A federal court has temporarily enjoined the Texas Medical Board (TMB) from implementing and enforcing a rule restricting the practice of telemedicine pending resolution of an antitrust lawsuit filed by Teladoc, Inc.  The temporary injunction represents a small victory for Teladoc, a leading telemedicine provider, in its ongoing legal battle with TMB over the practice of telemedicine in Texas.

Dallas-based Teladoc typically contracts with employers to provide telemedicine services to their employees for a per-member subscription fee.  Individuals register with Teladoc and create a personal account that includes a medical history and records.  Teladoc employs board-certified physicians who are trained to provide diagnosis and treatment over the telephone.  When an individual requests a consultation, a Teladoc physician reviews pertinent information and records online, then calls the individual and conducts the consultation by telephone.  Based on the consultation, the physician dispenses medical advice and may prescribe certain medications. A high percentage of Teladoc consultations result in prescriptions.  

As originally adopted in 2003, 22 Tex. Admin. Code § 190.8(1)(L) (Old Rule 190.8) generally prohibits physicians from prescribing any “dangerous drug or controlled substance” without first establishing a “proper professional relationship” which requires, among other things, “establishing a diagnosis through the use of acceptable medical practices such as patient history, mental status examination, physical examination, and appropriate diagnostic and laboratory testing.”  Old Rule 190.8 also prohibits the use of “[a]n online or telephonic evaluation by questionnaire” to establish a diagnosis.

In June 2011, TMB issued a letter to Teladoc stating that Old Rule 190.8 required a face-to-face examination before the physician could write a prescription, essentially declaring Teladoc’s telephone-only consultations to be prohibited.  Teladoc filed suit against TMB in Texas state court, and, in December 2014, a Texas appeals court concluded that TMB’s June 2011 letter was a procedurally invalid amendment to Old Rule 190.8. 

In response, TMB issued an  “emergency rule” amending Old Rule 190.8 in January 2015 to require a face-to-face visit or in-person evaluation before a prescription.  However, Teladoc obtained a temporary injunction in Texas state court.  TMB then engaged in the formal rulemaking process.  In April 2015, TMB adopted revised telemedicine rules, including a revision of 22 Tex. Admin. Code § 190.8(1)(L) (New Rule 190.8).  New Rule 190.8 would have gone into effect on June 3, 2015.

New Rule 190.8 generally prohibits physicians from prescribing any “dangerous drug or controlled substance” without first establishing a “defined physician-patient relationship,” which “must include,” among other things, “documenting  and performing . . . [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 patient to be in the same physical location or, if not in the same physical location, the use of real-time videoconferencing while the patient is in a healthcare setting with another provider physically present.  New Rule 190.8 also specifically provides that “[a]n online questionnaire or questions and answers exchanged through email, electronic text, or chat or telephonic evaluation of or consultation with a patient are inadequate to establish a defined physician-patient relationship.” 

In late April 2015, Teladoc filed an antitrust suit against TMB, alleging violations of Section 1 of the Sherman Act,  and sought a preliminary injunction preventing enforcement of New Rule 190.8.  On May 29, 2015, the United States District Court for the Western District of Texas issued an order granting Teladoc’s application for a preliminary injunction, blocking TMB from implementing and enforcing New Rule 190.8 pending final resolution of Teladoc’s antitrust claims.   Teladoc Inc. v. Texas Medical Board, No. 1-15-CV-343-RP (W.D. Tex. May 29, 2015) (order granting preliminary injunction). 

A party seeking a preliminary injunction may be granted relief only if the moving party establishes: (1) a substantial likelihood of success on the merits; (2) a substantial threat that failure to grant the injunction will result in irreparable injury; (3) that the threatened injury outweighs any damage that the injunction may cause the opposing party; and (4) that the injunction will not disserve the public interest.           

With respect to the antitrust claim, TMB did not assert any state immunity defenses in response to Teladoc’s application for preliminary injunction.  Instead, TMB maintained that Teladoc failed to demonstrate the requisite anti-competitive effect.  The court disagreed, concluding that Teladoc had demonstrated a substantial likelihood of success on the merits of its antitrust claims by showing, among other things, that New Rule 190.8 would increase prices, reduce choice, reduce access and reduce the overall supply of physician services.  The court cited Teladoc’s evidence of the price disparity between the average physician visit and a Teladoc consultation.  The court also cited evidence that patients choose telemedicine for a variety of reasons, including reduced travel and waiting times, as well as evidence that Texas suffers from a shortage of physicians.  The court characterized TMB’s assertion that New Rule 190.8 would improve quality of care “suspect” and found it insufficient to outweigh the anti-competitive effect of New Rule 190.8.

The court also found that Teladoc faced a substantial threat of irreparable injury.  Teladoc maintained that New Rule 190.8 would destroy its business, as it would prevent it from providing telephone-only service in Texas, which represented almost a quarter of its revenue in 2014.  The court agreed, while also crediting Teladoc’s assertion that it is unlikely to recover monetary damages from TMB. 

Finally, the court weighed the respective interests of the parties and the public, concluding that the potential injury to Teladoc from New Rule 190.8 outweighed any threat to public health and safety the injunction would cause.   In reaching this conclusion, the court noted that TMB had presented only anecdotal evidence of possible public harm from telephone-only diagnosis and treatment, while Teladoc had presented countervailing anecdotal evidence, along with evidence that new Rule 190.8 would result in higher prices and reduced access. 

While the temporary injunction is a victory for Teladoc in its back-and-forth battle with TMB, the future of telemedicine in Texas is still uncertain, and telemedicine providers doing business in Texas should monitor this case carefully.  Perhaps the most-watched aspect of this case will be whether TMB asserts a state action immunity defense in the next round of litigation.  In order to successfully assert such a defense, TMB will have to contend the Supreme Court’s recent decision in North Carolina State Board of Dental Examiners v. Federal Trade Commission, No. 13-534, slip op. (U.S. Feb. 25, 2015).  In that case, the Supreme Court reaffirmed that state licensing boards made up of active members of a licensed profession, such as TMB, are not immune from federal antitrust laws if they take anticompetitive actions without active supervision by the state.