Teladoc Wins First Round In Lawsuit Against Texas Medical Board

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Last month, Dallas-based telehealth vendor Teladoc made two significant announcements regarding the future of its business. The first was that it had filed paperwork with the SEC to initiate an IPO. The second was that it was suing the Texas Medical Board over allegations that its policies unfairly protect brick-and-mortar practices from competing with telehealth vendors in the state. That lawsuit was filed by Teladoc on April 29th and this past week the company walked away with an early victory in what is likely to be a long legal battle.

In the case, Teladoc is arguing that newly published limits on the use of telemedicine in Texas put the company at an unfair competitive disadvantage, essentially protecting traditional practices without substantiating the clinical benefit of doing so. The new rules were passed on April 10 after four years of legal battles with Teladoc. Specifically, the rules mandate that physicians are not authorized to diagnose conditions or prescribe medications over a phone or video connection unless they have a preexisting relationship with the patient that has included at least one prior face-to-face visit. For a company like Teladoc, which matches patients with any available doctors over the Internet, this requirement brings its service to a complete halt. Bill Hammond, CEO of the Texas Association of Business, claims that the rules “will drive a stake right through the heart of telehealth,” while Teladoc legal council estimates that the company will lose an estimated $15.5 million if the rule is not overturned before its implementation date of June 3.

In response to the new rules, Teladoc filed an antitrust lawsuit against the Texas Medical Board claiming that it recognized that telehealth services had become a threat to brick-and-mortar healthcare providers and was working on their behalf to provide protection. The complaint reads, “The competitive threat to traditional office- and hospital-based physicians became clear. The TMB began working to stamp out this threat to competing physicians.”

Last week, the company argued its case successfully enough to earn a temporary injunction from US District Judge Robert Pitman. The injunction bars the Texas Medical Board from enacting the new rules until the lawsuit is resolved. Pitman agrees that the Texas Medical Board may be acting anti-competitively, and cites the state’s physician shortage in rural areas and Teladoc’s potential to help alleviate the problem as part of the reason for his decision. He writes, “Elimination of physicians providing health care would thus negatively impact not just the competitor physicians, but consumers, a classic anti-trust injury.”


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