Rep overtime-pay issue will be argued at the Supreme Court next week

While most of the US healthcare system will be watching for the Supreme Court decision on healthcare reform expected in June, one sector—pharma sales and marketing—will also be watching for a decision on whether pharma reps are entitled to overtime pay. The Supreme Court will be hearing arguments on Christopher v. SmithKline Beecham on Apr. 16, and is said to be prepared to provide its decision in June in that case as well. At stake: whether the existing definition of “outside salesmen” exempts reps from overtime pay, and whether the US Dept. of Labor’s interpretation of the Fair Labor Standards Act is appropriately framed.

There have been numerous cases filed by reps (especially as the working ranks have dwindled over the past few years) seeking additional compensation. A case filed against Novartis was settled for $99 million last month, and other cases are filed against AstraZeneca, Abbott Labs, Sanofi and Pfizer, according to JacksonWhite, a Mesa, AZ law firm that filed part of what is now the Christopher case.

The legal details are interesting: By law, only physicians are authorized to prescribe the sales product—a drug—to the “ultimate user”—a patient. By the Dept. of Labor interpretation, “outside salesmen” are those that have considerable control over their work, and are actively involved in price negotiations--and are exempt from overtime pay rules. But by regulation, reps cannot sell samples or discuss pricing with physicians, so reps have argued that they are not outside salesmen. All this has occurred in a backdrop of increased accountability of reps to their managers as to who they see and what they are permitted to discuss, per recent guidelines of the rep function. The rep briefs have argued that if they have so little individual discretion, they are by default hourly employees who happen to be working outside their company’s facilities.

How the Supreme Court rules is, of course, conjectural at this point. But if it rules in favor of the reps, one can expect a pretty thorough revamping of rep duties and compensation (which is generally a combination of salary and incentive). Ironically, this would occur at a time when the industry is trying to position reps more as trusted advisors to physicians, and less as meet-and-greet salespeople handing out sample products.