Court upholds decision to block $54 billion Anthem-Cigna merger (updated)

There’s been a new development in the Anthem-Cigna merger saga: On Friday, a U.S. appeals court upheld a lower court’s earlier decision to block the $54 billion deal.

gavel and cash money

This post has been updated to include a statement from Anthem.

It looks like it’s probably the end of the Anthem-Cigna merger.

A U.S. appeals court upheld a lower court’s earlier decision to block Anthem’s proposed $54 billion takeover of Cigna. The 2-1 vote was issued Friday morning.

In the opinion, U.S. Circuit Judge Judith Rogers wrote Anthem failed “to show the kind of extraordinary efficiencies necessary to offset the conceded anticompetitive effect of the merger in the fourteen Anthem states: the loss of Cigna, an innovative competitor in a highly concentrated market.”

U.S. Circuit Judge Patricia Millett concurred. “I join the opinion of the court in full, including its two separate and independent holdings that the proposed merger would substantially reduce competition in (i) the national-accounts market and (ii) the large-group-employer market in Richmond,” she wrote.

But U.S. Circuit Judge Brett Kavanaugh dissented. “The problem for this merger, if there is one, is in its effects in the upstream market  namely, in its effects on hospitals and doctors as a result of Anthem-Cigna’s enhanced negotiating power,” he wrote.

For its part, Anthem argued that due to the medical savings gleaned from the merger would neutralize competition, according to Bloomberg.

The insurers could request that the appeals court reconsider the case. They could also appeal to the U.S. Supreme Court, according to Reuters.

A Cigna spokesperson told MedCity via email that it released an 8-K but does not have comment beyond that.

In a statement, Anthem expressed dissatisfaction with the court’s decision:

Anthem, Inc. is disappointed by today’s decision given that the demonstrated efficiencies make this a pro-competitive, consumer friendly transaction. Combining Anthem and Cigna would positively impact the health and well-being of millions of Americans and deliver significant cost savings to consumers. As Judge Kavanaugh noted in his dissent, ‘the record decisively demonstrates that this merger would be beneficial to the employer-customers who obtain insurance services from Anthem and Cigna.’ We are committed to completing the transaction and are currently reviewing the opinion and will carefully evaluate our options.

The decision has pleased some parties, including the American Medical Association. In a statement, AMA President Dr. Andrew Gurman said:

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. The result of 21 months of advocacy before the U.S. Department of Justice (DOJ), congressional leaders, state attorneys general, insurance commissioners, and federal court, this outcome shows again that when doctors join together, the best outcome for patients and doctors can be achieved.

The pending merger has been on the table for a long time. Anthem and Cigna originally agreed to merge in July 2015. Their announcement caused a number of initial reactions from the healthcare community, many of which were negative. In July 2016, the Department of Justice, 11 states and the District of Columbia sued to block the proposed merger.

In early February 2017, Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia blocked Anthem’s proposed merger with Cigna, citing antitrust law. Soon after, Anthem said it would appeal the ruling. Later that month, the insurers sued each other, with Cigna asking for a $1.85 billion breakup fee and more than $13 billion in additional damages.

Photo: zimmytws, Getty Images