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From Antitrust Law Daily, February 14, 2017

Anthem seeks expedited appeal of ruling barring proposed merger with Cigna

By Edward L. Puzzo, J.D.

Health insurance carrier Anthem, seeking to appeal a February 8 federal district court order enjoining its proposed merger with health insurance carrier Cigna, should have its appeal expedited due to the potential for irreparable harm should a decision on the merits occur after a looming April 30 merger agreement termination date, Anthem has argued to the Court of Appeals in Washington, D.C. (U.S. v. Anthem, Inc., February 13, 2017).

Merger proposed. On July 23, 2015, Anthem and Cigna, the nation's second and third largest medical health insurance carriers, entered into a merger agreement wherein Anthem would pay approximately $54 billion to acquire Cigna. In July 2016, after approximately a year of investigation of the merger by the Department of Justice Antitrust Division, the Justice Department and the States of California, Colorado, Connecticut, Georgia, Iowa, Maine, Maryland, New Hampshire, New York, Tennessee, and Virginia, and the District of Columbia challenged the merger on a number of grounds. According to their complaint, the combination of Anthem—the largest member of the Blue Cross and Blue Shield Association—and Cigna—another commercial health-insurance option—would substantially lessen competition for the sale of health insurance to national accounts in the parts of the 14 states where Anthem sells under a Blue license and in the United States generally. The government also contended that the transaction would substantially lessen competition for the sale of health insurance to large-group employers in 35 metropolitan areas, and would be presumptively unlawful in 20 of those markets. In addition, potential anticompetitive effects were identified in the sale of health insurance on the public exchanges in Colorado and Missouri. Lastly, the government alleged that the proposed merger would eliminate competition between Anthem and Cigna for the purchase of health care services in 35 metropolitan areas. According to the complaint, the harm to competition in any one of these markets was sufficient to enjoin the transaction.

District court ruling. On February 8, 2017, the federal district court in Washington, D.C. permanently enjoined the proposed merger between Anthem and Cigna, ruling that the Department of Justice and the specified states had met their burden of demonstrating that the proposed combination was likely to have a substantial effect on competition in an already highly concentrated market in which there were only four national carriers. Upon release of that order, Anthem pledged to continue to fight for approval of the merger. Anthem has now filed an emergency motion with the U.S. Court of Appeals for the District of Columbia Circuit for expedited consideration of its appeal of the lower court ruling.

Expedited appeal sought. In arguing for expedited appeal—which, it concedes, is a "extraordinary request"—Anthem seeks expedited consideration of the motion, an expedited briefing schedule and an expedited decision on the merits due to the fact that, under the merger agreement, the "Termination Date" is April 30, 2017, less than 90 days away.

Anthem noted that it has asked Cigna to agree to extend the termination date, but Cigna has not agreed to do so. Cigna's stance is perhaps unsurprising, considering that in its ruling, the lower court noted that Cigna had sown doubt into the record in connection with the question of whether the merger would benefit competition. According to the court, Cigna was "actively warning against [the merger]...Cigna officials provided compelling testimony undermining the projections of future savings, and the disagreement runs so deep that Cigna cross-examined the defendants’ own expert and refused to sign Anthem’s Findings of Fact and Conclusions of Law," the court pointed out. While Anthem attempted to chalk up the difference to a mere "rift between the CEOs," the court was concerned that "the relationship between the companies is marked by a fundamental difference of opinion over the effect the Anthem strategy to impose lower rates on providers and move members away from Cigna’s network will have on the collaborative model of care that is central to the Cigna brand."

Anthem argues that it will suffer irreparable harm without expedited review in the form of termination of the merger agreement, other prejudice such as the expiration of financing commitments, and the denial of its appeal rights without a stay of the lower court order pending appeal. Anthem further argues that the lower court order is subject to substantial challenge, as set forth in greater detail in its concurrently-filed appellate brief. Finally, Anthem argues that an expedited appeal would be in the public interest because a merged entity would create $2.4 billion in medical cost savings annually, provide a 38 percent premium over market value for Cigna shareowners, and provide meaningful appellate review on the merits, a rarity for antitrust cases.

The case is No. 17-5024.

Attorneys: Scott Anthony Westrich, U.S. Department of Justice, for the United States. Paula Lauren Gibson, Office of the Attorney General, for State of California. Christopher Mark Curran (White & Case LLP) for Anthem, Inc. Craig Aaron Benson (Paul, Weiss, Rifkind, Wharton & Garrison LLP) for Cigna Corp.

Companies: Anthem, Inc.; Cigna Corporation.

MainStory: TopStory AcquisitionsMergers Antitrust AntitrustDivisionNews DistrictofColumbiaNews

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