Okay, since I teach medical students, I suppose I'm the one who can answer this question.
First, in terms of number of years of work and depth of material studied, and the overall "rank" of degrees, a Ph.D. is the highest degree conferred by universities. So, in terms of degree/rank, a Ph.D. is a higher degree than an M.D.
And, yes, in the first 2 years of medical school, the students are taught by Ph.D.s These are the years when they receive their basic science training...physiology, anatomy, biochemistry, histology, etc. These subjects are of course those in which Ph.D.s have the greatest expertise to teach them (we teach them what they need to know to a depth appropriate for the practice of medicine, but that is a long way off from what we know of the subject). Then, in their second 2 years, they are taught by the clinical faculty (M.D.s) who teach them about patient care, conducting physical exams, taking patient histories, clinical signs, symptoms, diagnosis and treatments (this all requires those basic science years to understand why certain symptoms indicate certain disorders and to understand why certain drugs treat certain diseases but not others, and why you would want to avoid some drugs in some patients).
So, while I can teach med students, you sure don't want to come to me when you've got a complex disease that needs to be diagnosed and treated.