Anthem, in D.C. Circuit, fights to save $54B Cigna merger

Anthem Inc. pressed Friday to salvage its proposed $54 billion acquisition of Cigna Corp., arguing before a Washington federal appeals court that the deal would drive down costs for consumers.

“This is dollars in the consumer’s pocket,” Anthem’s lawyer, White & Case partner Christopher Curran, told the U.S. Court of Appeals for the D.C. Circuit.

The hearing unfolded in a crowded courtroom in downtown Washington as lawmakers and White House officials scrambled, blocks away, to change the Affordable Care Act. The Justice Department has argued the merger would hurt competition for consumers who receive health insurance through the ACA’s public exchanges, along with millions of others who receive insurance from their employers.

Anthem and the Justice Department made their arguments six weeks after a Washington federal trial judge struck down the proposed acquisition on the grounds it would hurt competition. The Justice Department in July sued to block the Anthem-Cigna tie-up and Aetna’s proposed $37 billion acquisition of Humana, alleging the deals would amount to an “unprecedented consolidation” in the health insurance industry.

Aetna and Humana abandoned their deal after a judge granted a preliminary injunction in January. But Anthem has continued onward, even as it faces a lawsuit from Cigna in the Delaware Court of Chancery seeking a $1.85 billion termination fee and an additional $13 billion in damages.

Several trade groups, including the American Hospital Association, have urged the D.C. Circuit to keep in place the injunction against the Anthem-Cigna deal. “Permitting an acquisition that will reduce the market for national insurers from four to three will lessen the incentive of all players in the market to innovate—to the detriment of patients,” the association said in a friend-of-the-court brief.

Cigna was something of an unwilling merger partner. U.S. District Judge Amy Berman Jackson of the District of Columbia, in her decision striking down the deal, noted that a lawyer for Cigna, Charles Rule of Paul, Weiss, Rifkind, Wharton & Garrison, cross-examined a defense expert and undermined Anthem’s forecasts for future savings from the acquisition.

Jackson described the discord between the two companies as the “elephant in the room.” The tension between the companies wasn’t raised at Friday’s hearing.

D.C. Circuit Judge Brett Kavanaugh questioned why the Justice Department challenged the deal even as the two sides agreed it would lower insurance rates.

Scott Westrich of the Justice Department said the deal would hurt competition and, perhaps, the quality of health care. Cigna, he said, has proven itself an innovator in the insurance industry with wellness programs. Westrich questioned whether Anthem—with its strategy of using buying power to win favorable terms—would be able to incorporate the more cooperative approach Cigna has taken.

Antitrust division leadership

President Donald Trump hasn’t named a leader to the Antitrust Division, now under the direction of Brent Snyder, the acting assistant attorney general. Snyder has served in the division since 2003.

Trump, according to Reuters and other reports, intends to name White House lawyer Makan Delrahim to lead the Antitrust Division. Delrahim, a former lobbyist for Anthem, is a deputy counsel in the White House who joined the administration from Brownstein Hyatt Farber Schreck’s Los Angeles office.

U.S. Senate lobbying records show Delrahim lobbied for Anthem last year on “antitrust issues associated with Anthem’s proposed acquisition of Cigna.” Anthem paid Brownstein Hyatt $400,000 for that lobbying work, the records show. Delrahim was not immediately reached for comment Friday.

Earlier this week, a group of former Obama administration lawyers urged the Justice Department to investigate whether the Trump administration has communicated to the Justice Department about the Anthem-Cigna case, according to The Washington Post. The group, United to Protect Democracy, sent the letter to DOJ Inspector General Michael Horowitz.

“We are concerned that administration officials may have engaged in inappropriate conduct regarding the Anthem-Cigna litigation,” the letter said. “Were the White House to engage in any contacts with DOJ about this ongoing antitrust enforcement matter, it would substantially undermine Americans’ confidence in the Department’s commitment to equal justice under law.”

The White House didn’t respond to a request for comment Friday. But a White House official, according to the Post, called the letter meritless.