Aetna, Anthem vow to fight for mergers, but is it a losing battle?

Aetna vows to “vigorously defend” its merger with Humana from regulators’ lawsuit seeking to block it, and Anthem plans to fight a legal challenge that it calls a “misguided step backwards.”

Some experts, though, aren’t so sure that either company will prevail.

“I think the Justice Department has a compelling case that will be very persuasive to a federal judge,” antitrust lawyer David Balto tells FierceHealthPayer in an exclusive interview.

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Leerink Partners analyst Ana Gupte takes a similar view.

“We see the likelihood of any settlement or win for the companies in court as slim given the political nature of the outcome and the tone of the communication from the DOJ,” Gupte writes in a research note.

The related suits filed Thursday by the DOJ and several state attorneys general come roughly a year after both pairs of companies announced their plans to merge, which would consolidate the “big five” U.S. insurers into three.

“If these mergers were to take place, the competition among these insurers that has pushed them to provide lower premiums, higher quality care and better benefits would be eliminated,” U.S. Attorney General Loretta Lynch said during a press conference announcing the DOJ’s decision.

The DOJ’s William Baer added that the divestitures Anthem and Aetna have suggested are inadequate, as they “would not give the buyers of the divested assets the necessary tools to compete with the intensity that Cigna and Humana provide today.”

Balto isn’t surprised that the DOJ was unwilling to accept the companies’ proposed remedies to concerns about their effect on competition, given antitrust officials’ skepticism about the merits of such fixes in recently challenged deals.

“There’s an increasing recognition that divestitures leave consumers holding the bag,” he says.

Aetna and Humana, however, argue that not only will their deal not harm competition in the Medicare Advantage market, but “any perceived competition concerns can be addressed through divestitures.” They add that they “look forward to making this clear in court, where a judge will review the transaction based on its merits.”

Anthem does not plan to go quietly either, saying that it is “fully committed to challenging the DOJ’s decision in court,” but also will “remain receptive to any efforts to reach a settlement with the DOJ.”

Its acquisition target, Cigna, was less enthusiastic.

“Given the nature of the concerns raised by the DOJ and the overall status of the regulatory process, which under the terms of the merger agreement was led by Anthem, Cigna is currently evaluating its options consistent with its obligations under the agreement,” the insurer said in a statement.

It added that it does not believe the merger will close in 2016, but rather 2017, “if at all.”

To Balto, signs point to Cigna and Anthem being less poised for a court battle than Aetna and Humana.

Not only has Cigna been a reluctant merger partner, but “I think they realize that this was like climbing Mount Everest,” Balto says of the task of convincing federal regulators to approve the deal with Anthem. 

For more:
- here's Gupte's research note
- read Lynch prepared remarks
- check out Baer's remarks
- here's Anthem's statement
- check out Cigna's statement
- read Aetna and Humana's statement

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