Sales Reps to Big Pharma: 'Sue You!'

April 11, 2007
Pharmaceutical Executive
Volume 0, Issue 0

Class action suits across the country challenge firms to pay overtime.

Tens of thousands of drug sales reps could sue their current and former employers for overtime pay--joining a class action case arguing that the nature of the job does not exclude them from time and a half requirements.

In class action suits across the country, reps are arguing that their role isn't a sales job in the traditional sense--and, moreover, that their scripted calls leave little room for independent decision-making. Only outside sales reps and administrative positions are exempt under overtime pay laws.

Suits have been filed against at least 10 major drug makers, including Johnson & Johnson, Eli Lilly, and Amgen. As of now, they will be tried state by state, company by company. Collective settlements of about $1 billion are at stake for the industry. Similar suits awarded $98 million to stockbrokers at Smith Barney and $135 million to State Farm insurance adjusters.

"There's going to be some question about what it means to be making sales in this business," said Michael D. Thompson, an attorney at Epstein Becker & Green, who is not involved in the case. "Obviously you're never closing deals."

Indeed a California suit against AstraZeneca states, "Plaintiff and the class members did not sell tangible or intangible items nor obtain orders or contracts for products, services or use of facilities. Therefore, the outside-sales explanation [for the overtime exemption] would not be applicable." It seeks $5.5 million in damages.

In addition, plaintiffs' attorneys argue that restrictions on off-label promotion and similar marketing regulations have made sales calls very scripted. "Sales reps have gotten less and less discretion in how they make presentations," Thompson said.

The suits come at a time when drug companies are reevaluating their sales model and trimming their ranks. Pfizer in December cut about 20 percent of its sales force, backing off a tactic it pioneered of having multiple reps calling on the same physician. The company is using more electronic selling methods--like its MedNet Web site--to fill some functions like facilitating sample orders. Merck, after implementing telephone or video detailing in 50,000 physician offices, reports that annual calls per rep increased 20 percent.

In contrast to the job's perceived easygoing glamour in days past, pharma sales reps are now under pressure to call on 40 or 50 physicians a week--at a time when harried doctors are increasingly barring their doors against the onslaught. "Reps today have really been challenged in terms of time management," said Eric Newmark, a senior research analyst at Health Industry Insights, a market research firm.

Newmark believes that the suit will spur investments in more sophisticated automation systems that provide reps with information on specific doctors, their prescribing habits, and route planning. Still, technology is unlikely to replace face-to-face interactions in the near term. "Most of the industry sentiment is that e-detailing hasn't been as successful as hoped," he said.