No overtime for pharma reps, Supreme Court says

The Supreme Court has spoken to pharma reps. In a split decision, the justices ruled that drugmakers don't have to pay overtime to salespeople. It's a landmark ruling that will send a lot of lawsuits to the rubbish bin. It will also save Big Pharma hundreds of millions, if not billions, of back overtime pay.

The Court smashed the argument that pharma reps aren't actually "outside salespeople" as defined by wage-and-hour laws. Justice Samuel Alito, who wrote the court's opinion, stated that reps' essential goal was to drive prescription growth, not simply educate doctors about a company's products. And that means they're outside salespeople, regardless of the fact that they don't close sales.

It was a 5-4 vote, split along ideological lines, so that opinion wasn't shared by all the justices. In the dissenting opinion, Justice Stephen Breyer pointed out that pharma reps don't "take orders," and nor do they "consummate a sale" (as quoted by Bloomberg).

So, the last avenue for sales rep overtime is now closed. As Reuters points out, a U.S. Appeals Court upheld the administrative exemption last month, in a separate case against Eli Lilly ($LLY) and Abbott Laboratories ($ABT). Yesterday's ruling came in a case filed by GlaxoSmithKline ($GSK) reps.

A who's who in pharma has fought one of these overtime cases, and more were expected to be filed if the court had ruled the other way. The ruling won't affect Novartis' overtime settlement, just affirmed by a judge, which requires the company to distribute $99 million in back overtime to some 7,000 reps.

- read the Reuters news
- get more from Bloomberg