A Texas Medical Board rule requiring a physician to conduct an in-person evaluation before prescribing certain drugs will not go into effect today, June 3, as originally planned. A federal court granted a preliminary injunction to halt enforcement of the rule pending the resolution of an antitrust lawsuit filed by Teledoc, a telehealth services provider.
As originally adopted by the Texas Medical Board in 2003, a state administrative rule prohibits prescription of certain drugs without first establishing a “proper professional relationship.” At the time, such a relationship required “establishing a diagnosis through the acceptable medical practices such as patient history, mental status examination, physical examination, and appropriate diagnostic and laboratory testing.” As telemedicine grew in popularity, the Board revised the rule to require a “defined physician-patient relationship,” which required a “physical examination that must be performed by either a face-to-face visit or in-person evaluation,” elsewhere defined as requiring the physician and the patient to be in the same physical location or at an established medical site. The revised rule would have gone into effect today.
Teledoc sued under Section 1 of the Sherman Act in April, alleging an unlawful conspiracy to restrain trade, and sought a preliminary injunction to block enforcement of the rule in the interim. Teledoc employs board-certified physicians specially trained to provide treatment and diagnosis over the telephone. Individuals register with Teledoc and create a personal account that includes a medical history and records. When an individual requests a consultation, a Teledoc physician reviews the appropriate records online, then calls the individual by telephone for a consultation. The physician dispenses medical advice and may prescribe medications.
The U.S. District Court for the Western District of Texas held that Teledoc showed it was likely to succeed on the merits and thus granted the preliminary injunction. Section 1 of the Sherman Act prohibits concerted action which unreasonably restrains trade in the relevant market. To succeed on its claim, a plaintiff must show both an injury to competition and an injury to itself. In this case, Teledoc showed that it would likely succeed on both counts.
First, Teledoc argued that the Board’s revised rule would harm competition by increasing prices, reducing patient choice and access, and reducing physician services. Teledoc produced evidence showing the average costs of visits to a physician or emergency room are $145 and $1957, respectively, compared to $40 for a Teledoc consultation. Teledoc also showed that patients chose telemedicine for reduced travel and waiting times. Furthermore, Teledoc cited evidence of a shortage of doctors in Texas and argued that its services increased opportunities for physicians to provide care.
The court determined that Teledoc’s pro-competitive effects outweighed the Texas Medical Board’s justifications for the anti-competitive rule. The Board argued only that the revised rule would improve quality of medical care. The court dismissed this explanation, noting that all physicians licensed by Texas are bound by the same standard of care and ethical rules. The court also noted that the Board’s evidence consisted mainly of anecdotal testimony rebutted by Teledoc’s own anecdotes.
Second, Teledoc contended that it faced irreparable injury if the rule stands. Teledoc maintained that it would no longer be in business if it could not conduct a telephone-only business. The court agreed and observed that monetary damages alone would likely not make Teledoc whole.
Interestingly, the Texas Medical Board did not raise a state-action immunity defense, avoiding the complications presented by North Carolina State Board of Dental Examiners v. FTC. The court therefore did not grant the normal deference afforded to a state agency under antitrust law. The court itself called this “unusual” and admonished that its opinion should be read through a narrow lens, perhaps anticipating a state-action immunity argument in the next round of litigation.
The case is Teledoc, Inc. v. Texas Med. Bd., Civil Action No. 1:15-cv-343 (W.D. Tex. May 29, 2015).
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