A federal judge in Washington blocked Anthem’s proposed $54 billion acquisition of Cigna., handing antitrust enforcers a second win in two months against a major merger in the health insurance sector.
The U.S. Justice Department sued in July to block Anthem’s deal and Aetna’s proposed $37 billion tie-up with Humana, alleging the mergers would amount to an “unprecedented consolidation in the health insurance industry.” In the suit against the Anthem and Cigna merger, federal antitrust lawyers said the deal would hurt competition for millions of consumers who receive health coverage from national employers.
Anthem and Cigna’s defense, at trial, was dogged by tension between the two companies over the execution of the merger. In the buildup to trial, U.S. District Judge Amy Berman Jackson was struck by the feud, at one point remarking that it was a “bizarre situation” to make scheduling accommodations for a deal Cigna appeared to no longer desire.
In her ruling on Feb. 8, Jackson described that discord as the “elephant in the room.”
“In this case, the Department of Justice is not the only party raising questions about Anthem’s characterization of the outcome of the merger: one of the two merging parties is also actively warning against it,” Jackson wrote.
Cigna officials, Jackson said, “provided compelling testimony” that undermined the forecast of future savings. “[T]he disagreement runs so deep that Cigna cross-examined the defendants’ own expert and refused to sign Anthem’s findings of fact and conclusions of law on the grounds that they ‘reflect Anthem’s perspective’ and that some of the findings ‘are inconsistent with the testimony of Cigna witnesses,’” the judge wrote.
Jackson’s ruling was the second in weeks against consolidation in the health care arena.
U.S. District Judge John Bates in January, citing “serious concerns,” enjoined the Aetna-Humana merger. A status conference is set for April 5.
Jackson rejected Anthem’s argument that the deal would create efficiencies that would save national account customers a combined $2 billion in medical expenses. The judge said the claimed savings are not “merger-specific, they are not verifiable, and it is questionable whether they are ‘efficiencies’ at all.”
She also said the Justice Department lawyers had “carried their burden to demonstrate that the proposed combination is likely to have a substantial effect on competition in what is already a highly concentrated market.”
Anthem’s lawyer, White & Case partner Christopher Curran, declined to comment on the decision, noting that the case remains pending. A lawyer for Cigna, Paul Weiss partner Charles Rule, was not immediately reached for comment.
The ruling Wednesday came as the Senate confirmed U.S. Sen. Jeff Sessions as U.S. attorney general. Sessions’ approach to antitrust issues remains a question to many corporate defense lawyers.
Trump hasn’t given any clear indications of how his administration will approach antitrust enforcement. He has repeatedly said he’s not in favor of AT&T Inc.’s proposed tie-up with Time Warner Inc. “It’s too much concentration of power in the hands of too few,” Trump said in October.
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