McKinsey Opened a Door in Its Firewall Between Pharma Clients and Regulators

Jeff Smith, a partner with the influential consulting firm McKinsey & Company, accepted a highly sensitive assignment in December 2017. The opioid manufacturer Purdue Pharma, beleaguered and in financial trouble, wanted to revamp its business, and an executive there sought out Dr. Smith.

Over the following weeks, he traveled to Purdue’s offices in Stamford, Conn., meeting and dining with executives. His team reviewed business plans and evaluated new drugs that Purdue hoped would help move the company beyond the turmoil associated with OxyContin, its addictive painkiller that medical experts say helped to spark the opioid epidemic.

But the corporate reorganization was not Dr. Smith’s only assignment at the time. He was also helping the Food and Drug Administration overhaul its office that approves new drugs — the same office that would determine the regulatory fate of Purdue’s new line of proposed products.

The story of Dr. Smith’s simultaneous work for Purdue and its federal regulator is told through previously undisclosed internal McKinsey records that more broadly call into question the consulting firm’s firewall between its work for private companies and for the authorities that oversee them.

A review by The New York Times of thousands of internal McKinsey documents found that the firm repeatedly allowed employees who served pharmaceutical companies, including opioid makers, to also consult for the F.D.A., the drug industry’s primary government regulator.

And, the documents show, McKinsey touted that inside access in pitches to private clients. In an email in 2014 to Purdue’s chief executive, a McKinsey consultant highlighted the firm’s work for the F.D.A. and stressed “who we know and what we know.”

The documents reviewed by The Times were obtained by the House Committee on Oversight and Reform, which on Wednesday released initial results from its investigation into McKinsey’s work with the federal government, and by a coalition of state attorneys general as part of a 2021 settlement resolving an investigation into the firm’s work with Purdue. The records detail the firm’s work for Purdue and other opioid manufacturers over a 15-year period, from 2004 to 2019.

Since 2010, at least 22 McKinsey consultants have worked for both Purdue and the F.D.A., some at the same time, according to the committee’s 53-page report drafted by its Democratic majority. The firm provided no evidence to the committee that it had disclosed the potential conflicts of interest as required under federal contracting rules — an “apparent violation,” the report said.

McKinsey also allowed employees advising Purdue to help shape materials that were intended for government officials and agencies, including a memo in 2018 prepared for Alex M. Azar II, then the incoming secretary of health and human Services under President Donald J. Trump. References to the severity of the opioid crisis in a draft version of the memo, the documents show, were cut before it was sent to Mr. Azar.

“Today’s report shows that at the same time the F.D.A. was relying on McKinsey’s advice to ensure drug safety and protect American lives, the firm was also being paid by the very companies fueling the deadly opioid epidemic to help them avoid tougher regulation of these dangerous drugs,” Representative Carolyn Maloney, the New York Democrat who chairs the committee, said in a statement.

McKinsey says that its consultants are forbidden to share confidential information or discuss their work with clients that have competing interests, and in a statement a spokesman disputed that there was a disclosure requirement related to the work it did for the F.D.A.

“Since McKinsey has not advised the F.D.A. on specific regulatory decisions or on specific pharmaceutical products, our consulting engagements with pharmaceutical companies did not create a conflict of interest with McKinsey’s consulting work for the F.D.A.,” the spokesman said. “Because there was not a conflict of interest, there was not a requirement for a disclosure.”

Dr. Smith, who this year was promoted to senior partner, did not respond to phone calls or emails seeking comment. One former McKinsey consultant familiar with his work said Dr. Smith’s assignment at the F.D.A. was “very high-level project management” and could not have helped Purdue. The former consultant spoke on the condition of anonymity because he was subject to a nondisclosure agreement.

For nearly a century, McKinsey has taken on clients in the same industries, with internal rules meant to prevent trade secrets from leaking to competitors. As McKinsey expanded to 67 countries, serving many of the world’s biggest companies, it also began to mine a new source of revenue: governments, including in the United States, Europe and Asia. It wasn’t until McKinsey began to work extensively with federal agencies that potential conflicts of interest drew the attention of Congress.

A bipartisan group of lawmakers last month introduced legislation aimed at preventing conflicts of interest in federal contracting, citing McKinsey’s experience with Purdue and the F.D.A. And last week, seven Democratic senators called on the inspector general of the Department of Health and Human Services to investigate what they described as McKinsey’s failure to disclose its work with opioid makers even as it consulted for the F.D.A. “on issues related to opioids.”

McKinsey’s own guidelines on dealing with conflicts of interest for government work, which are based on federal rules, state that “even the appearance” of a conflict compels its consultants to make a report to the government client’s contracting officer.

Ms. Maloney said she planned to hold a hearing and summon a top McKinsey partner to testify about the documents obtained by the committee from the firm. The other documents will be made public as part of an agreement between McKinsey and the attorneys general, led by Massachusetts and Colorado.

In a statement, the F.D.A. said that the agency relies on its contractors to assess and report potential conflicts of interest. “The F.D.A.’s contracts with McKinsey were related to internal and process issues,” the agency said. “The contracts did not include work on specific drug products or product classes, including opioids.”

In one F.D.A. proposal, McKinsey did note that Dr. Smith had previously served an unnamed opioid manufacturer, and in its statement to The Times, the firm’s spokesman said it had “repeatedly made the agency aware of our industry experience and our colleagues’ expertise in the pharmaceutical industry.”

But the committee’s report criticized McKinsey’s disclosures as “isolated and vague” and not in accordance with the firm’s own policy. The F.D.A. has previously said it was unaware of McKinsey’s work for Purdue until 2021.

Cultivating a Friend in Trump’s Cabinet

The committee identified 37 F.D.A. projects staffed by McKinsey consultants who also worked for Purdue. Additional documents suggest that McKinsey’s work for the agency, including by Dr. Smith, was even more extensive.

Dr. Smith worked on more than 40 projects for the F.D.A. between 2007 and 2019, while also serving Purdue in at least a half-dozen initiatives — advising the drugmaker on interactions with the regulator and, in one case, helping secure approval of a new opioid product, according to the documents obtained by the attorneys general.

The documents also identify other McKinsey consultants who both worked with the F.D.A. and advised drugmakers on regulatory issues.

Navjot Singh, a partner, led more than 80 McKinsey projects at the agency between 2007 and 2019. Emails and presentations from that period show that he also worked on multiple projects for Purdue. The McKinsey team advising Purdue solicited his insight in an email discussing “F.D.A. issues,” and the firm in 2014 offered him to Purdue as an expert in “regulatory agencies.”

He did not respond to emails or phone calls seeking comment.

Several of McKinsey’s F.D.A. projects pertained directly to work the firm was doing for Purdue at the same time.

In 2011, the F.D.A. hired McKinsey to advise its office overseeing drug companies’ agency-approved plans to monitor the safety of potentially risky products such as opioids. Dr. Smith worked on the project while also advising Purdue on an effort that would, among other things, demonstrate whether OxyContin was meeting those requirements.

In 2016, while Dr. Smith advised the F.D.A. on its use of data for tracking drug safety, colleagues sought his counsel on how the firm might draw on that work with the agency to help Purdue.

The documents indicate multiple occasions when McKinsey promoted its connections with federal regulators when pitching its services to pharmaceutical clients.

“We serve the broadest range of stakeholders that matter for Purdue,” one consultant, Rob Rosiello, wrote in the 2014 email to Purdue’s chief executive. He added, “One client we can disclose is the F.D.A., who we have supported for over five years.”

Earlier, in a 2009 presentation offering its services to a pharmaceutical industry group, McKinsey wrote that it directly supported regulatory bodies “and as such have developed insights into the perspectives of the regulators themselves.”

More recently, McKinsey also sought to cultivate closer ties to Mr. Azar, who was nominated in November 2017 by Mr. Trump to be the nation’s top health official. McKinsey collected at least $400 million advising pharmaceutical companies in 2018 and 2019, according to its internal records.

The firm’s relationship with Mr. Azar began well before his appointment. In February 2017, Mr. Azar, who had left his job as president of the drugmaker Eli Lilly’s U.S. business, emailed Martin Elling, a senior partner who co-led the firm’s work with Purdue.

“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,” Mr. Azar wrote to Mr. Elling. Other emails show that Mr. Elling and others at McKinsey had scheduled a meeting with Mr. Azar at the firm’s Midtown Manhattan office on May 1, 2017.

Later, upon learning of Mr. Azar’s Senate confirmation in January 2018, Mr. Elling wrote to him: “One giant step! Congratulations.”

Mr. Azar replied: “Thanks guys. 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.”

The documents don’t explain the nature of the “help” provided to Mr. Azar by McKinsey. Mr. Azar declined to be interviewed but issued a statement asserting that McKinsey had “played no role in my appointment as secretary” and that, contrary to the email suggestion, he had had no meetings with McKinsey “as a follow-up to their notes of congratulations.”

The McKinsey spokesman said the firm was “not aware” that it played any role helping Mr. Azar get nominated for his cabinet post.

McKinsey consultants had begun drafting a detailed memo to Mr. Azar before his confirmation, the documents show, in which they outlined major issues he would face. One paragraph offered a blunt assessment of the continued severity of the opioid crisis. It said that two programs Mr. Azar would oversee as secretary — Medicare and Medicaid — were contributing to the problem by allowing opioids to be dispensed to people prone to abuse them and in doses that were too high.

But those references were deleted after a consultant working for Purdue, Arnab Ghatak, objected to them. In addition, heeding some of Mr. Ghatak’s suggestions, the final version added language that broadened responsibility for the crisis to include generic manufacturers and illicit heroin use.

The problem with inviting a consultant for Purdue to weigh in on the Azar memo wasn’t lost at the time on McKinsey’s managers, the documents show. Tom Latkovic, a McKinsey senior partner, said that conferring with Mr. Ghatak had been a mistake.

“His view is we shouldn’t say anything on topic to anyone,” Mr. Latkovic wrote in an email. “He told me the word ‘epidemic’ and/or ‘crisis’ are hyperbolic. That’s where he is coming from.”

Mr. Azar’s statement to The Times said that addressing the opioid crisis was among his top priorities as secretary. “I was the first Republican health secretary to declare that addiction is a disease, never a moral failing,” the statement said.

A former McKinsey partner, Paul Mango, served as Mr. Azar’s deputy chief of staff for policy. Both left the department at the end of the Trump administration.

‘These Guys Will Be Deposed’

The memo for Mr. Azar was not the only source of frustration for consultants at McKinsey working with government agencies and civic institutions to counter the opioid crisis.

In 2018, for example, Mr. Latkovic and his colleagues prepared publications with titles such as “Why We Need Bolder Action to Combat the Opioid Epidemic.” Drafts were sent for review to other McKinsey consultants serving pharmaceutical companies.

“We really want to make sure you are comfortable with the content, and that you don’t feel your respective clients would be concerned in any way,” one manager wrote when soliciting feedback from two consultants who had worked with opioid manufacturers.

Mr. Latkovic complained in an email that one colleague working with the drugmakers “waters down whatever I say.”

As Purdue’s legal troubles festered, McKinsey partners overseeing the firm’s work with the opioid maker appear to have taken steps to limit material that could be subpoenaed, according to the documents. In one text message exchange with Mr. Ghatak in May 2017, Laura Moran, a partner, said she would not email slide decks to Purdue but would instead provide printed copies.

“These guys will be deposed,” she wrote to Mr. Ghatak. “Best our emails are not sucked into it.”

In late August 2018, after Massachusetts and New York had sued Purdue over its marketing of opioid products, Mr. Elling wrote an email to himself that said “delete old pur documents from laptop.”

Mr. Elling and Mr. Ghatak were fired after The Times reported in 2020 that they had discussed purging documents from McKinsey’s work with Purdue. In February 2021, McKinsey agreed without admitting wrongdoing to pay about $600 million to settle state investigations into its role in helping “turbocharge” sales at opioid makers. Neither responded to emails or phone calls seeking comment. Ms. Moran could not be reached for comment.

When some of McKinsey’s work with Purdue was revealed by the news media in early 2019, a consultant named Sarah Nam reached out to Dr. Smith.

“I am still struggling to come to terms with how our practice’s broader work impacts public health,” she wrote. Apparently unaware of Dr. Smith’s work for Purdue, she continued, “I know you lead work in combating the opioid crisis with public health institutions and regulators (on the complete other side), and would love to get your thoughts.”

His reaction to the public disclosure of the firm’s work for Purdue had been quite different. After a colleague suggested they talk through what to say to the F.D.A., Dr. Smith replied, “Yes, let’s discuss how to manage this.”

In the three years since the firm’s work with Purdue was made public, McKinsey has taken steps to overhaul the way it selects clients, and has tripled its staff members who oversee compliance, risk management and professional standards, the McKinsey spokesman said in the statement.

“McKinsey will continue to take steps to strengthen our policies, professional standards, and our risk and governance processes to ensure our work is consistent with our values and the high expectations we set for ourselves,” the statement said.