US court blocks Anthem's $54-bn acquisition of Cigna
09 February 2017
A US federal court has blocked Anthem's proposed $54-billion acquisition of Cigna, in a move that closed doors on what could have created the largest health insurance company in the United States.
The federal judge said the merger of the nation's two largest insurers could have affected up to 53 million consumers and unduly reduced competition in the healthcare economy.
"The antitrust laws are designed to protect competition, and the claimed efficiencies do not arise out of, or facilitate, competition," Judge Amy Berman Jackson wrote in the ruling.
The judge said the merger of two of the nation's largest insurers would make it harder for large national employers to get competitive rates for health insurance.
"The evidence has shown that the merger is likely to result in higher prices," US district judge Amy Berman Jackson wrote in the ruling.
"Anthem is encouraging the court to ignore the risks posed by the proposed constriction in the health insurance industry… on the grounds that consumers might benefit from the large size of the new company in other way at the end of the day," Jackson said.
The Department of Justice had also argued that the combination of Anthem and Cigna would reduce the number of health insurers able to provide coverage on a national level from four to just two.
Analysts had already forecast a failed merger because of their overlap in the market.
Anti-trust lawyers had said the merger would be an uphill task because of the concentration of national accounts and the absence of a way to remedy anti-competitive effects.
The American Medical Association, one of a number of health care groups that had opposed the merger, welcomed the judge's ruling.
"The significant absence of health insurer competition in most markets is detrimental to patients and poses an important public policy problem," said Dr. Andrew Gurman, president of the American Medical Association, in a statement.
Another federal court had last month blocked Anthem's $34-billion acquisition of Humana, although both companies still claim they are exploring a possible appeal.
A spokeswoman for Anthem said the company is reviewing the court order, while Cigna issued a statement saying that it "intends to carefully review the opinion and evaluate its options."
Cigna has signalled that it is ready to move past its merger agreement with Anthem.
Judge Jackson also noted that the friction was evident during the trial as Cigna executives' testimony at times contradicted Anthem's arguments for the benefits of the deal.
The merger agreement calls for a $1.85-billion break-up fee if the deal is not approved, and, as analysts say, Anthem and Cigna would now be back in court, battling over the break-up fee.