Novartis Should Pay Overtime To Sales Reps: Judge
11 CommentsBy Ed Silverman // July 7th, 2010 // 7:11 am
In the latest victory for sales reps, a federal appeals court ruled Novartis reps are not exempt from overtime provisions of the Fair Labor Standards Act and, therefore, should be paid overtime. The same court also upheld a similar decision reached last year against Schering-Plough by a federal court, which denied a motion to dismiss a case brought against the drugmaker by some of its sales reps (see the rulings here and here).
The rulings are the latest in a highly contentious issue that has divided courts across the country and, some lawyers speculate, could eventually reach the US Supreme Court. Abbott reps won a similar battle last month (back story). Ironically, the decisions come at the same time that the pharmaceutical industry is accelerating plans to eliminate still more sales positions. A Pyrrhic victory, of sorts?
In any event, the FLSA’s overtime compensation requirement doesn’t apply to employees who work as outside salespeople, but the law does require employers to pay overtime for hours worked beyond 40 hours a week, unless a FLSA exemption applies. What are those exemptions? If an employee’s primary duty is to obtain orders or contracts (as defined by the statute) and regularly does so away from the employer’s place of business.
Drugmakers argue their sales reps are, indeed, outside salespeople who close sales because the primary customer is the physician. But last fall, the US Department of Labor added an unexpected twist to the debate by filing an amicus brief with a federal appeals court contending that a lower court was wrong to toss their lawsuit (see here). Some courts remain unconvinced. Last fall, a federal judge ruled in favor of Glaxo (see here).
In the Novartis case, which was brought by some 2,500 reps, the court agreed that Novartis doesn’t allow its reps to play a part in “formulating the core” sales message or exercise any discretion or independent judgment in performing their jobs. In fact, one rep testified they were, essentially, robots because they were so limited in what they could discuss in sales calls with docs.
As an interesting aside, the ruling discloses Novartis has data for only 72 percent of all prescriptions written, since some 19,000 pharmacies do not report to the prescription services that contract with the drugmaker. Of course, Novartis sets goals for its reps based on the prescriptions written; in 2005, the average total compensation for a rep was $91,539, including bonuses based on prescriptions.
UPDATE: Charles Joseph, a lawyer who represents Schering-Plough reps writes us to say: “The Second Circuit confirmed that Connecticut federal Judge Arterton’s reasoning, not just her result, was sound. It is that same sound reasoning by the Second Circuit and other courts that we expect will carry the day in other jurisdictions. The decision affects directly not only the cases that were before the court, Schering-Plough and Novartis, but other cases pending within the Second Circuit such as Pfizer and Boehringer Ingelheim.”
doc
Reps are told who to call on, how often, what order in which to present products, what message to spout, what answer to give to objections, cannot answer any off label questions - they must fill out a medical request.
The companies do not get accurate data, they “project” for sales, many do not count mail order business for rep evaluation/compensation.
There is really no independent judgement exercised by reps, even what appears to be “independent judgement” is hyper-analyzed by product marketing departments from ad-com physician groups and reps are told how to respond.
I say all this with some sadness, as the job has drastically changed over the years. Because of marketing department and sales administration excesses to “drive sales”, off label promotion has killed the goose the laid the golden egg. The Federal Government had to step in and limit what reps can promote for patient safety, because the pharma companies could not control themselves in pursuit of profit.
The time has really come for very small, targeted medical professional teams (PharmDs, MDs, RNs, etc) that have in-depth training, patient well being as top priority, that can answer off-label questions accurately and unbiased. Yes, it is possible.
Most doctors see today’s reps for free samples for patients, these can be mailed as some companies are already doing.
If the industry doesn’t change soon, it’s public image will suffer even more, if possible.
It will be interesting to watch and see which CEO has a vision of the future that faces reality. Who will be the first to take the big step and essentially replace it’s entire sales force with the above mentioned highly trained, medical task force? I predict, that CEO will make the biggest positive impact on their company’s image with the MDs, public and sales increases.
Tom McCollum
I can’t believe that reps really want to “win” this fight. By making the company liable to pay overtime, then the rep just continues to make the arguement for Reductions in Force. With the ongoing downsizing of sales forces, this “victory” just creates more fodder for the finacial suite.
Tobias
Reps should be more angry about the 72% number than overtime pay. Reps rankings and promotions are based on how they rank. I would bet that 72% number is closer to 40%. Everyone in this industry knows these numbers aren’t accurate. Why not the uproar over this? Oh yeah, it’s not a real sales job.
JC
True pharma companies drive sales (just like every company that wants to exist into the future). However, the robotic nature of the sales reps is less due to the drive for sales and more a result of the hyper regulation by the goverment entities and the excessive scutiny on the industry.
Not a real sales job…you obviously do not know the industry well and therefore haven’t got a clue (probably never sold a thing in your life). These people are highly trained, knowledgeable, professional, and work extremely hard.
There are always examples of slackers but all in all these people are hard working professionals.
doc
JC,
Any hyper-regulation by the govt, was brought on pharma co’s due to their own greed. Off-label promotion and kickbacks were the doing of the industry, they have no one to blame but themselves.
Mkter
doc - If you want to get into the blame game, it’s the reps’ fault for not knowing what they were getting in to. Sales reps jobs in pharma are pretty prestigious positions for fresh undergraduates - thousands upon thousands apply for these jobs and candidates are screened extremely carefully.
Your ignorance is shown when you say “pharma coompanies’ greed”. I want to see you run a business where you spoend 7-10 years and $1.4 billion for a 1% chance that a drug will pass FDA approval, then ship these drugs off for 5 cents on the dollar so the public is happy. I want to see what you tell your employees when they go home after they’ve been laid off because you didn’t capitalize on the economic rent available on your drug.
doc
Mktr,
My goodness, I guess 35 years in big pharma, sales, training, marketing and medical has taught me nothing.
You could not be more incorrect.
What justifies any pharma company paying physicians kickbacks to use their product?
What justifies any pharma company promoting their drug for off-label use, which they have chosen not to do safety and efficacy studies on?
MDs may Rx for off-label, that is their professional opinion, based on individual patient factors.
Your type of thinking is what has infected the industry.
I would hope that one day when you or a family member need to see a doctor, the treatment choice is based on what is best for the patient, not kickbacks and off-label info.
Realist
We sell, we don’t sell. Company’s fault, govt’s fault. Blah, blah, blah. What possible difference does it make now?
Look, it was a good gig for several years and now it is over. The market changed. It happens, deal with it.
The drug rep position was, at one time, a very good way to move product. Things change. Promotional tools, (which is all that we really are) become obsolete and need to be retired at some point in any industry. That is all there is to all this back and forth mumbo jumbo.
The only reason that reps are still around is that if an organization comes to terms with reality and axes reps; they are defacto saying that every successive layer of sales management is not needed. Pretty soon, you end up with some guy at the Vp level that is pulling down 400K a year that has his job threatened by reality; so of course he/she is going to say that we need to “maintain our sales forces.”
It is all just a joke and anyone that works in this industry knows it. Hope no one put all their eggs in this basket. If so,……….ouch.
pharmavet
Tom, you are correct. This is a classic example of win the battle and lose the war. It will only accelerate the body count. Believe me, no one is falling on their swords for these guys. It’s pretty much everyone for themselves these days in the rep world.
Codes R not us.
The pharma reps used to be true sales reps.That was during the classic days of ethical pharmaceuticals business when reps were called “detailers”.Those who sold for Sandoz or CibaGeigy in the seventies, eighies and maybe in nineties know what it was about. Once the mergermania hit this biz the pharma sales rep was turned into “scientist” from an artis in selling. You see selling is an art not a science but the big pharma did not believe in that.They figured that reps can be trained to the last detail of sales story so once they are in front of doctor they can deliver like robots. And the doc will buy it.At the same time they have invented and generated so much of “other” work for reps (computer work, study,planning, group meetings etc etc)that they had to put in 12-15 hours per day to keep up. The company, now Novartis never ever said that this extra work must be done after the work in territory calling on docs.The only thing reps were told they had to spend 8 hours calling on docs.All other work including, dinner meetings, weekend work etc. was expected from reps without any compensation.This is where the overtime comes from and what makes this job so time consuming nowdays.And this is why the reps were successful in winning this lawsuit.Now the smart reps still don’t have to do such hours if they work smart but is getting harder. Personally I worked strictly “smart”.If I had a night work I did not work during the day or just half a day, for instance. All told I spent just about 30 years with this Co and gave them about 12-15 years of work volume according to them. Which is just about right.
Dan Abshear
This ruling is ridiculous. I specifically use to work for Novartis as a rep- and I maybe ‘worked’ 20 hours a week.