Anthem's appeals loss may not dampen health insurers' appetite for M&A

Analysts see either Anthem or Cigna as likely acquirers of Humana, which is prized for its considerable Medicare Advantage market share.

Though Anthem has lost an appeal of the ruling against its proposed purchase of Cigna, the health insurance industry at large may not lose its desire to consolidate.

Anthem remains committed to completing the transaction, the insurer said in a statement following Friday’s decision by a federal appeals court, adding that it is reviewing the opinion and “will carefully evaluate our options.”  

Antitrust attorney David Balto told FierceHealthcare that he believes Anthem will continue to appeal in a bid to save the $54 billion merger, though he doubted that effort would be successful.

Indeed, the court battle to watch now will be one between Anthem and Cigna themselves, Leerink Partners analyst Ana Gupte wrote in a research note (PDF).

“We expect the focus to now be on the possible breach of the merger agreement by the two parties and the break-up fee of $1.85 [billion] with a court hearing scheduled for May 8,” she wrote.

Cigna sued Anthem in February, seeking to terminate their merger agreement and asking Anthem to pay the breakup fee plus more than $13 billion in damages. The May 8 hearing will concern a preliminary injunction filed by Anthem that seeks to keep Cigna from scrapping the agreement.

If the judge denies that motion from Anthem, Cigna would be free to pursue other transactions—including a possible deal with Humana, according to Bloomberg. Humana, which Aetna planned to acquire before a federal judge ruled against their deal, has long been a prime acquisition target given its considerable Medicare Advantage market share.

Analysts see either Anthem or Cigna as likely acquirers of Humana, the article notes, though Cigna might have a better chance because its core business overlaps less with Humana’s.

Leemore Dafny, Ph.D., a professor of business administration at Harvard Business School, wrote recently that after what happened with the Anthem-Cigna and Aetna-Humana deals, the industry should turn its focus toward providing value to customers rather than “swallowing rivals.”

Yet even after those two deals were struck down, large insurers may still be likely to pursue transactions because the Trump administration’s pick to lead the antitrust division of the Justice Department, Makan Delrahim, is expected to view such deals more favorably, the Bloomberg article adds. Delrahim was previously a lobbyist for Anthem.