Anthem Inc. drew the battle lines Monday in defense of its proposed purchase of Cigna Corp., faulting the U.S. Justice Department for refusing to see any benefit in the $48 billion deal as the blockbuster megamerger trial opened in Washington federal district court.
In his opening statement, Anthem lawyer Christopher Curran of White & Case sought to discredit the government’s claim that the combination of the two health insurers would eliminate competition that has lowered prices, improved care and driven innovation.
A combined Anthem and Cigna, Curran said, would better position the company to compete against the market leader, UnitedHealth Group Inc., and against Aetna, whose planned $37 billion acquisition of Humana Inc. goes to court in Washington on Dec. 5.
The Justice Department has alleged, in part, that Anthem’s acquisition of Cigna would hurt competition for millions of consumers who receive health insurance from large national employers. Antitrust enforcers sued in July to block the deal.
Curran argued Monday that large companies have the resources and sophistication to negotiate lower prices and even stitch together a network of competing insurers.
“The notion that these Fortune 500 companies will be victimized here is not realistic,” he said. Curran added: “It’s a menu selection that these companies make. There’s a variety of alternatives.”
The trial, rooted in millions of documents in discovery and more than 100 depositions, is expected to last through December.
Anthem, Cigna tension
In the buildup to trial, U.S. District Judge Amy Berman Jackson was struck by the reported discord between Anthem and Cigna. The companies have accused each other of breaching the terms of their deal.
At one hearing, Charles Rule, a Paul, Weiss, Rifkind, Wharton & Garrison antitrust partner representing Cigna, asked for permission to object to questions from Anthem. Jackson called the request “completely extraordinary.”
Curran addressed the contentiousness in court Monday, saying that disputes over of the corporate governance of the combined insurer “should not impede their ability to integrate.”
Justice Department attorney Jon Jacobs noted that even the two health insurers’ chief executives have raised questions about whether the combined company would be able to effectively wield its new negotiating power with providers.
“No one knows how these negotiations are going to wind up, because they are negotiations,” Jacobs said in court.
“It is Anthem’s burden to quantify efficiencies, and they won’t be able to,” he added.
At what he called an “important time in the industry,” Jacobs argued the Anthem-Cigna deal would deprive the market of competition that drives innovation.
“A key question in this is going to be: What creates innovation? Well, a broker in California answered that question in his deposition: Competition creates innovation,” Jacobs said.
“We’ll show that Cigna has innovated precisely because it is not the wolf at the top of the hill in the vast majority of these markets.”
Anthem, facing an April 30 deadline to close its acquisition of Cigna, pushed for a ruling from Jackson by the end of the year, giving the company time to secure approval from state regulators.
Jackson effectively denied that request when she set Nov. 21 for the start of trial. Jackson said she hopes to rule on the deal by the end of January.
The trial will be divided into two parts—focusing first on the deal’s effect on national markets, and then on local markets. Jackson said in September she might issue a preliminary ruling after the first phase.
The Trump effect
President-elect Donald Trump didn’t articulate a clear antitrust position on the campaign trail, although he said he would block AT&T Inc.’s planned $85 billion purchase of Time Warner Inc. Trump’s pick for U.S. attorney general, Republican Sen. Jeff Sessions of Alabama, does not have a clear record of antitrust positions.
Trump’s Justice Department would likely have a chance to oversee any appeal in the case in the early months of his presidency.
One possible clue to Trump’s thinking on antitrust was on display this month in a New York Times piece from Joshua Wright, a former Federal Trade Commissioner who’s reportedly advising the Trump transition team on antitrust matters. Wright argued that “big” isn’t inherently “bad.”
“The new antimerger fervor is based upon the presumption that they are never a good deal for consumers because more consolidation always leads to higher prices, and never leads to cost savings or product improvements that benefit consumers,” Wright wrote. “Both are demonstrably false.”
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