Teladoc's Antitrust Suit Against TMB Moves Forward

Teladoc's lawsuit against the Texas Medical Board (TMB) is heating up. On Dec. 14, U.S. District Judge Robert L. Pitman refused to dismiss telemedicine provider Teladoc Inc.'s antitrust challenge of TMB's rule requiring, in most circumstances, a defined physician-patient relationship (including a physical examination either in person or face-to-face via telemedicine with a presenter) before prescribing a dangerous drug or a controlled substance. 

The judge found that TMB cannot claim sovereign immunity from antitrust liability as an agent of the state because the state of Texas "lacks sufficient control" over the regulatory board composed of the licensees it regulates.

In its motion to dismiss the case, the state argued that oversight of TMB provided by Texas' courts, the State Office of Administrative Hearings, the governor (by appointing TMB members), and the Texas Legislature were sufficient to meet the "active supervision" requirement of the state action immunity doctrine and that it should be given sovereign immunity from Teladoc's antitrust challenge of the board's regulatory action. In his order, Judge Pitman rejected this argument. 

The Teladoc challenge came on the heels of a decision from the U.S. Supreme Court last year. The Supreme Court ruled that the North Carolina State Board of Dental Examiners violated federal antitrust laws by preventing non-dentists from providing teeth-whitening services in competition with the state's licensed dentists. The Federal Trade Commission (FTC) had challenged the board’s authority to act as a state agency with "state action immunity" from federal antitrust laws. FTC argued (and the Supreme Court agreed) that the board, elected by the licensed dentists in North Carolina, was considered to be a private entity subject to antitrust scrutiny. The court also agreed with the FTC argument that the fact that the licensees subject to the board's authority composed a majority of the regulatory board was further evidence that the state was not sufficiently supervising the board's actions. This was enough for the dental board to be considered a private entity for purpose of antitrust scrutiny.

Since the Supreme Court's decision on the North Carolina case, FTC developed "Staff Guidance on Active Supervision of State Regulatory Boards Controlled by Market Participants." (Note that the adherence to the FTC Staff Guidance is not necessarily required to qualify for state action immunity).* 

In its guidance, FTC states, "Federal antitrust law does not require that a state legislature provide for active supervision of any state regulatory board. A state legislature may, and generally should, prefer that a regulatory board be subject to the requirements of the federal antitrust laws. If the state legislature determines that a regulatory board should be subject to antitrust oversight, then the state legislature need not provide for active supervision."

The Teladoc case against TMB will continue to move forward. The denial of TMB's motion to dismiss does not necessarily mean that a violation of antitrust law has occurred. It only means that the state action immunity defense has been rejected. 

This issue is on the TMA 2015 Winter Conference program Saturday morning, Jan. 30, at the Hyatt Regency Austin. The Texas Sunset Review Commission's review of health-related licensure boards, including TMB, also is in play. The Sunset Advisory Commission's report will be provided to the Texas Legislature meeting in 2017. These developments will affect licensing board composition, operations, and oversights in the future. 

* Note the following limitation on the guidance, as stated in the document: "This document contains guidance developed by the staff of the Federal Trade Commission. Deviation from this guidance does not necessarily mean that the state action defense is inapplicable, or that a violation of the antitrust laws has occurred."

Action, Jan. 5, 2016

Last Updated On

May 12, 2016

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