Antitrust Law Daily Wrap Up, ANTITRUST—W.D. Tex.: Texas Medical Board not immune from liability, (Dec 15, 2015)

By Greg Hammond, J.D.

Teladoc, Inc., one of the largest telehealth services in the United States, may proceed with claims that the Texas Medical Board (TMB) is unlawfully restricting telehealth services in Texas, the federal district court in Austin has decided. In denying the TMB’s motion to dismiss, the court determined that Teladoc’s antitrust claim is not barred by the applicable statute of limitations and the TMB is not entitled to state action immunity (Teladoc, Inc. v. Texas Medical Board, December 14, 2015, Pitman, R.).

Teladoc filed suit in April 2015, seeking to enjoin the TMB from enforcing rules that would purportedly restrict telehealth services in Texas. In particular, Teladoc identified a number of rules that the TMB implemented or attempted to implement in in order to block competition from Teladoc, including: (1) New Rule 174, requiring an in-person physical exam before any consultation with a patient using video conferencing technology, which would prevent Teladoc from offering Texas patients the option of video consultations; (2) an invalid interpretation of Rule 190.8, which was rejected by the Texas Court of Appeals as departing from and effectively changing the text of the rule; (3) an “emergency” rulemaking, which was invalidated by a Texas state court that found no imminent peril to public health, safety or welfare; and (4) New Rule 190.8, requiring that physicians conduct an in-person physical exam before telephonic diagnosis and treatment are allowed, regardless of whether the exam is medically necessary.

The TMB moved to dismiss, alleging the antitrust claim is barred by the statute of limitations and that it is immune from antitrust liability.

Statute of limitations. The court first concluded that the TMB has failed to show that the statute of limitations bars the individual doctor plaintiff’s claims because the TMB focuses solely on Teladoc’s claims. Second—under the continuing violation doctrine—allegations that the TMB began its course of conduct prior to adopting New Rule 174 by attempting to enforce a new reading of Old Rule 190.8, and when that attempt failed, continued its course of conduct by adopting the new rule, was sufficient to demonstrate that TMB engaged in a continuous course of conduct aimed at interfering with the plaintiffs’ ability to engage in telemedicine. Lastly, the court concluded that the antitrust claim was not barred by laches because the TMB failed to rebut arguments that New Rule 174 would cause consumers to face higher prices for medical care, as well as reduced access to telehealth services.

State action immunity. Teladoc’s antitrust claim also was not barred by the doctrine of state action immunity. TMB argued that it is subject to active state supervision because its decisions are subject to judicial review by the courts of Texas and the State Office of Administrative Hearings, as well as review by the Texas Legislature. The Supreme Court, however, mandated that the supervisor must have the power to veto or modify particular decisions to ensure they accord with state policy for the active supervision requirement to be met. The court concluded that the TMB failed to demonstrate that the courts of Texas, the State Office of Administrative Hearings, or the Texas Legislature have the ability to veto or modify the TMB’s rules.

The case is No. 1-15-CV-343 RP.

Attorneys: Drew Navikas (Cleary Gottlieb Steen & Hamilton, LLP) and Dudley D. McCalla (Jackson Walker LLP) for Teladoc, Inc. and Teladoc Physicians, PA. James Carlton Todd, Office of the Attorney General, for Texas Medical Board.

Companies: Teladoc, Inc.; Teladoc Physicians, PA

Cases: Antitrust TexasNews