Update: Cigna sued Anthem after terminating the merger deal. Read more here.
- Anthem's notice of appeal to reverse a federal judge's recent decision to block its pending $54 billion acquisition of Cigna has been sent to the U.S. Court of Appeals for the District of Columbia.
- Last week, U.S. District Judge Amy Berman Jackson ruled in favor of the Department of Justice, which filed an antitrust lawsuit against the insurance giants last summer to block the merger, citing anticompetition, hindered innovation efforts, and increased prices to consumers.
- The $37 billion proposed merger between Aetna and Humana, which was also challenged by the DOJ's antitrust division, was recently blocked in court on antitrust grounds as well.
According to the final court decision blocking the megamerger, Anthem and Cigna are the second and third largest health insurance companies in the country. Combining the two would result in the nation's largest payer, and the judge found this would substantially lessen competition in the insurance market.
The effect the merger would have on the insurance industry could be highly detrimental, as many in the hospital industry have contended, including the American Medical Association. It would likely lead to higher prices for consumers, eliminate the companies' "competition against each other for national accounts," and hinder innovation efforts in the insurance market, according to the court ruling.
The bickering between the two companies, which was at least in part due to Cigna's uncertainty that was made public through court documents of whether it wanted to proceed with the deal, had an influence on the judge's ruling. "...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," the court order states. "Cigna officials provided compelling testimony undermining the projections of future savings, and the 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," the filing adds.
The judge argued Anthem has urged "the Court to look away, and it attempts to minimize the merging parties’ differences as a “side issue,” a mere “rift between the CEOs.” But the Court cannot properly ignore the remarkable circumstances that have unfolded both before and during the trial."
Anthem had indicated it would file for an appeal on the same day of the court ruling. This move had been expected given the large sum of the contractual breakup fee Anthem would have to pay Cigna if the merger fails to go through – $1.85 billion. However, Anthem is perhaps attempting to buy more time to avoid having to pay the breakup fee as antitrust lawyers and analysts argue the ruling is unlikely to be reversed, CNBC reported.