- On Friday, a federal DC district appeals court upheld a February 2017 decision which blocked the acquisition of Cigna by health insurance giant Anthem. Antitrust concerns led 11 states and the District of Columbia to join the US Justice Department Antitrust Division in the original suit, and again for the appeal.
If approved, the $54 billion acquisition of Cigna by Anthem would have reduced the number of national health insurance carriers from four to three. According to Justice Department statements, it would have been the largest transaction of this type in the healthcare industry, and would have crippled competition in over 30 individual healthcare markets across the nation.
In a statement released after the ruling, Anthem said it was “disappointed by today's decision given that the demonstrated efficiencies make this a pro-competitive, consumer friendly transaction.”
“Combining Anthem and Cigna would positively impact the health and well-being of millions of Americans and deliver significant cost savings to consumers,” the statement said. Anthem is currently reviewing its options and continues to claim it is committed to completing the acquisition.
The insurer further quoted a statement by Judge Kavanaugh in her dissent on the appeal who wrote, “the record decisively demonstrates that this merger would be beneficial to the employer-customers who obtain insurance services from Anthem and Cigna.”
In a statement released after the ruling on Friday, Deputy Assistant Attorney General Brent Snyder of the Justice Department’s Antitrust Division applauded the court’s decision.
“It upholds an injunction against the merger of two of the country’s largest health insurers, which not only would have led to higher prices but also slowed innovation and harmed consumers by weakening value-based offerings aimed at lowering medical costs,” said Snyder. “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.”
“I am proud of the outstanding work done by the trial team, who established that this merger would be anticompetitive, and by the lawyers who defended the case on appeal. As this case shows, the Antitrust Division and our state partners will continue to vigorously protect competition and enforce the antitrust laws in this critical industry.”
The original ruling which blocked the acquisition cited possible negative effects on market competition as a key reason for denying the merger.
In the original decision, Judge Amy Berman Jackson cited the effect such a merger would have on the health insurance market of Richmond, VA. If approved the merger would give the new insurer entity a 77 percent market share in Richmond.
Five days after the original verdict, Anthem filed an appeal and requested an expedited process.
Anthem argued the acquisition would enable the insurance giants to have the bargaining power to negotiate rates with physicians and pharmaceuticals.
Anthem testified that the merger would bring $2.4 billion in efficiencies
The American Hospital Association was among the healthcare stakeholders vehemently opposed to the merger.
For the appeal the AHA testified against Anthem’s assertion that a merger would bring efficiencies and cost savings to the healthcare markets.
“The trial court properly found that the lower fees Anthem characterizes as a consumer benefit will actually damage patient care, stifle innovation, and cause patients to use more health care services.”
“The market cannot rely on small players and new entrants to provide the competition needed to spur incumbents to adopt innovative solutions, nor can these small and new entrants consistently develop innovative and workable solutions on their own.” the AHA wrote.
“Innovative, value-based reimbursement models frequently require large numbers of lives, making it all but impossible for new entrants to compete with the large, national players like Anthem and Cigna.”
Shares for Cigna on Friday closed at $156.37, up 0.1 percent, while Anthem shares ended at $177.89, down 0.2 percent.
Anthem and Cigna continue to be in opposing lawsuits with each other over alleged obligations stemming from the acquisition process.