In what may be the beginning of a wave of lawsuits filed by city and county governments across the state and country, Pembroke Pines, a suburb of Miami, filed a class action lawsuit against McKinsey & Company, a global consulting firm that worked to “turbocharge” sales of the opioids on behalf of Purdue Pharma. The lawsuit alleges that McKinsey’s actions helped contribute to an addiction epidemic that devastated the country and caused more than 400,000 deaths.
To date, Pembroke Pines is the only local Florida government to take legal action against McKinsey.
The timing of the Pembroke Pines lawsuit is interesting because it was filed February 5th, the day after a nationwide settlement for $573 million, between McKinsey & Co. and attorneys general from 47 states, including Florida, the District of Columbia and five U.S. territories. In that settlement, Florida will receive more than $40 million. The money will be used to abate problems caused by opioid abuse in Florida.
It’s not clear how much of the state settlement money would go towards local government mitigation of the opioid epidemic, if any.
The multi-state settlement arose out of lawsuit over marketing collaboration with Purdue Pharma in which McKinsey was allegedly tasked with maximizing profits from its opioid products, including targeting high-volume opioid prescribers, using specific messaging to get physicians to prescribe more OxyContin to more patients and circumventing pharmacy restrictions to deliver high-dose prescriptions.
“McKinsey’s method of aggressive marketing of opioids to prescribers has demonstrably exacerbated the opioid crisis,” according to the class action filed in Florida federal court. Those marketing efforts tripled OxyContin sales nationally.
But Pembroke Pines’ suit may just be one of the first of many filed by local governments. A report published by Law 360 said “There are early signs that a wave could be building. Cities, counties and at least one Native American tribe have recently filed similar suits against McKinsey in New York, Illinois, Florida, West Virginia and Oklahoma, including some cases filed prior to the nationwide settlement, according to state and federal court records.”
The less than $600 million settlement with the states was heralded as wholly inadequate by many following the case. In the LawSuit 360 story, Napoli Shkolnik PLLC partner Hunter Shkolnik, whose firm represents several objecting New York cities and counties, called the nine-figure deal “a joke” and said that McKinsey should pay closer to $2 billion.
In an Orlando Sentinel opinion editorial, Central Florida residents Brandy Fulghum and Della Wiggins, who each lost a son to opioid overdose, wrote, “Responsibility in creating this nightmare cannot be erased with a check.”
“This (the $573 million settlement) is a trivial amount when compared to what the company profited at the expense of lives and is just a drop in the bucket when it comes to properly addressing the needs of those most affected by their actions.”
Evidently, the City of Pembroke Pines agreed, although its mayor, Frank Ortis, declined to comment for this story.
Attorneys for Pembroke Pines said in the lawsuit that “McKinsey has deliberately engaged in significant acts and omissions within the City of Pembroke Pines … that has injured its residents. (McKinsey) purposefully directed their activities in the City of Pembroke Pines … and the claims arise out of those activities.”
The lawsuit said McKinsey’s “unconscionable, unfair, or deceptive acts or practices … are immoral, unethical, oppressive, and unscrupulous, as well as malicious, wanton, and manifesting of ill will, and they caused substantial injury to (the City of Pembroke Pines)” causing “irreparable injury.”
The Capitolist reached out to the Florida’s Attorney General Ashley Moody’s office to determine if Moody believed Pembrook Pines should seek damages from McKinsey in light of the AG’s settlement and if she believed the initial settlement negotiated with McKinsey on behalf of the state of Florida is adequate.
Her office responded, “It would not appropriate for us to comment on other parties’ pending litigation. Florida cities and counties have their own counsel to independently advise them on whether to bring litigation. We believe that the settlement achieved by almost every state in the nation and McKinsey was and is an adequate settlement of the claims that the State of Florida had. Under the settlement, Florida obtained millions of dollars that it will be able to utilize this year to help abate the epidemic, which is claiming nearly 17 lives a day.”
But to add insult to injury, reports are now surfacing that McKinsey may now profit off of treating addicts, and be paid by the very money awarded in the settlement.
NBC News reported, “McKinsey’s wholly owned hedge fund affiliate, MIO Partners, holds indirect stakes in addiction treatment centers and a maker of overdose treatments.
“Because most of the money to be paid by McKinsey will go to state programs funding addiction treatment centers and recovery services, the deal may allow a McKinsey hedge fund affiliate to generate investment gains, an NBC News investigation has found. That’s because the firm’s wholly owned hedge fund affiliate, called MIO Partners, holds indirect stakes in addiction treatment centers and a maker of overdose treatment products.
“The MIO investment records … show that MIO, which is run on behalf of current and former McKinsey employees, invested in companies that benefited during the rise of the opioid crisis and now holds stakes in companies that could profit from remediation efforts in the aftermath.”
In the article, a McKinsey spokesman said it is “false and absurd” to suggest that the firm will benefit financially from the big state settlement.
“McKinsey has no visibility into or control of how settlement money will be used by the states,” he said. In addition, he said, the hedge fund and the firm’s consulting business are “operationally separate,” and the firm’s past stakes in opioid makers through MIO were taken by outside investment managers whose decisions McKinsey doesn’t direct or control.”
McKinsey has made it clear they intend to fight the local government lawsuits. “The recent settlements with state attorneys general provided us an opportunity to be part of the solution to the opioid epidemic and contained no admission of wrongdoing or liability,” a company spokesperson told Law360.com. “We will defend ourselves against cases brought by the plaintiffs bar that are designed to double-dip on the state settlements.”