The market believes that two vertical health care mega-mergers — CVS Health Inc.’s purchase of Aetna Inc. and Cigna Corp.’s deal for Express Scripts Holding Co. — have a greater chance of success after a judge gave AT&T Inc.’s purchase of Time Warner Inc. the go-ahead late Tuesday.
That’s not an unreasonable leap. I’m going to take a bigger one, and it’s about Anthem Inc. In spite of the fact that its attempted purchase of Cigna dissolved into lawsuits and sniping under government scrutiny last year, I think there’s a better chance today that the Anthem will consider a bid for another rival health insurer: Humana Inc.
The principal motivation is that the market is probably right about Cigna=Express Scripts and CVS-Aetna. True, Tuesday’s ruling was narrow, and health care mergers sometimes get extra scrutiny. But there’s broad consensus that the administration’s ability to challenge vertical mergers has been substantively weakened.
If these deals go through, Anthem and Humana would have to compete with three major rivals that would all have the advantage of being integrated with a massive pharmacy-benefit manager (PBM). As of now, there’s just one in that camp: UnitedHealth Group Inc.
Humana, which saw a potential purchase by Aetna derailed by the government last year, offers a possible lifeline. It would give Anthem the potential to become a larger player in the rapidly growing Medicare Advantage market, it has a PBM that would bolster Anthem’s nascent effort to build one of its own, and it’s made diversifying investments in health care providers. Those factors could convince Anthem to gamble that constraints on merger enforcement or newfound Trump administration skittishness might extend to a horizontal deal.