Why Texas wants Teladoc's antitrust suit thrown out

By Jonah Comstock
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TeladocVideoVisitThe Texas office of the Attorney General weighed in on a motion to dismiss Teladoc's antitrust suit against the Texas State Medical Board on the grounds that there is, in fact, state supervision of the medical board which would make it a state agency under law and therefore immune to suit. Politico first spotted the news.

In April, 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 serves to restrict competition from telemedicine companies. The suit leaned heavily on a recent Supreme Court ruling, North Carolina Board of Dental (NCBD) Examiners vs Federal Trade Commission, which ruled that medical boards comprised of private professionals (like practicing doctors and dentists) are not immune to federal anti-trust laws unless they’re directly overseen by full-time agents of the state.

“A long time ago, the courts crafted the so-called state actor defense, which tolerates what otherwise would be anticompetitive activity in the name of some dedicated state police power interest — generally health, welfare, safety of the population,” Stuart Gerson, a member of Epstein Becker Green and former acting Attorney General of the United States, told MobiHealthNews in an interview in March. “It’s easy to declare that if you’re a board. But the nut of the NCDB case is, in order to avail themselves of the state action defense, the board not only has to be duly constituted, but the activity that it is involved in needs to be directed by the state. There has to be what’s called ‘active supervision’. And that’s what the Supreme Court made clear.”

Now, the Texas AG is arguing that the Texas State Medical Board is different from the North Carolina Dental Board in important ways, and that the TSMB is subject to judicial review that constitutes active supervision.

Teladoc argued that the state's judiciary only has the power to challenge whether the medical board was acting within its own authority and, in order for active supervision to apply, it would need to have the power to challenge whether the board was affecting state policy. Texas argues that "[s]tate policy consists of the general objectives and purposes of state statutes... Consequently, a court’s decision under section 2001.038 that an agency rule is not in harmony with the general objectives of the agency’s enabling statute inescapably constitutes a determination that the rule is not consistent with (does not promote) state policy."

The bulk of the argument in the 41-page document outlines various ways the Texas medical board satisfies the "active supervision" requirement, although the AG office takes issue with several other aspects of Teladoc's case along the way. For instance, responding to Teladoc's invocation of the interstate Commerce Clause, they argue that there's nothing at all discriminatory about the rules, as they apply equally to all physicians, in and out of the state.

"Of more importance, the plaintiffs cannot show that the challenged rules burden them to any greater extent than in-state physicians," they write. "The plaintiffs’ selective out-of-context quotations from Supreme Court cases cannot obscure the plain fact that contested rule applies equally to all physicians, wherever they are located. (It is quite an anomaly when a Texas corporation can manufacture an interstate commerce claim simply by contracting with doctors in other states.)"

Texas also argues that the immunity afforded by the state actor defense is an immunity to suit, which means Teladoc never should have been able to bring the case in the first place. That's why they're requesting that "all of the plaintiffs’ claims against them be dismissed, that they recover their costs, and that they be awarded any additional relief to which they show themselves entitled."

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