Telemedicine company Teladoc's recent lawsuit against the Texas Medical Board is one of the first cases that could be affected by a recent U.S. Supreme Court ruling about state regulatory boards' immunity—or lack thereof—from antitrust laws.
Teladoc sued the Texas Medical Board on April 29 in federal court over a new rule that requires physicians to either meet with patients in person before treating them remotely or have other providers physically present with patients when treating them remotely for the first time. Teladoc, which uses technology to facilitate patient-doctor visits, alleges the rule violates antitrust laws because it would restrict the company's ability to compete—and as a result raise prices and reduce access to physicians in the state.
A spokeswoman for the Texas Medical Board said Friday that she couldn't comment on pending litigation. But the board characterized the new rules in an April 14 news release as an expansion of telemedicine opportunities “representing the best balance of convenience and safety by ensuring quality healthcare for the citizens of Texas.”
“Essentially the only scenario prohibited in Texas is one in which a physician treats an unknown patient using telemedicine, without any objective diagnostic data, and no ability to follow up with the patient,” the board said in the news release.
Teladoc, however, argues in its lawsuit that the state medical board began to take action to limit the company when it became a competitive threat.
Teladoc also argues that a recent U.S. Supreme Court decision makes it clear that the medical board is not immune from antitrust action.
In North Carolina Dental Board v. FTC, the Supreme Court said that state licensing boards made up of active members of the profession, such as practicing doctors, are not immune from antitrust laws unless they are actively supervised by the state.
The Supreme Court said the North Carolina Dental Board, composed mostly of practicing dentists, had no right to tell competing non-dentists in mall kiosks to stop offering teeth-whitening services. The board was not immune from antitrust laws because it was not actively supervised by the state, the justices said.
Twelve of the Texas board's 19 members are practicing doctors, and Teladoc alleges that neither the state of Texas nor the state's Legislature actively supervise the board.
"As the Supreme Court confirmed in its NC Dental opinion earlier this year, the Sherman Act reaches joint conduct by licensing boards, and states may not abandon markets to the unsupervised control of members of the licensed profession," Leah Brannon, an attorney with Cleary Gottleib Steen & Hamilton representing Teladoc, said in a statement.
Board spokeswoman Megan Goode, however, said the board is supervised by the state in that it “is subject to continuous oversight and review by the governor and Legislature." "There are a number of standard reporting requirements for all Texas state agencies, plus all go through sunset review, audits, etc.," Goode said.
But Dr. William Sage, a professor at the University of Texas School of Law, said the Texas dispute "is exactly the sort of case that the North Carolina board decision was concerned about."
Sage said he doubts the medical board of Texas would meet the Supreme Court's definition of actively supervised.
Robert Fellmeth, a professor of public interest law at the University of San Diego School of Law, agrees. In fact, he doesn't believe any state medical board would clear the bar.
Fellmeth, who is also director of the university's Center for Public Interest Law, said that allowing active market participants to make decisions about competitors presents “naked conflicts of interest.”
“They think they're doing what's right, but they're members of a tribe that profits from erecting barriers to entry,” Fellmeth said.
But Dan Goldfine, chair of the antitrust practice at Snell & Wilmer in Phoenix, said it's possible the Texas Medical Board might clear the threshold laid out in North Carolina Dental Board.
Supreme Court Justice Anthony Kennedy wrote in the majority opinion in that active supervision requires the supervisor to review the substance of an anticompetitive decision; the supervisor must have the power to veto or change the board's decisions to make sure they're in line with state policy; and the supervisor may not be an active market participant.
But Goldfine said he doesn't think the high court's opinion necessarily affects the Texas case because it simply affirmed existing law. The case would have raised the same questions regarding antitrust immunity even without that ruling, he said.
Fellmeth, however, called the North Carolina ruling one of the most important Supreme Court decisions in more than 70 years, and he thinks more lawsuits will flow from it.
His Center for Public Interest Law, along with two consumer organizations, recently sent letters to every state attorney general saying states should change how they regulate and license professions and trades in light of the decision.
The boards, the groups said, must be subject to active state supervision, or they must change their compositions so they're not dominated by professionals actively competing in the market they're regulating.
