Anthem loses Cigna takeover appeal

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Dive Brief:

  • The U.S. Court of Appeals on Friday upheld a decision to block the $54 billion merger between insurance giants Anthem and Cigna.
  • A federal judge ruled in February that the combined company would result in reduced competition in the national health insurance market, agreeing with the U.S. Department of Justice, which brought the antitrust case last July. Anthem filed an appeal to reverse the decision later that month.
  • In a 2-1 decision, the court ruled Anthem had failed to “show the kind of extraordinary efficiencies necessary to offset the conceded anticompetitive effect of the merger.”

Dive Insight:

Unless Anthem takes it to the Supreme Court, this is the end of the deal after several months of contentious debates and infighting among the two health insurance giants.

The healthcare industry has been closely watching the case. The American Medical Association 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.

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 $14 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 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.

Earlier this week, Anthem filed a motion with the Delaware Court of Chancery for a preliminary injunction that would block Cigna from terminating the deal on April 30, which is the contractual deadline.

Anthem and Cigna could soon end their plan to merge. Once it’s over, it will be “harder for either Anthem or Cigna to do another deal that involves a combination of another large insurer,” 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.”

Also this week, Anthem 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.

Healthcare Dive requested comments from both payers. Anthem has not yet sent a statement. Cigna, through a company lawyer, said it has no comment at this time. An 8-K Cigna filed earlier today just states 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 scheduled for May 8, 2017.”

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