Anthem-Cigna Merger Blocked; Judge Cites Anticompetitive Effects

The proposed merger between Anthem and Cigna has been blocked following a judge’s ruling that the deal would be harmful to customers. With the $48 billion purchase derailed, Anthem will have to pay Cigna a $1.85 billion break-up fee.

The decision comes just 2 weeks after another judge blocked the merger of Aetna and Humana. If both mergers had been allowed, the market in the United States would have gone from 5 big insurers to just 3.

Anthem and Cigna are the nation’s second and third largest insurers, and the Department of Justice (DOJ) had filed an antitrust lawsuit in July 2016 to prevent both the Anthem-Cigna and Aetna-Humana deals. The DOJ argued that the mergers would reduce competition and potentially raise healthcare costs for consumers.

“Today’s decision is a victory for American consumers,” Acting Assistant Attorney General Brent Snyder of the DOJ’s Antitrust Division, said in a statement. “This merger would have stifled competition, harming consumers by increasing health insurance prices and slowing innovation aimed at lowering the costs of healthcare.

The DOJ was joined by 11 states and the District of Columbia in the lawsuit to prevent the merger of Anthem and Cigna, and the judge determined that they had demonstrated “the proposed combination is likely to have a substantial effect on competition in what is already a highly concentrated market.”

Judge Amy Berman Jackson of the Federal District Court for the District of Columbia ruled in the lawsuit that the merger would have harmed customers in 14 states where Anthem operates as Blue Cross Blue Shield.

“The evidence has also shown that the merger is likely to result in higher prices, and that it will have other anticompetitive effects: it will eliminate the two firms’ vigorous competition against each other for national accounts, reduce the number of national carriers available to respond to solicitations in the future, and diminish the prospects for innovation in the market,” she wrote.

In response to the ruling, Cigna released a short statement that it would review the opinion and evaluate its options. Anthem provided a slightly longer response, expressing disappointment with the decision and claiming that the merger would have saved Americans more than $2 billion in medical costs annually. Anthem hopes to move forward with the merger, and will file a notice of appeal and request an expedited hearing of the appeal to reverse the decision.

“If not overturned, the consequences of the decision are far-reaching and will hurt American consumers by limiting their access to high-quality affordable care, slowing the industry’s shift to value-based care and improved outcomes for patients, and restricting innovation, which is critical to meeting the evolving needs of healthcare consumers,” Joseph R. Swedish, chairman, president, and CEO of Anthem, said in a statement.

Interestingly, in her ruling, Jackson cited conflicts between the companies, noting that she could not ignore testimony from Cigna officials that undermined the projections of future savings. She noted that the so-called “rift between the CEOs” and other differences between the companies could not be ignored as they “reflect that the pre-merger integration planning that is necessary to capture any hoped-for synergies is stalled and incomplete.”