Eli Lilly is using patient-safety laws as a competitive weapon against telehealth startups
State laws in most of the country say corporations cannot practice medicine — that prescribing decisions belong to physicians, not the companies that employ them. For most of the telehealth boom, that doctrine was more theoretical than enforced. Then Eli Lilly started using it as a weapon.
STAT News health tech correspondent Katie Palmer documented the mechanics in Part 5 of her VirtualRx series published Monday: telehealth companies across more than 30 states present a unified clinical face to patients while operating behind networks of physician-owned medical groups, which are supposed to keep prescribing decisions independent of corporate control. Whether those structures actually satisfy the corporate practice of medicine — CPOM — restrictions is the question Lilly decided to answer in court rather than wait for regulators to ask.
The company filed two lawsuits on April 23, 2025, in the Northern District of California, targeting Mochi Health Corp. and Fella Health/Aios Inc. — cases 25-cv-03534 and 25-cv-03535. The legal theory was CPOM. The plaintiff was not a medical board or an attorney general.
In the Mochi Health case, Lilly alleged that neither company owner was a licensed California physician. The CEO, Myra Ahmad, holds a doctor of medicine degree but is not licensed to practice in the state. The complaint alleged that she and her husband, who runs an affiliated pharmacy and import distributor, directed clinical decisions at Mochi Medical, the affiliated medical group that nominally writes the prescriptions. The corporation, Lilly argued, was practicing medicine through affiliated entities designed to look compliant while the unlicensed owners controlled prescribing at every step. Ahmad told CNBC her model is compliant. She is not wrong that the structure exists. She is wrong that it is lawful.
In the Fella Health case, the allegation is more concrete. Lilly claimed the company's non-physician founder and CEO made sweeping corporate decisions that dictated patient care. Specifically, the complaint alleged that Fella changed patients en masse from one tirzepatide formulation to another with additives for business reasons, not clinical ones. The physicians in the affiliated medical group, according to the complaint, followed instructions. If true, that is not a telehealth company with a compliance problem. That is a corporate structure that has captured the medical decision-making process entirely.
Both lawsuits asserted unfair competition and false advertising claims under California law and the Lanham Act, with CPOM allegations providing the foundational theory. Wilson Sonsini Goodrich & Rosati and Frier Levitt both published detailed analyses of the Lilly complaints when they were filed. Dickinson Wright and Holt Law also covered the suits as part of a broader telehealth regulatory landscape that was shifting. The drug company was not alleging that the compounded drugs were unsafe in isolation. It was alleging that the business model was itself illegal because non-physicians controlled prescribing. This distinction matters: the lawsuits are not really about drug quality. They are about who decides what drug a patient takes.
The enforcement gap is the story's connective tissue. For decades, CPOM was mostly enforced through medical board disciplinary proceedings and occasional AG actions — slow, inconsistent, and largely ignored by the telehealth industry as an abstract threat. Then Eli Lilly changed that. State AGs and medical boards have the authority to bring CPOM actions. California SB 351 and AB 1415, which took effect January 1, 2026, codified and strengthened CPOM restrictions specifically targeting private equity firms, hedge funds, and management services organizations. The laws prohibit these entities from influencing diagnostic decisions, patient care plans, physician schedules, medical records, and clinical hiring and firing. They require 90 days advance notice to the Office of Health Care Affordability for material transactions and detailed financial and governance disclosures. Texas, Oregon, and Washington are considering similar measures. The regulatory infrastructure is being built.
And yet the lawsuits filed last April did not come from the OHCA or the AG. They came from Eli Lilly. The company that sells Zepbound and Mounjaro decided it was easier and faster to enforce the doctrine itself through litigation. The cases are still working through the courts. No judge has ruled on the merits. The companies being sued dispute the allegations. Discovery has not been completed. The legal outcome is genuinely uncertain.
But the competitive effect is already visible. Willow Health and Henry Meds, also named in the April 2025 filings, are smaller companies with less resources to litigate. The lawsuits themselves create pressure. They generate press coverage. They scare investors and potential partners away. A drug company with a billion-dollar interest in protecting its GLP-1 franchise has more stamina for multi-year litigation than a startup betting everything on a compounded product that may or may not survive the FDA's shortage determinations. Lilly does not need to win in court. It needs to make the market too expensive to operate in.
The second-order effect is what makes this worth watching beyond the immediate parties. If Eli Lilly's CPOM theory succeeds, or even if it simply survives a motion to dismiss and forces expensive discovery, other pharmaceutical companies have a template. Any drug maker facing compounded competition could file similar suits in California and other CPOM jurisdictions. The doctrine was designed to protect patients from corporate interference in their medical care. It is now being used by a corporation to eliminate competitors. The irony is structural, not accidental.
Medical boards and AGs have largely declined to act. The enforcement gap is real. California's new laws are stronger, but they were not on the books when the alleged conduct occurred, and their enforcement mechanism relies on the AG's office, which has many priorities and finite resources. Eli Lilly has a very specific one. It is protecting a franchise.
The deeper question is whether CPOM, as a doctrine, was ever really about protecting patients or whether it was always partly about protecting incumbents from competition. The answer is probably both. Physicians have used it to resist hospital consolidation. Hospitals have used it to resist private equity. Now pharmaceutical companies are using it to resist telehealth. The doctrine has no stable political valence. It is a tool, and who holds it determines what it does.
The cases are Eli Lilly and Company v. Mochi Health Corp., No. 25-cv-03534, N.D. Cal. and Eli Lilly and Company v. Fella Health/Aios Inc., No. 25-cv-03535, N.D. Cal.