This sounds like a blame shifting article. Sure McKinsey as a consulting company would advise its clients on how to do something / anything while staying within legal fringes.
But it was the pharmacy companies that wanted to price gouge while avoiding any kind of scrutiny . So they roped in McKinsey for how to best do that without attracting any kind of government attention and McKinsey advised them on that.
The author blames McKinsey for gaming the system . But what is the system - it is just a list of laws and regulations written by Congress . If Congress finds any kind of gamification-it should change the laws accordingly.
The biggest reason for higher prices for drugs for Medicare was the prescription drug bill passed under the Bush administration that prevented the government from using its buying power to negotiate prices. I understand that affects only Medicare patients but that became the springboard for other opportunistic pricing employed by all drug companies.
Also the age old practice of buying the patents of an old drug and hiking the price by 10000% or more ( as employed by Daraprim (Martin Shakreli) or numerous other companies )was not Mckinsey’s brainchild but rather the demand from the drug companies that McKinsey helped to materialize.
But what is the system - it is just a list of laws and regulations written by Congress
This attitude stinks, I’m sorry. “If it’s legal, it’s ethical” is no way to run a society.
I had my neighbour on my lawn regarding a minor (cat-related) dispute the other week. He brought his kid with him, trying to show him how to behave I guess. At one point he said “well it’s not illegal” and I thought, wow, there you have it. This guy, 12-year-old in tow, thinks that actions are de facto fine if they’re “not illegal”.
I should have offered to take him to the local brothel. He’s married, I have a long-term partner. But that’s not illegal so I’m sure they would have been A-OK with it.
The author blames McKinsey for gaming the system . But what is the system - it is just a list of laws and regulations written by Congress . If Congress finds any kind of gamification-it should change the laws accordingly.
This is such a crap concept of business ethics. You expect Congress to be everyone's mommy and daddy and tell them right from wrong? Have you seen how Congress operates?
If you do wrong, don't act all surprised and aggrieved if people blame you. It doesn't matter if the authorities happened to have a law on the books at the time. There's more to life than pursuing maximum profit.
I mean there are plenty of people who deserve blame here, the pharma companies for doing this shit, congress for enabling it and McKinsey for consulting on it, but really I think that’s the order the blame flows in.
"Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other." - John Adams.
We will find that the more we lose our morality, the less we are able to abide in freedom, and the more we will require an authoritarian state to control ourselves.
Responsibility for an outcome is not zero sum. The pharma companies and McKinsey can both be morally responsible. As can Congress, lobbyists, etc.
As somebody who has done consulting, it's perfectly possible to do it in a way that isn't totally amoral like "how to do something / anything while staying within legal fringes" indicates. As an example, read through the IEEE/ACM code of ethics for software engineering: https://ethics.acm.org/code-of-ethics/software-engineering-c...
Big chunks of that are applicable to consulting too. That McKinsey doesn't care is a choice they made, and one we can hold them accountable for.
So they roped in McKinsey for how to best do that without attracting any kind of government attention and McKinsey advised them on that.
My emphasis.
From thefreedictionary.com[1]:
rope in. To persuade, entice, or enlist someone to do or participate in something. A noun or pronoun can be used between "rope" and "in." I really didn't want to sing in the talent show, but Janet roped me in.
Notice that all the examples there involve either someone who would rather not get involved in the given activity, or a person or animal that lacks the ability to avoid being "roped."
In conclusion: have you ever considered working for McKinsey? If not, you should!
The author blames McKinsey for gaming the system . But what is the system - it is just a list of laws and regulations written by Congress . If Congress finds any kind of gamification-it should change the laws accordingly.
I support this view but I've had a lot of difficulty arguing it. It's similar to tax loopholes- accountants find legal, even if unintended ways to avoid or reduce tax. Government can either close the loophole or let it stand, but the point is that accountants are economically incentivized to find flaws in regulations that can be identified and corrected, so the laws get better. It's a form of arbitrage, and is a feature of a well functioning regulatory system.
Another example is what all the electricity companies were doing in California when deregulation happened. All the Enron tactics of sending power out of state and back in, or bringing down generators to game the prices (this is distinct from the accounting fraud the company was known for, was generally legal, and done by all energy players). The root cause was poor regulation, and energy companies were identifying and demonstrating these flaws in a way that could only happen when there is money to be made. The government response should have been to quickly close the loopholes, but from what I remember, there was a lot of blaming the companies.
It's the same here. People would rather blame an evil company because they are a convenient scapegoat than actually understand the root of the problem.
I agree too, for me it sort of boils down to don't hate the player, hate the game, and congress are the ones that make the game's rules. The game right now rewards unscrupulous behavior, so it makes sense that successful companies "get away" with doing it. As demonstrated, simply player hating doesn't do much.
Nah. Was regulation inadequate to keep up with Enron's level of sociopathy? Sure. Should we have had better regulation? Also yes. Does that in any way excuse Enron's behavior? Not at all, I say.
But let's see if you're sincere in your principles. If I can find a way to get away with murdering you, is that ok? What if I turn a profit doing it by, say, taking all your assets? After all, it's kinda ridiculous how fragile the human body is. I'm practically doing you (and your next of kin) a favor by demonstrating how dangerous it is to have major arteries and veins so exposed. And I could also surface issues with the legal system; we know that the homicide clearance rate is only 55%, [1] so by your logic I'm helping the laws get better by giving lawmakers more data to work with.
I of course wouldn't do this, because I think one shouldn't do harmful things just because one can get away with it. But if you truly believe in this, just post your name and address, and I'm sure some public-spirited person will take you up on your offer of a little bit of for-profit, blame-free murder.
The biggest reason for higher prices for drugs for Medicare was the prescription drug bill passed under the Bush administration that prevented the government from using its buying power to negotiate prices. I understand that affects only Medicare patients but that became the springboard for other opportunistic pricing employed by all drug companies.
It does no good to always blame those government people for current circumstances. They are just riding on the wave of money like everyone else. The reason for high drug prices is that people continue to pay those prices. Drugs sold in other countries are less expensive than the same drugs sold in the US. Pharma gets paid high prices, because people pay them those amounts.
You guys are asking a lot of McKinsey. Asking that org to be a moral and ethical part of society is like asking a rake to be a shovel. It doesn’t make any sense to the point of being unfair to the rake.
It seems that if you use the AITA way of looking at things you can just assign it to ESH (Everyone sucks here).
McKinsey is awful for helping enable an immoral business practice. The pharma companies engaging in it are also practicing an immoral business practice. And Congress is failing in its duties to reign in the excesses of American capitalism.
The point isn't that McKinsey is solely to blame but that a hugely powerful consultancy firm that expounds upon their higher morals at any opportunity was recommending something that was, at the very least, morally bankrupt (and btw, it was also financially catastrophic for any firm that took that advice in the end).
A great example is Valeant...long forgotten today but the stock went from $10 to $250 to $10, it was a huge story at the time, and was in the news every day when their stock was at the peak. The guy who masterminded this actually worked at McKinsey as an outside consultant for Valeant before he became CEO. This was the McKinsey special strategy: jack up prices, reduce R&D spending, make acquisitions and repeat step 1 and 2 (ofc, there was accounting fraud and the CEO tried to make off with multiple billions...again, this guy was a very senior consultant and was one of the most greedy kleptomaniacs I have seen in corporate life...this is not a coincidence).
Also, this strategy was McKinsey's brainchild. I have seen this over and over where a consultancy firm gets known for their a certain strategy in a certain industry, and they sell it everywhere and it looks like they all just came up with it independently. This strategy was not common pre-Valeant to any great degree, Daraprim happened far after. It became huge because McKinsey were recommending it to clients.
Ironically, I have an almost identical story from another industry. In the early 2010s, some consultant (I never was able to find out from execs who, they referred to an NDA) suggested to housebuilders in the UK that they pull back on capex. These housebuilders controlled a good portion of the land that was available for planning permission in the UK, the industry is heavily consolidated so they control the market for new houses, the market was in massive shortage, and then house prices would go up. Right on cue, pretty much every major housebuilder announces within the space of a year that they are going to begin returning capital to shareholders...in a housing market that is in shortage by roughly 200k homes/year, and in which any housebuilder could have taken massive share in a free market. Either way, new house prices go through the roof (the govt also announces a subsidy program), margins are now 20% against the 5-10% previously, everyone is making out like bandits. That wouldn't have happened if the consultant didn't come along (because the only way it worked is if other housebuilders knew this consultant had been around the industry, and knew other firms would cut back on production too).
Consultants have an absolutely huge role in determining company strategy, and they do deserve blame if they recommend things that are unethical (the fortunate thing about US pharma is that politicians came down on these firms like a ton of bricks, this didn't happen in UK housing). They are totally unaccountable too because when you talk to management, they just refer to some faceless consultant who is pulling the strings...if you are a shareholder, what do you do? The CEO is the monkey, not the organ grinder but it is the CEO who is the public face (and ofc, the Board are totally uncommunicative about what is going on). It is a huge problem because, as happened in pharma, it ended up with lots of companies doing things that were legally questionable and incinerating massive amounts of capital (Valeant had something like $40bn in debt at the peak, and equity was worth near $100bn at peak). ESG investing becomes impossible because there is no governance.
Comments
This sounds like a blame shifting article. Sure McKinsey as a consulting company would advise its clients on how to do something / anything while staying within legal fringes.
But it was the pharmacy companies that wanted to price gouge while avoiding any kind of scrutiny . So they roped in McKinsey for how to best do that without attracting any kind of government attention and McKinsey advised them on that.
The author blames McKinsey for gaming the system . But what is the system - it is just a list of laws and regulations written by Congress . If Congress finds any kind of gamification-it should change the laws accordingly.
The biggest reason for higher prices for drugs for Medicare was the prescription drug bill passed under the Bush administration that prevented the government from using its buying power to negotiate prices. I understand that affects only Medicare patients but that became the springboard for other opportunistic pricing employed by all drug companies.
Also the age old practice of buying the patents of an old drug and hiking the price by 10000% or more ( as employed by Daraprim (Martin Shakreli) or numerous other companies )was not Mckinsey’s brainchild but rather the demand from the drug companies that McKinsey helped to materialize.
This attitude stinks, I’m sorry. “If it’s legal, it’s ethical” is no way to run a society.
I had my neighbour on my lawn regarding a minor (cat-related) dispute the other week. He brought his kid with him, trying to show him how to behave I guess. At one point he said “well it’s not illegal” and I thought, wow, there you have it. This guy, 12-year-old in tow, thinks that actions are de facto fine if they’re “not illegal”.
I should have offered to take him to the local brothel. He’s married, I have a long-term partner. But that’s not illegal so I’m sure they would have been A-OK with it.
This is such a crap concept of business ethics. You expect Congress to be everyone's mommy and daddy and tell them right from wrong? Have you seen how Congress operates?
If you do wrong, don't act all surprised and aggrieved if people blame you. It doesn't matter if the authorities happened to have a law on the books at the time. There's more to life than pursuing maximum profit.
I mean there are plenty of people who deserve blame here, the pharma companies for doing this shit, congress for enabling it and McKinsey for consulting on it, but really I think that’s the order the blame flows in.
"Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other." - John Adams.
We will find that the more we lose our morality, the less we are able to abide in freedom, and the more we will require an authoritarian state to control ourselves.
Good quote. Atheists might be right, but turns out a pretend panopticon has better value than a real one, or none, along every dimension.
Responsibility for an outcome is not zero sum. The pharma companies and McKinsey can both be morally responsible. As can Congress, lobbyists, etc.
As somebody who has done consulting, it's perfectly possible to do it in a way that isn't totally amoral like "how to do something / anything while staying within legal fringes" indicates. As an example, read through the IEEE/ACM code of ethics for software engineering: https://ethics.acm.org/code-of-ethics/software-engineering-c...
Big chunks of that are applicable to consulting too. That McKinsey doesn't care is a choice they made, and one we can hold them accountable for.
My emphasis.
From thefreedictionary.com[1]:
Notice that all the examples there involve either someone who would rather not get involved in the given activity, or a person or animal that lacks the ability to avoid being "roped."
In conclusion: have you ever considered working for McKinsey? If not, you should!
1: https://idioms.thefreedictionary.com/roped+in
Edit: clarification
I support this view but I've had a lot of difficulty arguing it. It's similar to tax loopholes- accountants find legal, even if unintended ways to avoid or reduce tax. Government can either close the loophole or let it stand, but the point is that accountants are economically incentivized to find flaws in regulations that can be identified and corrected, so the laws get better. It's a form of arbitrage, and is a feature of a well functioning regulatory system.
Another example is what all the electricity companies were doing in California when deregulation happened. All the Enron tactics of sending power out of state and back in, or bringing down generators to game the prices (this is distinct from the accounting fraud the company was known for, was generally legal, and done by all energy players). The root cause was poor regulation, and energy companies were identifying and demonstrating these flaws in a way that could only happen when there is money to be made. The government response should have been to quickly close the loopholes, but from what I remember, there was a lot of blaming the companies.
It's the same here. People would rather blame an evil company because they are a convenient scapegoat than actually understand the root of the problem.
I agree too, for me it sort of boils down to don't hate the player, hate the game, and congress are the ones that make the game's rules. The game right now rewards unscrupulous behavior, so it makes sense that successful companies "get away" with doing it. As demonstrated, simply player hating doesn't do much.
Nah. Was regulation inadequate to keep up with Enron's level of sociopathy? Sure. Should we have had better regulation? Also yes. Does that in any way excuse Enron's behavior? Not at all, I say.
But let's see if you're sincere in your principles. If I can find a way to get away with murdering you, is that ok? What if I turn a profit doing it by, say, taking all your assets? After all, it's kinda ridiculous how fragile the human body is. I'm practically doing you (and your next of kin) a favor by demonstrating how dangerous it is to have major arteries and veins so exposed. And I could also surface issues with the legal system; we know that the homicide clearance rate is only 55%, [1] so by your logic I'm helping the laws get better by giving lawmakers more data to work with.
I of course wouldn't do this, because I think one shouldn't do harmful things just because one can get away with it. But if you truly believe in this, just post your name and address, and I'm sure some public-spirited person will take you up on your offer of a little bit of for-profit, blame-free murder.
[1] https://www.statista.com/statistics/194213/crime-clearance-r...
And how are this laws and regulations made? By massive lobbying. So first they rig the game then play the game.
It does no good to always blame those government people for current circumstances. They are just riding on the wave of money like everyone else. The reason for high drug prices is that people continue to pay those prices. Drugs sold in other countries are less expensive than the same drugs sold in the US. Pharma gets paid high prices, because people pay them those amounts.
You guys are asking a lot of McKinsey. Asking that org to be a moral and ethical part of society is like asking a rake to be a shovel. It doesn’t make any sense to the point of being unfair to the rake.
It seems that if you use the AITA way of looking at things you can just assign it to ESH (Everyone sucks here).
McKinsey is awful for helping enable an immoral business practice. The pharma companies engaging in it are also practicing an immoral business practice. And Congress is failing in its duties to reign in the excesses of American capitalism.
The point isn't that McKinsey is solely to blame but that a hugely powerful consultancy firm that expounds upon their higher morals at any opportunity was recommending something that was, at the very least, morally bankrupt (and btw, it was also financially catastrophic for any firm that took that advice in the end).
A great example is Valeant...long forgotten today but the stock went from $10 to $250 to $10, it was a huge story at the time, and was in the news every day when their stock was at the peak. The guy who masterminded this actually worked at McKinsey as an outside consultant for Valeant before he became CEO. This was the McKinsey special strategy: jack up prices, reduce R&D spending, make acquisitions and repeat step 1 and 2 (ofc, there was accounting fraud and the CEO tried to make off with multiple billions...again, this guy was a very senior consultant and was one of the most greedy kleptomaniacs I have seen in corporate life...this is not a coincidence).
Also, this strategy was McKinsey's brainchild. I have seen this over and over where a consultancy firm gets known for their a certain strategy in a certain industry, and they sell it everywhere and it looks like they all just came up with it independently. This strategy was not common pre-Valeant to any great degree, Daraprim happened far after. It became huge because McKinsey were recommending it to clients.
Ironically, I have an almost identical story from another industry. In the early 2010s, some consultant (I never was able to find out from execs who, they referred to an NDA) suggested to housebuilders in the UK that they pull back on capex. These housebuilders controlled a good portion of the land that was available for planning permission in the UK, the industry is heavily consolidated so they control the market for new houses, the market was in massive shortage, and then house prices would go up. Right on cue, pretty much every major housebuilder announces within the space of a year that they are going to begin returning capital to shareholders...in a housing market that is in shortage by roughly 200k homes/year, and in which any housebuilder could have taken massive share in a free market. Either way, new house prices go through the roof (the govt also announces a subsidy program), margins are now 20% against the 5-10% previously, everyone is making out like bandits. That wouldn't have happened if the consultant didn't come along (because the only way it worked is if other housebuilders knew this consultant had been around the industry, and knew other firms would cut back on production too).
Consultants have an absolutely huge role in determining company strategy, and they do deserve blame if they recommend things that are unethical (the fortunate thing about US pharma is that politicians came down on these firms like a ton of bricks, this didn't happen in UK housing). They are totally unaccountable too because when you talk to management, they just refer to some faceless consultant who is pulling the strings...if you are a shareholder, what do you do? The CEO is the monkey, not the organ grinder but it is the CEO who is the public face (and ofc, the Board are totally uncommunicative about what is going on). It is a huge problem because, as happened in pharma, it ended up with lots of companies doing things that were legally questionable and incinerating massive amounts of capital (Valeant had something like $40bn in debt at the peak, and equity was worth near $100bn at peak). ESG investing becomes impossible because there is no governance.