Teladoc's antitrust suit against the Texas Medical Board will test the limits of recent Supreme Court precedent

By Jonah Comstock
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JONAH_COMSTOCK_HEADSHOTOne month ago, I wrote about how a Supreme Court case with little to do with digital health on the surface could turn out to be a game changer for telemedicine. It only took a month for the first lawsuit to put that new precedent to the test, and the players involved are big ones. Fresh off the news of its IPO filing, Dallas, Texas-based Teladoc sued the Texas Medical Board, alleging that a recently passed rule requiring doctors to have an in-person or face-to-face visit with a patient in order to prescribe medication, is in violation of antitrust laws and has no purpose other than to muscle out telemedicine companies.

“It is clear that the medical board acted only when Teladoc consultations became sufficiently numerous to be perceived as a competitive threat to brick-and-mortar physician practices,” Teladoc CEO Jason Gorevic said in a statement. “We can’t sit back and let a bad rule by the Texas Medical Board rob from millions of consumers and physicians the tremendous benefits of telehealth."

The Texas Medical Board hasn't issued a statement, but has made their position clear in the past. In the minutes of a January emergency meeting, held after Teladoc won an earlier appeal, the board wrote that it sees a threat to patient health in certain kinds of telemedicine: specifically video visits between a patient and previously unknown physician that result in the prescription of drugs.

"Specifically, the imminent threat to the public includes: prescribing to a patient without first evaluating and examining the patient in a face-to-face visit or in-person evaluation makes it impossible for a practitioner to insure proper and accurate diagnosis and treatment; to insure proper prescribing practices are followed; to insure the drugs prescribed are therapeutic, i.e., the medications prescribed are actually needed and/or proper for the condition (which has never been verified by an in-person evaluation or face-to-face visit); and/or prevent overuse/abuse of drugs of any kind," they wrote.

In a statement, Gorevic asserted that "not one shred of data was presented during the medical board’s comment period to support the position that telehealth poses a patient safety risk.”

Teladoc and the Texas Medical Board have been duking it out since 2011, but up until now the legal challenges have been procedural, with Teladoc alleging that rule changes by the Texas Medical Board didn't follow proper procedures or didn't allow sufficient time for public comment. The allegation that the Board is violating the Sherman Antitrust Act, by passing a rule specifically to discourage competition, is a new one, and is similar in many ways to the FTC vs the North Carolina Dental Board case that went before the Supreme Court in February.

Notably, the Supreme Court ruled that state medical boards made up primarily of practicing doctors don't meet the requirements of a state actor, and are therefore not immune to the Antitrust Act.

"As we were reminded in the North Carolina Dental Board case, there are two factors that determine the outcome of judicial review where a Board claims antitrust immunity under the so-called 'state action' exemption," Stuart Gerson, a lawyer with Epstein Becker Green and former acting Attorney General of the United States, told MobiHealthNews in an email. "The first is whether the Board’s action is in furtherance of a well-articulated state policy. In the Teladoc case, it would appear that assuring patient safety likely would satisfy that criterion. However, the second, and likely determinative factor – active supervision by the state itself – is far more problematic. One sees no sign in this case that there is any automatic review or veto power in the hands of an official office or person in the state of Texas itself, where the decision maker is not a competitor of the entity that the board would act against. The lack of 'active supervision' by the state was the critical factor in the Supreme Court’s reasoning and, to the extent that Teladoc can make the same point, it very well can prevail."

If Teladoc were to win on those grounds, however, the medical board could go to the legislature and get them to pass the changes into law. Then Teladoc would have the harder challenge of proving that the state "acted arbitrarily or capriciously". But so far Texas's legislature has been hesitant to get involved in the fight between Teladoc and the medical board one way or the other. According to the Texas Tribune, a bill that would have settled the matter has languished in the Texas house without a vote. Its sponsor, Representative Jodie Laubenberg, told the Tribune that "the time is not right".

"The TMB and [Teladoc] are going to have to iron out their differences, and I don’t want to put anyone in a rough spot,” she said.

That hesitancy could be a gain for telemedicine as a whole if Teladoc wins the suit. By allowing this to play out in the courts, Texas is poised to create a strong precedent about the extent to which state medical boards can limit the practice of telemedicine. Telemedicine companies and medical boards in other states will certainly be watching.