Pharma’s addiction to McKinsey

The top executive at McKinsey & Company appeared before Congress to answer for the consulting firm’s role in fanning the opioid crisis and came under intense criticism from lawmakers. One likened the firm’s earnings from advising Purdue Pharma and other pharmaceutical companies to “blood money” from drug traffickers. Yet, pharma continues to be aligned with MBA spreadsheet consulting.

I couldn’t believe what I heard during a McKinsey report on a pharma company’s oncology drug. They recommended that the company increase the drug’s price substantially even though the brand’s research showed that Oncologists would stop using the drug if the price increased. They followed McKinsey’s advice, and the VP of sales questioned why volume had dropped so much.

McKinsey typically hires young MBAs right out of good schools. But these MBAs have no experience in working within pharma. A recent study looked at MBA’s impact on business. They found that MBAs increased returns on assets five years after their appointment, But it wasn’t because they boosted sales, ratcheted up investments, or raised productivity. Rather, the higher returns result from suppressing workers’ wages, which fall by 6%. In short, listening to MBA consultants seems to boost shareholder value by slicing the pie in specific ways, not by making the pie bigger.

McKinsey had worked with Purdue, Johnson & Johnson, and other opioid makers to identify doctors who were heavy prescribers of painkillers, resulting in highly addictive drugs finding their way to some of the most vulnerable people in America. The work for Purdue began in 2004 and continued for 15 years as opioid-related deaths surged.

McKinsey stopped advising opioid manufacturers in 2019 and agreed to pay about $600 million to settle investigations by state attorneys general into its role in helping “turbocharge” opioid sales. The firm, which did not admit wrongdoing, was barred from taking on such work.

In one exchange, Rashida Tlaib, a Michigan Democrat, asked Mr. Sternfels why a McKinsey consultant placed a smiley face in an email questioning whether high-prescribing doctors would even notice new F.D.A. rules requiring tougher language for painkiller labels.

One has to wonder why pharma would continue to use McKinsey. The consultants that Biogen hired no doubt recommended massive layoffs after the failure of their Alzheimer’s drug. Still, they said nothing about the CEO, who will take home over $18 million in compensation, or the fact that the drug should never have been submitted to the FDA without a lot more data.

Will MBA spreadsheet marketers sink pharma more?