A federal appeals court in Washington on Friday rejected Anthem Inc.’s proposed $54 billion acquisition of Cigna Corp., upholding a trial judge’s decision to block the deal on the ground it would substantially reduce competition.
Anthem had argued in the U.S. Court of Appeals for the D.C. Circuit that any anti-competitive problems with the deal would be outweighed by billions of dollars in savings that would be passed on to consumers. Anthem, represented by White & Case partner Christopher Curran, said the lower court had failed to give those savings — or “efficiencies,” as the lawyers referred to them — proper weight when she issued an injunction blocking the combination of the two health insurers.
Writing for a divided three-judge panel, Judge Judith Rogers upheld U.S. District Judge Amy Berman Jackson’s decision to enjoin the merger. The trial court, Rogers wrote, “did not abuse its discretion” by rejecting 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 the fourteen Anthem states: the loss of Cigna, an innovative competitor in a highly concentrated market.”
Rogers was joined in the decision by Judge Patricia Millett. In a concurring opinion, Millett struck down Anthem’s efficiencies argument in harsher terms.
“Paying less to get less is not an efficiency; it is evidence of the anticompetitive consequences of reducing competition and eliminating an innovative competitor in a highly concentrated market,” Millett wrote.
In a dissenting opinion, Judge Brett Kavanaugh said the Anthem-Cigna deal should be saved for the cost savings it would create for consumers.
“The merged Anthem-Cigna would be a more powerful purchasing agent than Anthem and Cigna operating independently,” Kavanaugh wrote. “The merged Anthem-Cigna would therefore be able to negotiate lower provider rates on behalf of its employer-customers. Those lower provider rates would mean cost savings that would be passed through directly to the employer-customers.”
Kavanaugh is the same judge who wrote the opinion, in October, in connection with a ruling on the Consumer Financial Protection Bureau provision in the Dodd-Frank Act, that found the “massive, unchecked” authority of the bureau’s director to be unlawfu.
The Justice Department in a statement said it was “pleased with the appellate court’s decision. It upholds an injunction against the merger of two of the country’s largest health insurers, which not only would have led to higher prices but also slowed innovation and harmed consumers by weakening value-based offerings aimed at lowering medical costs.”