Supreme Court sides with GSK over sales reps

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The Supreme Court's 5-4 decision denying overtime to GlaxoSmithKline sales reps will have fallout beyond the GSK reps pocketbooks.

"The bulk of these cases are over,” former Pfizer senior counsel and FDA assistant chief counsel Arnie Friede told MM&M.

The case alleged that GSK owed its reps overtime because they did not qualify as “outside salesmen” under the Department of Labor's Fair Labor Standards Act. It's one of a number of similar cases that have been making their way though the courts, including one against Novartis, which the drug maker settled for $99 million in January. Friede noted that this decision has not only thrown out overtime claims for reps, but has also effectively reset the relationship between agencies and the court.

According to the court's decision, the Department of Labor made a major misstep by changing its definition of what it meant to make a sale after the lawsuit was already in progress. The Supreme Court then said the agency compounded this error by doing so through amicus briefs as opposed to using a public forum. The court found fault with both of these moves and said it went straight to the law for interpretation, whereas there has been a history in which the court has deferred to agencies regarding the meanings of its policies. Friede said this means the courts are likely give agencies like FDA far less latitude in wording and require a more open process for defining policies.

The justices also picked at the pro-rep position because the Department of Labor has allowed the industry to treat drug reps like “outside salesmen,” for 70 years under the Fair Labor Standards Act and said the “only plausible explanation for the DOL's inaction is acquiescence.”

In a classic non-overtime rep situation, a sales person makes a pitch, gets a promise or an order and is done with it. The GSK sales reps said that they didn't fall under the non-overtime umbrella because regulations bar them from taking orders or getting practitioners to promise to prescribe their products. The chain is far more convoluted.

“Pharmaceuticals are unique because there is a separation between the physician or the prescriber that's licensed to write it and the way it's actually sold. Because you get the prescription as a patient from a doctor, that's not a sale as such – you have to take that to a retailer that sells it to you, who has in turn purchased it from a wholesaler,” Burt Rein, partner of the Washington-based law firm Wiley Rein, told MM&M.

Similar lawsuits against other drug makers are still pending, but Friede said that the path is set and an act of Congress changing the disputed definitions would be the only way to for reps to collect overtime pay.
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