February 27, 2016 Practice Points

Sales Representatives: Greatest Asset or Biggest Liability?

By Karen M. Firstenberg

A manufacturer's sales force can be one of its most important assets or one of its biggest liabilities. Sales rep­resentatives provide the health care professionals (HCPs) with neces­sary technical and marketing information. Unfortunately, the activities of sales representatives carry risks. Not only can their actions create legal prob­lems for the company, they can also be an important source of information for plaintiffs' attorneys in pending lit­igation. A sales representative is likely to have informa­tion, not just about how the company promotes its products, but about the company's organizational struc­ture, marketing plans, regulatory reporting policies, docu­ment retention policies, warnings, product launches, and sales literature. Their understanding of these issues sometimes differs from the company's official policies or positions. This liability potential makes proper training and supervision of the sales force an important risk management tool.

Many potential liability problems can be eliminated (or greatly reduced) by proper training of sales representatives, both upon hiring and throughout their employment. In addition to the traditional topics including science, medical benefits and risks, product specifications, and marketing strate­gies, an effective training program should include a dis­cussion of the role of the sales representative in minimizing legal liability for the company. By increasing sales representatives' level of aware­ness of the role they play, they will be better equipped to identify and respond to situations of potential legal liability.

Practice Points of topics to address:

1. Products liability. At the outset, a brief overview of the legal theories involved in a product liability action should be given. The goal is to increase general awareness of the sales force, not to make them lawyers.

2. Over-promotion. The overly aggressive marketing of a product is the most common pitfall of zealous sales representatives and the most critical liability risk. It can be in the form of overstating a product's benefits or min­imizing its risks. Such activities result in a failure to ade­quately warn physicians of the product's dangers, even where the written warnings are otherwise adequate (see, e.g., Cunningham v. Smithkine Beecham, 255 F.R.D. 474 (N.D. Ind., 2009) (sales representative's numerous calls and promotion to pediatrician was discoverable in action alleging that patient/child's suicide was caused by prescription anti-depressant manufactured by drug company, despite knowing that its drug was ineffective and had dangerous side effects when ingested by children).

3. Off-label use. Related to over-promotion is the concept of an "off-label use"; it is the promotion of a product for uses other than those approved by the FDA. Physicians are, of course, permitted to use a drug or device for any purpose which they, in their medical judgment, believe will assist the patient. In contrast, however, manufacturers can only sell and promote products for those uses which are approved by the FDA. Sales representatives should never promote drugs or devices for off-label uses.

4. Document handling and retention. Company documents, including those of sales representatives, are often critical evidence. Most sales personnel work from home or remote office, making it difficult for management to keep track of their documents. In addition to the company's document retention policy, the company should instruct representatives on preservation of information subject to Legal Hold, including diaries, appointment books and the like. Use of company issued devices should be limited to business purpose.

5. Company-sponsored meetings and conferences. Manufacturers often host or sponsor meetings for physicians about their products. All presenta­tions and written materials distributed to physi­cians at any meeting must comply with the FDA's label­ing guidelines. In addition, statements made by company employees at such meetings must be consistent with the approved labeling and can be admissible evidence of the company's knowledge regarding a particular risk or of over-promotion (see e.g., Hogan v. Novartis Pharm. Corp., 2011 WL 1533467 (E.D. N.Y. April, 24, 2011) (sales representatives' email correspondences admissible to evidence bad faith corporate conduct; see also Sabel v. Mead, Johnson & Co., 737 F. Supp. 135 (D. Mass. 1990)). Sales representatives should be cau­tious about their statements at such meetings or in follow up email correspondences.

Sales representatives are a critical group in any pharmaceutical or medical device company, and they play a vital role in the company's success in avoiding or prevailing in litigation. Although the sales representative's job, by its very nature, creates a potential for liability, these risks can be minimized by proper training and supervision.

Keywords: product liability, sales representatives, over-promotion, off-label promotion, sales training

Karen M. Firstenberg is with Morris, Polich & Purdy, LLP, in Los Angeles, California.


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