Thursday, January 26, 2012

Will Supremes' Novartis Overtime Case Settlement Mean That New Merck Will Settle, Too?

As Ed at Pharmalot reported earlier in the week, Novartis will pay $99 million to settle its long-running fight with sales reps -- over back overtime pay. Here's Ed, then -- on Novartis:

. . . .The move is significant because, until now, drugmakers have been fighting efforts by their current and former sales reps to win overtime pay. The topic has divided the courts and there have been so many conficting rulings that the US Supreme Court agreed last November to review the debate. A ruling is expected this summer. Ironically, the Supreme Court had earlier declined to review the decision in the Novartis case (here is the 2006 lawsuit filed by the Novartis reps).

At issue is whether sales reps are exempt from overtime provisions of the Fair Labor Standards Act. The FLSA overtime compensation requirement does not apply to employees who work as outside salespeople, but the law does require employers to pay overtime for hours worked beyond 40 hours a week, unless a FLSA exemption applies. . . .

Since the time of the original Schering-Plough complaints, Novartis, New Merck (the entity now responsible for the Schering-Plough overtime claims) and many other pharma concerns have restructured their sales reps' duties, hours and roles to bolster the case that at least the currently-serving US reps are not entitled to overtime. So, this would be only a "look-back" settlement (should it occur), not a "look forward" settlement amount.

Importantly, even at $150 million, would be decidedly immaterial to New Merck. I do think the $99 million Novartis legacy sales rep settlement suggests that many of these cases (including the legacy Schering-Plough ones) are ripe for any number of agreed settlements. And Chairman/CEO Frazier has shown he is looking to put past Schering-Plough troubles very-firmly in the rear-view mirror -- by settlements.

You read it here first, if it turns out this way, friends -- perhaps even as soon as the February 2, 2012 Merck year-end results earnings call.

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