields in the industry—the equivalent of twenty cigarettes. As a bonus, the nicotine taste could be masked in fruity, child-appealing flavors. Its small size made it easy to hide from parents and teachers, and unlike cigarettes it left no telltale smell of smoke on their clothes.

Asked whether McKinsey worked on FDA issues, an employee with direct knowledge of these meetings replied: “Oh my God, McKinsey helped JUUL write their FDA submission—dead serious.” Pulido in his deposition confirmed that McKinsey helped prepare Juul’s response to the FDA’s inquiry into the company’s marketing practices.

McKinsey wrote that drug companies could fix the problem simply by doing a better job of analyzing prescription data. “When a patient fills a prescription, the order is stored in a database that can be matched for drug, producer, and physician,” the firm explained. This information could then 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.” It also allowed companies to identify high-performing sales reps and reward them.

The article did not go unnoticed. One predatory drug company, Purdue Pharma, apparently liked McKinsey’s ideas. From 2004 to 2019, Purdue 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.

OxyContin had first hit the stores in 1996. Because the drug could continuously treat severe pain, patients were now able to sleep through the night with a low risk of addiction, the company said. Both claims were soon revealed to be overstated or false. Some patients found that the drug, a powerful opioid, stopped working sooner than advertised, prompting them to take more of it. Purdue also started offering OxyContin in higher doses, increasing the risk of addiction.

By unlocking the power of data analysis to find doctors most likely to prescribe the opioid, Purdue had created a monster that would tear holes through families, schools, and communities. Many died. Reputations were ruined.

In the end, the casualties included Elling and his colleague Arnab Ghatak, a medical doctor—both fired by McKinsey after internal records showed they had discussed purging records to hide the firm’s involvement. The consultancy, which for decades had mostly kept its name out of the news, suddenly found it on the front pages of America’s newspapers, leaving an ugly and lasting reputational scar. To settle government investigations into its role in helping Purdue “turbocharge” opioid sales when thousands of people were dying of overdoses, the firm agreed to pay more than $600 million even as it denied any wrongdoing.

Looking back, it is easy to see how this tragedy unfolded. The FDA approved OxyContin without a proper review. Purdue exaggerated its benefit and downplayed its risk. The drugmaker bought doctor loyalty by hosting more than forty pain management training conferences, some at warm-weather resorts. Upwards of five thousand physicians, pharmacists, and nurses attended these all-expense-paid meetings where Purdue recruited and trained them to speak on matters important to the company, according to the American Journal of Public Health.

McKinsey helped J&J sell its signature opioid, a narcotic patch called Duragesic. In PowerPoint slides, McKinsey recommended that J&J target “high abuse-risk patients (eg males under 40)” and move physicians who were “stuck” in prescribing less potent opioids into prescribing stronger formulations. Another slide asked, “Are we properly targeting and influencing prescription behavior in pain clinics?”

At least twenty-four other partners consulted for Purdue. To have seven partners on the same contract, in addition to a support staff, signaled this wasn’t a rogue unit flying under the radar of the firm’s risk managers. The size and duration of the job guaranteed the firm steady revenue, not something the higher-ups would be inclined to disrupt.

To boost sales amid the strengthening opioid epidemic, McKinsey had to cook up radical new ideas. One suggestion was to promote OxyContin as a drug that gave patients “freedom” and “peace of mind,” along with the “best possible chance to live a full and active life.” OxyContin could also reduce stress, making patients more optimistic and less isolated, McKinsey said, a suggestion health officials called ludicrous.

At a Fort Wayne pain clinic, Dr. Michael Cozzi wrote more opioid scripts than any doctor in the state, eventually leading the state to suspend his medical license. Seeing up to 120 patients per day, Cozzi wrote sixty-four thousand prescriptions for controlled substances in two years. Of those, almost three million dosage units were for oxycodone, the opioid and main ingredient in OxyContin. When patients didn’t have cash, Cozzi accepted guns as payment. In one month, he prescribed controlled substances for 1,700 patients.

The worst access problems were at retail pharmacies, especially Walgreens, which had abruptly changed policies after admitting it broke the law by not properly monitoring prescriptions. The drugstore chain’s new safeguards flagged suspicious patients and imposed dose limits.

McKinsey recommended a counterattack. The firm suggested lobbying Walgreens leaders “to loosen up.” The most audacious recommendation was to create an alternative drug delivery system. The plan, McKinsey said, was to deliver OxyContin directly to patients through mail-order pharmacies to circumvent retail pharmacy restrictions on high-dose, suspicious prescriptions.

The most important takeaway from McKinsey’s July 2013 analysis was this: while drugstores and law enforcement officials were trying to limit how much OxyContin was coursing through the nation’s bloodstream, McKinsey was doing just the opposite, even suggesting ways to get around those safety measures.

Then, a little more than a week after McKinsey suggested ways to boost sales of OxyContin, the FDA—the agency most responsible for ensuring the safety of the country’s drug supply—rewarded McKinsey with a $2.6 million consulting contract with the Center for Drug Evaluation and Research, which regulates prescription and generic drugs, including OxyContin. The FDA contract called for McKinsey to “work with the office leadership, the program managers, and other key personnel to design, develop, and implement an operating model that ensures good communication both internally and externally.”

In the following weeks, McKinsey rolled out ever-stronger recommendations to keep the OxyContin pipeline flowing, such as targeting the heaviest prescribers, sharply increasing prescriber visits by sales reps, using patient advocacy groups to push back against efforts to limit “appropriate” access, accelerating efforts to set up an...

In 2017, McKinsey made a suggestion that stunned the health-care community when it later became public. The firm thought Purdue should consider giving distributors a rebate for every OxyContin overdose attributable to pills they sold. As a guide, McKinsey estimated how many customers of these companies might overdose. It projected that in 2019, for example, 2,484 CVS customers would either overdose or develop an opioid use disorder. A rebate of $14,810 per “event” meant that Purdue would pay CVS $36.8 million that year. CVS is also one of McKinsey’s biggest clients. McKinsey said that Purdue never implemented the rebate program.

When McKinsey arrived, Gordian explained, Purdue was facing “an unstable and challenging situation.” Fortunately for the drug company, McKinsey came to the rescue. “Through a series of efforts, we secured the future of the crucial OxyContin franchise” (italics added).

Doubtful she’d put that on her résumé now.

Other embarrassing documents surfaced as government investigators closed in, including this email that Elling sent on July 4, 2018, to another senior partner on the Purdue case, Dr. Ghatak: “It probably makes sense to have a quick conversation with the risk committee to see if we should be doing anything other than eliminating all our documents and emails. Suspect not but as things get tougher there someone might turn to us.”

McKinsey fired both men without specifying a reason, except to say they violated the firm’s professional standards.

Purdue is not solely to blame for the opioid epidemic. Doctors overprescribed OxyContin, pharmacists collected bonuses for filling prescriptions they shouldn’t have, the FDA and DEA allowed the epidemic to take shape, and lawmakers failed to enact laws to safeguard the public.

A New York Times headline offered this harsh judgment: “As Tens of Thousands Died, F.D.A. Failed to Police Opioids.” The agency was supposed to oversee a program that required the makers of OxyContin and other long-acting opioids to finance the training of physicians on their safe use and then evaluate whether the program worked. But the FDA dropped the ball, a medical study concluded.

Here again McKinsey’s dual role as an adviser to the regulated and the regulator came into play. In 2011, the FDA awarded McKinsey a $1.4 million contract to reorganize the office overseeing the flawed programs that were the focus of the study.

Informed that McKinsey had consulted for the FDA while advising Purdue, Dr. Andrew Kolodny, a senior scientist and co-director of opioid policy research at Brandeis University, expressed surprise. “It is a very obvious conflict of interest,” he said in an interview. “That never should have been allowed, never should have happened.”

At least seventeen of the contracts awarded to McKinsey by the FDA between 2008 and 2021—worth more than $48 million—called for the firm to work with the Center for Drug Evaluation and Research, the letter said. That division was responsible for approving certain drugs, including prescription opioids.

In 2010 and 2011, the senators noted, the FDA had awarded more than $2.4 million in contracts to McKinsey to design a system called “track and trace” to enhance the agency’s ability to identify drugs harmful to consumers. Those contracts “strongly suggest that McKinsey, while representing the FDA, was actively engaging with its private-sector clients that were the targets of this new regulatory process—an obvious conflict of interest,” the letter said.

McKinsey’s ties to federal health officials went deeper than the senators realized. In March 2022, New York Times reporters were the first journalists to obtain a new cache of McKinsey documents that showed how the firm quietly courted the man who became the nation’s most influential heal...

“I’d really value sitting with you guys and talking through ideas you may have and advice on how to look at and for opportunities,” Azar told Elling in an email.

“Thanks guys,” Azar wrote to Elling. “Very grateful for all your help. Let me get my sea legs over there and we can chat about the practice and connection to HHS.”

A spokesman for Azar denied that McKinsey helped him get the HHS job.

Edstrom clicked play, and a slide popped up titled “Turning a coal mine into a diamond in 6 months.” Set to peppy music, the video, since taken down, describes a recent McKinsey job for what appeared to be an Asian client that resulted in a coal mine increasing production by 26 percent, he said. Despite the global climate crisis, despite the fact that burning coal for power contributes nearly a third of energy-related carbon emissions, someone at McKinsey thought this work was praiseworthy.

Edstrom questioned his superiors about the disconnect between McKinsey’s public statements about curbing carbon emissions and its work with coal companies. In response, he was told, “If we don’t serve coal clients, BCG [Boston Consulting Group] will.”

“My short time at the Firm,” he wrote, “has shown me how much impact McKinsey can achieve in a short amount of time. I’m immensely proud of having played a very small part in that. However, creating impact is not an absolute good.” And doing good work, he added, doesn’t equate to doing good. “I believe it’s time for McKinsey to take precedent-setting action around client selection. As an organisation, McKinsey seems to talk a lot about values and principles without taking a valued or principled stand for much of anything.”

Then, to make sure his message wasn’t lost, he used words rarely directed at McKinsey’s leaders. “In my mind McKinsey is an amoral institution.” He said McKinsey regularly took on clients who brought harm to others. “There are many cases where I believe this causes detriment to society, McKinsey’s reputation, and the planet.”

Since 2010, McKinsey has worked for at least forty-three of the hundred companies that have pumped the most carbon dioxide into the atmosphere since 1965, based on a list of polluters compiled by the Climate Accountability Institute, a nonprofit that raises awareness about how corporations are contributing to climate change. Those forty-three companies, when accounting for the customers who use their products, were responsible for more than 36 percent of the planet’s greenhouse gas emissions from fossil fuels in 2018.

One of the writers pointed out that Sternfels was making a straw-man argument: they were asking not that McKinsey abandon these clients but rather that the firm disclose the total carbon emissions from these clients and that it focus on helping them cut those emissions. Sternfels did not address the fact that McKinsey made many of these companies browner, not greener, and that they brought in hundreds of millions of dollars for the firm.

Aldridge eventually sued Allstate, alleging that the insurer acted in bad faith by not paying Deer’s claim. Only then did his lawyers make an important discovery: a management consulting firm, McKinsey & Company, had been advising Allstate through PowerPoint slides on how to save money on claims. So they asked Allstate to produce the slides. After Allstate refused, the judge in the case, Michael Manners, ordered Allstate to turn them over.

Allstate refused. Judge Manners found Allstate in contempt of court and fined the company $25,000 a day until it complied with his order. Allstate still refused. In late 2007, the Missouri Supreme Court followed up by also ordering the insurer to produce the slides. Again the insurer declined, and by the middle of 2008, Allstate had run up more than $7 million in fines. Manners later said he had never seen anything like it in nearly thirteen years on the bench.