Texas Telemedicine Provider Survives Another Round

Teledoc, a telehealth services provider looking to do business in Texas, continued its winning streak in Texas federal court: on Monday, a judge rejected the Texas Medical Board’s motion to dismiss Teledoc’s antitrust challenge to the Board’s new rule requiring a “face-to-face visit or in-person evaluation” for physical examinations. The federal judge, following the U.S. Supreme Court’s recent decision in North Carolina State Board of Dental Examiners v. FTC, ruled that the Texas Medical Board could not use sovereign immunity as a shield because the state lacks sufficient control over the Board.

For a full history of the case, please see this June 2015 post on Teledoc’s win of a preliminary injunction to block enforcement of the Board’s rule. In short, Teledoc employs board-certified physicians trained to provide treatment and diagnosis over the telephone. The physician dispenses medical advice and may prescribe medications despite contacting the patient only by telephone. In response to the rise in telemedicine, the Texas Medical Board revised a state administrative rule prohibiting the prescription of certain drugs without first establishing a “proper professional relationship” to require a “face-to-face visit or in-person evaluation.” Teledoc sued under Section 1 of the Sherman Act to block enforcement of the rule, alleging an unlawful conspiracy to restrain trade.

In the skirmish over the preliminary injunction, we noted that the Texas Medical Board chose not to raise a state-action immunity defense. It is now clear that such a defense would lose.

As the Texas federal court pointed out, under North Carolina State Board of Dental Examiners v. FTC, a “‘nonsovereign actor controlled by active market participants—such as the Board—enjoys Parker immunity only if’ it was subject to active state supervision and the challenged restrain was an expression of state policy.” The state need not micromanage the Board, but the state’s review mechanisms must provide “realistic assurance” that anticompetitive conduct by the Board “promotes state policy, rather than merely the party’s individual interests.”

In this case, the Texas court held that the Texas Medical Board failed to show active supervision of its activities by the state. First, judicial review of the Board’s decisions is limited to inquiring whether the Board’s decision exceeded its statutory authority, and does not provide for evaluation of the policy underlying the rule. Second, legislative review lacks authority to veto or modify the Board’s rules. Accordingly, the court could find no “realistic assurance” that the state could check any anticompetitive conduct for the promotion of state policy rather than personal interests.

Teledoc thus survives another round with the Texas Medical Board, which is quickly running out of punches to throw.

The case is Teledoc, Inc., et al. v. Texas Med. Bd., Civil Action No. 1:15-cv-343 (W.D. Tex. Dec. 14, 2015).

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