Texas Telemedicine Case Heads Back to Trial

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By Matthew Loughran

Oct. 18 — The Texas Medical Board has decided to abandon its challenge to a federal court ruling that the board was not immune from federal antitrust laws ( Teladoc, Inc. v. Texas Medical Board , 5th Cir., No. 16-50017, 10/17/16 ).

The U.S. Court of Appeals for the Fifth Circuit Oct. 17 granted a motion by the board to voluntarily dismiss the appeal in the case. The board was scheduled to file a brief on Oct. 17 defending its status as a state actor, immune from complying with the Sherman Act. However, the appeals court last week denied a motion by the board to extend that deadline to Oct. 24.

The action restarts the underlying case in the federal district court, where Teladoc Inc., one of the nation’s largest telemedicine providers, has challenged the board’s licensing rules as intentionally geared toward thwarting its attempt to enter the market for physician services in the state.

“The regulation of medicine is a right reserved for the States, and the Board stands behind and will seek future vindication of its state-action immunity for performing the duties assigned it by the Texas Legislature,” Scott Freshour, the interim executive director of the Texas Medical Board, said in a statement sent to Bloomberg BNA.

However, Teladoc questioned the board’s motives in withdrawing the appeal. “The Texas Medical Board evidently withdrew its appeal because it didn’t want to suffer a ninth loss to Teladoc in the courts,” Adam Vandervoort, the chief legal officer of Teladoc, said in a statement sent to Bloomberg BNA.

He added that the decision raised “troubling questions” about the board’s motive for filing the appeal in the first place.

State Action Immunity

The case involves a board rule that required physicians to perform face-to-face examinations before prescribing certain drugs. Teladoc sued in the U.S. District Court for the Western District of Texas, claiming that the law violated the Sherman Act because it acted as a way for practicing physicians in the state to prevent competition from telemedicine providers like Teladoc.

The board sought to dismiss the case, claiming that it acted as an agency of the state government and thus its actions were immune from federal antitrust scrutiny under the state action doctrine. The judge, however, refused to dismiss the case, finding that the board wasn’t sufficiently supervised by the state such that it could claim state action immunity.

The board appealed to the Fifth Circuit under the collateral order doctrine, which allows a party to appeal an order that doesn’t conclude the litigation if the order conclusively decides an issue different from the actual merits of the claim that would be effectively unreviewable if the parties waited for a final judgment.

After a series of friend-of-the-court briefs questioned whether the collateral order doctrine applied to a claim of state action immunity, the board went back to the district court seeking to certify the case for immediate appeal under a different procedural rule. However, the court denied that certification, finding that the board had waited too long and that the appeal to the Fifth Circuit removed the case from the district court’s jurisdiction ( 159 HCDR, 8/17/16 ).

Now that the board has dismissed its Fifth Circuit appeal, the case returns to the district court for trial, where the board is expected to reassert its immunity argument as a defense to the antitrust claims. “The Board’s commitment to the defense of its telemedicine rule and its immunity from federal regulation remains firmly intact,” Freshour said in his statement.

The board is represented by the Texas Attorney General’s Office. Teladoc is represented by Cleary Gottlieb Steen Hamilton LLP and Jackson Walker LLP.

To contact the reporter on this story: Matthew Loughran in Washington at mloughran@bna.com

To contact the editor responsible for this story: Peyton M. Sturges at psturges@bna.com

For More Information

The Fifth Circuit’s order dismissing the appeal is at http://src.bna.com/jrh.

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