Appeals court upholds decision to block Anthem bid for Cigna

Court denies Anthem's appeal of antitrust ruling against proposed Cigna merger
BREAKING: Anthem loses Cigna takeover appeal
Author

30 April, 2017

After the merger was first blocked, Cigna filed a lawsuit against Anthem seeking at least $14 billion in damages, which is a lot more than the $1.85 billion contractual breakup fee.

Anthem and Cigna announced their intention to live in corporate merged bliss back in 2015.

The federal appeals court in Washington ruled by a majority of 2 to1 that the Anthem-Cigna merger would have unacceptably reduced competition in the market. Therefore, my approach to this case would require District Court resolution of one remaining question: Would Anthem-Cigna obtain lower provider rates from hospitals and doctors because of its exercise of unlawful monopsony power in the upstream market where it negotiates rates with providers? Aetna then said it was abandoning its deal.

Anthem's bid to complete the merger is likely over now.

Anthem said it was disappointed by the decision. "We are committed to completing the transaction and are now reviewing the opinion and will carefully evaluate our options", the company said in a statement.

Anthem told the DE court in a filing on Wednesday that there were "meaningful opportunities" to complete deal, saying it was seeking a settlement with the Justice Department under the new Trump administration.

Consumer groups and medical organizations also objected to the merger, which would have resulted in the country's largest health insurer.

President Donald Trump and congressional Republicans want to scrap the Affordable Care Act and replace it, but so far they have been unsuccessful. Cigna, through a company lawyer, said it has no comment at this time. The Justice Department was skeptical that any savings would be passed on to customers.

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Bill Baer, the former head of the Justice Department's Antitrust Division who had made the decision to challenge both insurance mergers, said in an email that the ruling on the Anthem/Cigna deal "is a ringing endorsement of the importance of competition in health insurance markets". Indianapolis-based Anthem declined less than 1 percent to $177.89.

The decision likely puts an end to the merger, and comes on the heels of another major health insurance merger, between Aetna and Humana, also being blocked. "ORCRP000343-topic.html" class="local_link" >Aetna's planned acquisition of Humana.

The insurers have the option of appealing the case to the U.S. Supreme Court to try to save the deal.

As previously disclosed, on February 8, 2017, the U.S. District Court (the "District Court") for the District of Columbia enjoined the proposed merger between Cigna Corporation and Anthem, Inc. Of the $2.4 billion in claimed savings, Israel projected that $1.5 billion would result from Cigna customers accessing Anthem's lower rates, while $874.6 million would result from Anthem customers accessing Cigna's lower rates.

"Anthem has not explained why these projected savings would even exist", Rogers wrote.

The litigation has played out amid acrimony between Anthem and Cigna.

The American Medical Association, which represents physicians, applauded the decision. Rogers was nominated by another Democrat, President Bill Clinton, in 1993. Once it's over, it will be "harder for either Anthem or Cigna to do another deal that involves a combination of another large insurer", Mitchell Raup, an antitrust attorney from Polsinelli, told Healthcare Dive.


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