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VOL. 41 | NO. 17 | Friday, April 28, 2017
Appeals court upholds decision to block Anthem bid for Cigna
WASHINGTON (AP) — A federal appeals court on Friday left in place a decision blocking Anthem Inc.'s bid to buy rival health insurer Cigna Corp, saying that a bigger company is not better for consumers.
The 2-1 decision upholds a federal judge's ruling in February that said the proposed $48 billion acquisition would reduce competition in the concentrated insurance market.
Anthem argued the merger would save $2.4 billion in medical costs and lead to lower consumer premiums. But the Justice Department said Anthem had no real plan to reach those savings. The government sued last summer to block the deal amid concerns over its effect on prices and consumer choices.
The ruling from the U.S. Court of Appeals for the District of Columbia Circuit likely dooms the merger effort that lasted nearly two years. Even Cigna has soured on the deal, filing a separate lawsuit seeking a $1.85 billion termination fee from Anthem and billions more in damages that include the amount Cigna shareholders would have received if the merger hadn't failed.
Consumer groups had opposed the merger, saying it would have a negative impact on consumers and lead to fewer choices. Industry experts suggested any consumer impact from the deal would take years to materialize and could lead to savings in some areas but higher costs elsewhere.
Anthem had promoted the merger as a way to help the companies negotiate better prices with pharmaceutical companies, hospitals and doctor groups. They also said it would help cut expenses and add more customers.
Writing for the majority, Judge Judith Rogers said the lower court was correct to halt the merger "based on Anthem's failure to show the kind of extraordinary efficiencies necessary to offset the conceded anticompetitive effect of the merger" in 14 states.
Rogers also said the merger would have a "substantial anticompetitive effect" in the Richmond, Virginia, large group employer market.
In dissent, Judge Brett Kavanaugh said a merger would allow the larger company to negotiate lower provider rates and mean cost-savings for consumers. He said he would send the case back to the lower court for further deliberations.
Earlier this year, a federal judge also blocked a separate health insurer combination: Aetna's roughly $34 billion acquisition of Medicare Advantage provider Humana Inc.
Associated Press writer Tom Murphy in Indianapolis contributed to this report.