(Adds Anthem comment and closing share prices)
By Diane Bartz
WASHINGTON, April 28 A U.S. appeals court on
Friday blocked health insurer Anthem Inc's bid to merge
with Cigna, upholding a lower court's decision that the
$54 billion deal should not be allowed because it would lead to
higher prices for healthcare.
The ruling will probably kill the proposed merger, which was
opposed by the U.S. Justice Department, 11 states and a District
Court judge after consumers, medical professionals and others
objected to it. In the end, Cigna itself tried to back out.
Still, Anthem and Cigna have the option of trying to save
the deal by asking the appeals court to re-consider the case or
appealing straight to the U.S. Supreme Court.
Shares of Cigna closed Friday at $156.37, up 0.1 percent,
while Anthem shares ended at $177.89, down 0.2 percent.
Anthem's purchase of Cigna would create the largest U.S.
health insurer. Rivals Aetna Inc and Humana Inc
had also sought to merge but that deal collapsed this year amid
opposition from the federal government and states.
Insurers made the deals as they adjusted to new pressures
from the insurance overhaul of Obamacare, officially known as
the Affordable Care Act. They now face the potential for another
remaking of the industry, though the exact changes are unclear
because of Republican disagreements over how to repeal and
Anthem, said in a statement late Friday that it was
disappointed by the appeals court's decision. "We are committed
to completing the transaction and are currently reviewing the
opinion and will carefully evaluate our options," the company
said in a statement.
In a split decision, the U.S. Court of Appeals for the D.C.
Circuit disagreed with Anthem's contention that the Justice
Department and lower court improperly rejected its assertions
that the deal would lead to billions of dollars in medical
"Anthem has not explained why these projected savings would
even exist," Judge Judith Rogers wrote in the opinion. "The
record is clear that Anthem, unlike Cigna, has already achieved
whatever economies of scale are available."
In a dissent, Judge Brett Kavanaugh argued that the merger
would benefit the biggest customers, mainly large companies with
employees in many states. Kavanaugh argued that a combined
Anthem/Cigna would require higher payments to manage the
accounts but that would be offset by better negotiated rates
paid to providers.
Kavanaugh, however, noted that the deal could be stopped
based on monopsony arguments that the new company would have too
much heft in negotiating with doctors and hospitals.
Anthem, a member of the Blue Cross Blue Shield Association,
is the second biggest seller of medical insurance to big U.S.
companies. Cigna is in third place.
Bill Baer, the former head of the Justice Department's
Antitrust Division who had made the decision to challenge both
insurance mergers, said in an email that the ruling on the
Anthem/Cigna deal "is a ringing endorsement of the importance of
competition in health insurance markets."
The Justice Department, now under President Donald Trump,
also said that it was pleased by the decision.
Eric Schneiderman, attorney general of New York, which was
among the states that had opposed the deal, also said he was
pleased with the ruling.
"This is a red letter day for consumers," said David Balto,
an antitrust lawyer who opposed the deal.
In another obstacle, Anthem and Cigna have been at
loggerheads for months and are suing each other. Cigna has
sought to abandon the merger and force Anthem to pay a $1.85
billion breakup fee while Anthem filed a lawsuit to force its
smaller rival to go through with the combination.
(Reporting by Diane Bartz; Editing by David Gregorio and Leslie