BIONEWS
Eli Lilly Is Using a Patient-Safety Doctrine as a Competitive Lever
The drug maker's April 2025 suits against four telehealth startups look like product safety cases. The legal theory underneath them is something else.
The drug maker's April 2025 suits against four telehealth startups look like product safety cases. The legal theory underneath them is something else.
Eli Lilly's April 2025 lawsuits against four telehealth startups read, at first, like a fight over compounded knockoffs of Mounjaro and Zepbound. The complaints, filed April 23, 2025 in the U.S. District Court for the Northern District of California, name Mochi Health, Fella Health, Willow Health, and Henry Meds, plus their affiliated medical groups and compounding pharmacies. The headline accusation is that the defendants sell untested, unapproved copies of Lilly's GLP-1 drugs, including oral tablets and sublingual drops, at industrial scale.
That framing is the one a reader is most likely to see in wire copy. It is also the framing that buries the legal mechanism actually doing the work. The suits do not rely on FDA product-safety law as their central theory. They lean on a state-level doctrine called the Corporate Practice of Medicine, or CPOM, that was written to keep corporate profit motives away from clinical decisions. Lilly is the plaintiff. The defendants are commercial competitors and, in the case of the affiliated telehealth platforms, downstream distributors of the very products Lilly sells.
CPOM is a doctrine most readers have never heard of, and that is part of why the case is hard to read on the surface. California and more than 30 other states bar non-physician corporations from practicing medicine. The rule is enforced mostly by state medical boards, and it shows up in ordinary healthcare business as a structural requirement: a clinic must be owned by a licensed physician or a small group of them, and the corporate parent cannot dictate clinical judgment. The architecture of the modern national telehealth brand depends on this rule. Telehealth operators build affiliated medical groups, separately incorporated and separately licensed across states, that hold the prescribing authority. The brand sits above the medical group, contracts for its services, and stays clear of clinical decisions. Epstein Becker Green's analysis describes how that firewall is supposed to work, and how thin it can get in practice.
Lilly's theory, as laid out in the complaints, is that the firewall isn't real for any of the four defendants. The conduct alleged includes non-physician founders and CEOs setting prescribing policy, mass-modifying prescriptions for business reasons, controlling the hiring of medical staff, and managing medical records. Frier Levitt's client alert reads the cases as striking at "the very core of telehealth business models," because the affiliated-medical-group structure is the legal device that lets national telehealth brands operate across CPOM states at all.
Mochi Health, the most prominent of the four defendants, is also the one whose internal structure gets the most attention in the filings. Per Epstein Becker Green, Mochi's owners are a husband-and-wife pair, neither of them a licensed physician, and the CEO has publicly described herself as having doctor experience and characterized the business as developed by doctors. The complaint's CPOM theory, if proven, would establish that what looks like a compliant medical-group-and-brand split is in fact a corporation practicing medicine. Mochi has publicly defended its model as compliant with FDA guidance, according to CNBC. Fella, Willow, and Henry Meds had not commented at the time of CNBC's reporting.
The doctrinal inversion is the part the wire has not led with. CPOM is a patient-protection rule. The plaintiff invoking it here is not a state medical board. It is a publicly traded drug manufacturer whose revenue depends on Mounjaro and Zepbound maintaining market exclusivity against compounded tirzepatide. Wilson Sonsini's analysis frames the lawsuits as exposing the structural CPOM exposure of the entire compounded-GLP-1 telehealth channel, not just the named defendants. The Lanham Act and false-advertising claims are in the complaints too, but the CPOM theory is the one that could reach upstream into the affiliated-medical-group model that the broader telehealth industry has built on.
If the CPOM theory survives motion to dismiss, the practical risk migrates from the corporate defendant to the prescribing clinicians. State boards can pursue individual licensees for participation in a CPOM violation, and Frier Levitt flags that prescribers at affiliated medical groups may face adverse licensing actions even if their corporate parent is the named defendant. That is a different distribution of risk than a product-safety suit, where the manufacturer of a compounded drug takes the heat. In a CPOM case, the medical group is the structural insulator that has to hold, and individual prescribers are downstream of it.
The suits also land in the middle of a tightening CPOM environment that the industry was already watching. California passed AB 3129 in 2024 to extend CPOM restrictions to private equity and management services organizations; Governor Newsom vetoed it. A successor bill, AB 1415, has been refiled with a narrower scope, per Quarles & Brady. Oregon's HB 4130, which would have explicitly covered certain telehealth prescribing arrangements, died in the state Senate but is expected back in 2026, according to STAT. STAT's June 2026 reporting frames the telehealth industry as "caught in the crossfire" of this state-level activity. Lilly's private enforcement now sits on top of that public enforcement trend, using a doctrine the states are themselves trying to expand.
What to watch next is the venue answer, not the merits rhetoric. The N.D. Cal. complaints have been pending for more than a year. A motion to dismiss ruling on the CPOM counts will tell the industry whether a drug manufacturer can credibly invoke a state medical-licensing doctrine against a competitor, or whether Lilly has to fall back to its Lanham Act and false-advertising claims. Either outcome reaches the structural question every national telehealth operator is asking: how much of the affiliated-medical-group firewall actually has to be real for the model to survive?