Update: Cigna sued Anthem after terminating the merger deal. Read more here.
- Anthem filed an "emergency motion" on Monday requesting an expedited consideration of its appeal seeking to overturn last week's court ruling to block its $54 billion acquisition of Cigna.
- The insurance giant argued a speedy appeal process would benefit consumers, the judge "made serious errors of law, fact, and logic," and it would "suffer irreparable harm" if the appeal is delayed.
- The insurance companies' contractual merger deadline (April 30) is approaching, but Cigna refused to extend the timeline again, according to the new court filing. Their initial deadline was January 31.
Cigna's decision to turn down Anthem's proposal to extend their contractual deadline shows continued disagreement over whether or not to proceed with their merger plans and how. Cigna has been getting cold feet for months and the bickering among the two companies influenced Judge Amy Berman Jackson's decision to block the deal. The chances of the court ruling being overturned are slim to none so the payers' uphill battle may just come down to the $1.85 billion contractual breakup fee Anthem would have to pay Cigna if they fail to complete the deal. Earlier this month, Cigna reported its adjusted income from operations totaled $2.1 billion in 2016.
While Anthem argued in court that any anticompetitive effects of the combined company would be offset by the efficiencies it would create, the judge concluded it would likely result in increased prices for consumers, eliminated "competition against each other for national accounts," and hindered innovation efforts in the insurance market.
This conclusion as well as last month's court ruling that blocked the $37 billion proposed merger between Aetna and Humana underscore "that it is difficult to get approval for megamergers of companies that compete directly in multiple markets with consumer impact, especially if the market in question will be transformed from five competitors to three,” Bloomberg Law's Liz Crampton told Healthcare Dive. Aetna and Humana officially dropped their plans to merge on Tuesday. Aetna CEO Mark T. Bertolini said in a statement, "...both companies need to move forward with their respective strategies in order to continue to meet member expectations."
This isn't the first time Anthem attempted to expedite their case. When a speedy trial was requested last August, the response was that their case is too complicated and unprecedented to be rushed. In its latest motion, Anthem acknowledged that "this is an extraordinary request" and indicated it would be "willing to make substantial sacrifices to minimize the inconvenience to the Appellees and the Court." The company proposed that the opposing parties be given until March 6 to submit their arguments. "If necessary, Anthem will forgo oral argument," the court filing states.
If the deal isn't finalized, Cigna may look to merge with or be acquired by a different insurance company. It would make sense for the payer to engage in this activity, considering the chart in the tweet below from independent research provider CreditSights shows it has a relatively small presence in the Medicare and Medicaid markets and enrollment in both programs is expected to significantly grow in the near future:
With Anthem/Cigna prospects fading, is M&A the answer for $CI as it looks to build Medicare and/or Medicaid business? pic.twitter.com/9XdEDdz6wy— CreditSights (@creditsights) February 13, 2017
While Cigna was banned from marketing its Medicare Advantage plans in 2016 due to sanctions imposed by the CMS, the company would still have as much as $14 billion in capital this year to likely spend on more feasible M&A activity if the Anthem deal falls through, according to a Forbes report.