They call it the Supreme Court for a reason, right? It's supreme. It's the "decider".
And the Supreme Court has one coming up that all of you should be interested in. It's deciding whether pharma reps - those well dressed, good looking professionals who come in the doctor's office peddling their wares when you are there looking haggered, sick and generally untouchable - should be classified as exempt, or whether they in fact deserve overtime pay.
More on what's being decided in the case from the US Supreme Courts' blog (they've got a pretty good one):
"On April 16, the Court will hear arguments in Christopher v. SmithKline Beecham Corp. The Justices will decide, once and for all, whether pharmaceutical sales representatives (PSRs) are “outside salesmen” and thus exempted from overtime-pay requirements of the Fair Labor Standards Act of 1938 (FLSA) The decision will also settle a circuit split between the Second and Ninth Circuits: the former held that PSRs are not outside salesmen and thus are not exempted from the FLSA’s requirement that they be paid overtime wages, while the Ninth Circuit (in this case) unanimously reached the contrary conclusion. This will be an interesting case with wide-ranging ramifications for the pharmaceutical industry and the ninety thousand people nationwide employed as PSRs."
More on the work duties and who the pharma reps are selling to:
"To understand the typical duties of a PSR, it is necessary to understand the concept of an “ultimate user” in pharmaceutical lingo. An “ultimate user” is the patient who actually takes the prescribed medicine. Under the Controlled Substances Act of 1970, no one, including drug manufacturers, can dispense prescription medicine without a physician’s authorization. Because the drug manufacturers cannot sell their prescription medications directly to the public, they sell the medications to distributors or retail pharmacies, who then dispense the medications to an “ultimate user” who presents a proper physician’s authorization.
Within this framework, Glaxo employs PSRs to make calls on physicians. At a call, the PSRs will typically present information and samples to the physician and attempt to convince the physician to prescribe their employer’s pharmaceuticals instead of the competition’s.
PSRs work almost entirely outside of Glaxo’s offices. Most of a PSR’s time is spent traveling to physicians’ offices within a specified geographic region. A PSR will ordinarily make eight to ten physician calls per day, usually between 8:30 a.m. and 5:00 p.m. When not making physician calls, PSRs will study Glaxo products and relevant disease states. They will prepare new presentation modules, respond to phone calls and e-mails, generate reports, and attend evening and weekend seminars. These tasks are typically performed outside of customary business hours.
Of critical importance to this case is the fact that PSRs cannot sell samples, take orders for any medications, or negotiate drug prices or contracts with physicians or users. Instead, they can only try to convince physicians to prescribe Glaxo products instead of its competitors’ products."
Now, what the court is trying to decide:
"There are two issues before the Court. The first is whether it owes deference to the Department of Labor’s interpretation of its regulations. The second is whether PSRs are outside salesmen when they cannot legally sell prescription drugs, but instead can only encourage physicians to prescribe their employer’s drugs.
In both the Second Circuit and this case, the Secretary of Labor filed an amicusbrief in support of the PSRs. However, the courts in each of those cases split on whether the Secretary’s interpretation of the Department’s regulations warranted deference: the Second Circuit held that it did, while the Ninth Circuit held that it did not."
Interesting stuff. Here's how they are currently comped according to the details on the USSC blog:
"For their services, PSRs receive two types of payment: salary and incentive-based compensation. Glaxo aims to have its PSRs receive seventy-five percent of their payment as salary and twenty-five percent as incentive-based compensation. However, the amount of incentive-based compensation a PSR can receive is unlimited. In general, a PSR’s incentive-based compensation is calculated by measuring the increase of Glaxo’s market share for a particular drug within the PSR’s territory."
For a deeper dive on what pharma reps make, see this breakdown over at Recruitingblogs.com. Basically, pharma rep comp differs by company (makes sense - what primary product lines are they selling), but a good rule of thumb is salary of 60-70K and total comp of 90-110K.
Sound like an hourly job to you? I'm also wondering aloud if the objection is that they aren't true outside sales professionals, they're still marketing professionals who have discretion about when/where/how they do their jobs, right? The world has gone insane. Pharma reps who make 100K are now before the Supreme Court with a 50/50 shot at getting overtime.
If that's the case and the court decides in favor of the reps, then if I'm a comp professional, I'm turning the model upside down. Incentive pay goes away (and along with it, the ability to double your base) and I'm paying an hourly rate that factors in OT and reduces total comp to 85-90% of what I'm currently paying.
You know - just good enough to keep the talent in the job - but there's no way if the pharma industry loses the case that they're simply going to increase their talent comp structure by 15-20%.
And that, my friends, is what people who file and drive these cases don't understand. The attorneys win again, and 90,000 pharma reps end up with a decreased ability to earn. Nice.