Texas Medical Board First in the Antitrust Crosshairs After Supreme Court Decision in North Carolina State Board of Dental Examiners

The first lawsuit, in what may be a wave of antitrust litigation challenging professional board regulations in the wake of the U.S. Supreme Court’s decision in North Carolina State Board of Dental Examiners v. Federal Trade Commission (Dental Examiners), was recently filed in Austin, Texas, by “one of the first and largest telehealth services in the United States” that “connects a network of approximately 700 board-certified, state-licensed physicians with approximately 11 million patients.” The plaintiffs in Teladoc, Inc. v. Texas Medical Board are seeking to prevent a new Texas Medical Board (TMB) rule from taking effect that requires physicians to conduct an in-person patient exam prior to telephonic diagnosis and treatment, regardless of whether the exam is medically necessary.

According to Teladoc’s complaint, TMB (“made up of a majority of active market participants in the profession the TMB regulates”) has been waging a war for years against telehealth providers in Texas:

  • Beginning in 2010, TMB “added a requirement of a ‘site presenter’ to be present with a patient at a designated facility in many circumstances,” which action Teladoc contends “severely restrict[ed] telemedicine consultations” (defined as consultations using real-time audio and video communications). The TMB rule caused Teladoc to stop “offering its members the option of video consultations in Texas because doing so was no longer feasible or cost effective,” according to the complaint, whereas it “continues to offer the option of video consultations in 44 other states.”
  • In June 2011, TMB determined that an existing rule required an in-person physical examination in all cases before a physician can write a prescription. Teladoc challenged the TMB’s interpretation in the courts and won a favorable verdict in December 2014.
  • In January 2015, TMB adopted an “emergency” amendment to the rules mandating a “face-to-face visit or in-person evaluation” before a physician can issue a prescription, regardless of the medical need for the exam. Within days of the board’s action, a Texas state court declared the TMB amendment invalid in February 2015.

The most recent attempt to put Teladoc out of business, according to the complaint, is a new rule that would require Texas physicians to form a physician-patient relationship by “establishing a diagnosis through the use of … physical examination” regardless of the physician’s judgment about whether such an examination is needed. Teladoc is asking the federal district court to stop the new rulemaking, which becomes effective June 3, 2015, dead in its tracks.

Invoking Dental Examiners, in which the Supreme Court held that professional boards composed primarily of active market participants are exempt from antitrust claims only if they are actively supervised by the state government, the Teladoc complaint claims Texas did not actively supervise TMB’s adoption of the new rule. In Dental Examiners, the Supreme Court held that active supervision requires specific mechanisms that “provide ‘realistic assurance’ that a non-sovereign actor’s anticompetitive conduct ‘promotes state policy, rather than merely the party’s individual interests.’”

Put another way, Teladoc says, “[t]he active supervision requirement demands, inter alia, that ‘state officials have and exercise power to review particular anticompetitive acts of private parties and disapprove those that fail to accord with state policy.’” In Teladoc’s view, “[t]his unquestionably did not take place with respect to [the new rule],” because “[t]here was no actual review – much less endorsement – of the substance of the rule by any sovereign actor with the power to veto or modify the rule before it was adopted.” (Teladoc also says there is no “clearly articulated” state policy to adopt anticompetitive restrictions like the new rule.)

Whether Teladoc ends up winning its latest battle with TMB remains to be seen. However, professional boards pursuing upstarts challenging market participants had better watch out.