Anthem steadfast in commitment to increasingly unlikely Cigna merger
- The U.S. Court of Appeals for the District of Columbia Circuit on Friday upheld a court decision to block the $54 billion merger between health insurance giants Anthem and Cigna.
- Anthem remains committed to having its purchase of Cigna go through despite the courts' decisions and the fact that the payers' contractual deadline (April 30) has already passed.
- A federal judge ruled in February that the combined company would result in reduced competition in the health insurance market, agreeing with the U.S. Department of Justice, which brought the antitrust case in July 2016. Anthem filed an appeal to reverse the decision later that month.
Unless Anthem takes it to the Supreme Court, this is the end of the Anthem/Cigna-DOJ litigation after several months of contentious debates and infighting among the two health insurance giants. In a 2-1 decision, the Court of Appeals ultimately found Anthem had failed to “show the kind of extraordinary efficiencies necessary to offset the conceded anti-competitive effect of the merger.”
Last week, Anthem filed a motion with the Delaware Court of Chancery for a preliminary injunction that would block Cigna from terminating the deal. The hearing for the preliminary injunction is set for May 8. Cigna, through a company lawyer, said it had no comment on the court's decision. An 8-K Cigna filed on Friday just stated that it "continues to work through the litigation process in the pending Delaware Court of Chancery matter involving Cigna and Anthem, including the preliminary injunction hearing."
After the Court of Appeals' decision was announced, Anthem said it is disappointed "given that the demonstrated efficiencies make this a pro-competitive, consumer friendly transaction." The company added that it is "committed to completing the transaction" and it is "currently reviewing the opinion and will carefully evaluate" its options.
However, Anthem and Cigna are expected to soon end their plans to merge.
Cigna has been wanting to end the merger plans for months. After the merger was first blocked, Cigna filed a lawsuit against Anthem seeking at least $13 billion in damages, which is a lot more than the $1.85 billion contractual breakup fee. It also asked for a statement that Cigna had lawfully terminated the deal.
Anthem was granted a temporary restraining order against Cigna by a Delaware court judge shortly thereafter. The infighting certainly did not help support Anthem-Cigna's argument that it would effectively implement the claimed efficiencies that would benefit consumers.
"The decision confirms the district court’s conclusion that the merger would not have provided real benefits to consumers, but instead would have harmed competition in these important markets," Deputy Assistant Attorney General Brent Snyder of the DOJ's antitrust division said in a statement about the Court of Appeals' ruling.
The healthcare industry has been closely watching the case since for nearly a year. The American Medical Association (AMA) was quick to issue a statement applauding the decision from the Court of Appeals. “The appellate court sent a clear message to the health insurance industry: A merger that smothers competition and choice, raises premiums and reduces quality and innovation is inherently harmful to patients and physicians,” said AMA President Andrew W. Gurman. The American Hospital Association also supported the decision.
Anthem recently released first quarter 2017 earnings showing it beat projections with $1 billion in net income. It also said it would cautiously begin work on 2018 rates for the Affordable Care Act exchanges. Anthem and other payers, however, are still anxiously awaiting word from the President Donald Trump administration on whether it will continue the cost-sharing reduction subsidies. Cigna will release its Q1 2017 earnings report on Friday.
If the deal isn't completed, it will be “harder for either Anthem or Cigna to do another deal that involves a combination of another large insurer” once it's over, Mitchell Raup, an antitrust attorney from Polsinelli, told Healthcare Dive. “They would have to convince the Department of Justice or perhaps a court that the next deal is not like this deal, that the judge’s opinion about this deal doesn’t apply to the next deal.”
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