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Drug Sales Reps' OT Demand Will Sort Micromanagers From Soft Touches

A Takeda drug sales rep's class action lawsuit demanding overtime pay is just the latest in a string of suits that is likely to affect every drug company in the U.S. that employs salespeople to tout pharmaceuticals. The suits all hinge on the same issue: Whether sales reps meet the legal definition of making "sales," and their outcome will reflect the differing management philosophies and styles at the companies being sued. Those firms include Novartis (NVS), Abbott Labs (ABT), Merck (MRK), Boehringer Ingelheim and Johnson & Johnson (JNJ).

The suit will test "Takeda-ism," the company's management philosophy, which it says is based on "the highest ethical standards." Takeda is Japan's largest drug company. Takeda's best-known products are Actos, the diabetes drug, and Prevacid for heartburn. In the U.S. Takeda maintains a low public profile.

In the lawsuits, the sales reps argue that they don't make actual "sales" because the paid transaction only occurs when a doctor prescribes a drug and a pharmacy delivers it to a patient. They also argue that their jobs are so heavily micromanaged that they qualify as the kind of menial employees that are supposed to be protected by the law.

The companies argue that reps are well paid executives -- many make six figures a year -- who have managerial discretion about how they promote their products. They can choose which doctors to target and which tactics to use to persuade them, for instance. As such, reps are really salaried managers who are not eligible for OT pay.

Court rulings have so far been split on both sides. The issue is working its way up to the federal appeals courts where such splits are decided one way or another.

But there's another possibility: That the drug companies who have given their sales reps a free hand will have legally insulated themselves from paying overtime (because employees with discretion over how their jobs are done are not covered by OT laws). Conversely, the companies which have strictly controlled their reps may be vulnerable to the law, which says that non-executive workers must be paid extra for working beyond 9 a.m. to 5 p.m.

Beth Jones, the California Takeda rep who filed the case, makes life at Takeda sound awful. (Although not as awful as this.) Reps must "be physically present at a physician's office at 9:00 a.m. and at 5:00 p.m.," and therefore are forced to do their administrative tasks before and after those hours:

... and on some weekends; attend multiple Saturday day-long symposiums; conduct multiple evening speaker programs; attend company-mandated dinners after regional and annual meetings; view company-mandated training videos; and call in before 8:00 a.m. to monthly company-wide conference calls.
Takeda also uses spyware on its reps' laptops, Jones alleges:
"Company-mandated monthly scans of Plaintiff's computer were conducted to ensure that any computer work conducted during the hours of 9:00 a.m. to 5:00 p.m. on weekdays would be recorded and reported to Takeda management as evidence that an MR [medical rep] was not "in the field" visiting physicians as required by Takeda.
Jones even blasts the company's bonus structure:
[Sales commissions] are calculated pursuant to a defective company-wide formula that yields an arbitrary amount which is in no way reflects the Plaintiff's effectiveness in promoting the use of certain Takeda products.
The company has yet to file a response.

Here's the updated OT legal scorecard:

  • Companies that have lost rulings favoring OT for reps: Novartis
    Abbott Labs
    Merck (Schering-Plough)
    Boehringer Ingelheim
  • Companies that have won rulings denying OT for reps:
    King (Alpharma)
    Johnson & Johnson (Ortho McNeil)
  • Pending cases:
    Takeda, Amgen, Serono,
Related: Image by Flickr user borman818, CC
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