The telehealth industry has experienced explosive growth, offering patients unprecedented access to care and innovative treatment models. However, four lawsuits filed today by Eli Lilly and Company against Fella Health, Mochi Health, Willow Health and Henry Meds reinforce the importance of regulatory review of telehealth arrangements. These cases are not just about the legality of compounded GLP-1 medications like tirzepatide—they strike at the very core of telehealth business models, and at least two of the lawsuits raise critical questions about the corporate practice of medicine, regulatory compliance, and the potential for adverse licensing actions against prescribers.
Overview of the Lawsuits
Eli Lilly, the manufacturer of FDA-approved tirzepatide medications (MOUNJARO® and ZEPBOUND®), has filed complaints in federal court against four telehealth companies including Fella Health and Mochi Health, as well as their associated medical groups and compounding pharmacies. The lawsuits allege that these telehealth companies are engaged in the sale and marketing of untested, unapproved compounded versions of tirzepatide, often mixed with additives and not supported by clinical trials or FDA approval.
But the claims go much further than product safety or efficacy. Lilly asserts that Fella Health and Mochi Health have violated state laws prohibiting the corporate practice of medicine, engaging in unfair competition, and making false and misleading advertising claims. The complaints detail how non-physician founders and executives allegedly exert control over medical decision-making, prescription practices, and even the employment of medical staff—actions that, if proven, could constitute unlicensed practice of medicine and trigger regulatory action, including against individual prescribers.
Key Legal Claims and Theories
Corporate Practice of Medicine (CPOM) Violations
Both the Fella Health and Mochi Health lawsuits allege that the telehealth companies, through their non-physician owners and executives, unlawfully control or influence the practice of medicine. This includes:
- Directing or influencing prescribing decisions and treatment protocols.
- Modifying patient prescriptions en masse for business reasons, not based on individualized medical need.
- Controlling the hiring and firing of medical staff and the management of patient medical records.
California, like many states, strictly prohibits corporations owned or controlled by non-physicians from practicing medicine or employing physicians. The Medical Board of California has made clear that only licensed physicians may make key medical decisions, and that business entities cannot interfere with clinical judgment.
False Advertising and Unfair Competition
Lilly claims that the telehealth companies mislead consumers by:
- Marketing compounded tirzepatide as safe, effective, FDA-approved, or “personalized,” when it is not.
- Using Lilly’s clinical trial data and trademarks to promote unapproved products.
- Failing to disclose that patients would receive compounded, not FDA-approved, medications.
These actions are alleged to violate California’s Unfair Competition Law (Cal. Bus. & Prof. Code §§ 17200, 17500) and the federal Lanham Act.
Unlawful Prescription Practices
The complaints allege that prescriptions were changed or dosages altered without proper medical examination or clinical indication, in violation of state law (e.g., Cal. Bus. & Prof. Code § 2242).
Potential Defenses
Setting aside a pharmacy’s ability to compound (or a prescriber’s ability to order) a particular product that is not an essential copy of a commercially available drug, telehealth companies facing claims similar to those in the complaints may consider several defenses, including:
- Separation of Corporate and Medical Functions: Arguing that the medical groups are truly independent and that all clinical decisions are made by licensed physicians, not by the corporate parent or non-physician executives.
- Compliance with Telehealth and Compounding Laws: Demonstrating adherence to state and federal telehealth regulations, including proper patient consent, good faith examinations, and individualized prescriptions.
- Truthful Advertising: Ensuring that all marketing materials accurately describe the nature of the medications provided and do not misrepresent FDA approval status or clinical evidence.
However, the factual allegations in these lawsuits—such as documented communications where non-physicians allegedly directed prescription changes or provided medical advice—underscore the importance of robust compliance and clear separation between business and clinical operations.
Broader Implications for Telehealth Companies
The significance of these lawsuits extends well beyond the issue of compounded GLP-1 medications. They highlight a growing willingness by both private litigants and regulators to scrutinize the structure and operations of telehealth companies, especially those using the “MSO-PC” (Management Services Organization–Professional Corporation) model.
Key takeaways include:
- Increased Regulatory and Licensing Risk: If telehealth stakeholders are found to be violating CPOM laws, not only could the company(ies) face civil liability, but individual prescribers and medical directors could be subject to disciplinary action by state medical boards, including license suspension or revocation.
- Heightened Compliance Expectations: Regulators are likely to examine whether telehealth platforms are truly respecting physician autonomy, or whether business imperatives are driving clinical decisions.
- Reputational and Business Impact: Allegations of false advertising, patient harm, or regulatory violations can damage a company’s reputation and erode patient trust, with potential downstream effects on payer relationships and investor confidence.
A Call to Action for Telehealth Providers
The Eli Lilly lawsuits against Fella Health, Mochi Health, Willow Health and Henry Meds may be a wake-up call for the telehealth industry. Compliance is no longer just about following telehealth modality or compounding pharmacy rules—it requires a holistic review of corporate structure, advertising practices, and legitimate separation of business and clinical functions. While some digital health companies may take the position that CPOM concerns are less critical to operations because the likelihood of enforcement is low in a model that does not include insurance payments, the Eli Lilly litigation reinforces other mechanisms of exposure related to these structural issues. Furthermore, all healthcare organizations with a web presence (whether providing care virtually or not) are advised to conduct a thorough marketing review of their websites to ensure compliance with applicable FDA, FTC and state law standards for advertising. Telehealth companies must ensure that their models are not only innovative and patient-centered, but also fully compliant with the complex web of state and federal laws governing the practice of medicine.
Frier Levitt regularly advises telehealth clients on prioritizing proactive compliance reviews, developing robust training for both business and clinical staff, and implementing careful documentation of the independence of medical decision-making. The stakes for both the MSO/telehealth companies and the PC/individual prescribers are clear. Contact Frier Levitt to speak to an experienced attorney about how we can assist navigating the regulatory issues impacting telehealth models.
To learn more about legal challenges to the medical necessity of GLP-1 compounding, view our related article here.
