An appeals court has denied Anthem Inc.'s (NYSE:ANTM) bid to overturn a court ruling that blocked its planned merger with Cigna Corp.
The lower court judge ruled said the deal should be stopped because it risked undermining competition in the health insurance markets. Rivals Aetna and Humana had also sought to merge but that deal collapsed this year amid opposition from the federal government and states.
"Cigna officials provided compelling testimony undermining the projections of future savings" that Anthem proffered, the court said.
The companies still have the option of another appeal to try to save the deal.
The court said it was also concerned the merger would quash Cigna's innovative approach to lowering health care costs through policies that encouraged preventive treatment and monitoring of patients to make sure they were following their doctors' orders.
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U.S. Circuit Judge Judith Wilson Rogers wrote in her majority opinion on Friday, "One way Anthem maintains the merger will result in this new product is through rebranding".
Cigna, which wanted to end the merger, can fight to collect $1.85-billion break-up fee, as well as $13 billion in damages from the failure of the merger. In their written opinion, the panel said Anthem failed to demonstrate that the deal could achieve the "extraordinary efficiencies" necessary to offset the effect of losing Cigna as a competitor in the already highly concentrated markets where it sells employer-based plans to national accounts. "We are very pleased that the Court of Appeals agreed with the District Court's finding that this merger would violate antitrust laws by substantially lessening competition in commercial health insurance markets, likely leading to increased health insurance premiums and reduced quality and innovation". The Department of Justice and 11 states and D.C. sued to block the merger on the grounds it was likely.
"Anthem has not explained why these projected savings would even exist", Rogers wrote.
The American Medical Association applauded the decision and had submitted an amicus brief to the appellate court in support of preserving the merger injunction.
In a dissent, U.S. Circuit Judge Brett Kavanaugh said he'd have sent the case back to the lower court to re-examine whether those lower Anthem-Cigna rates would have been derived from unlawful market power over hospitals and doctors. The Delaware cases are Anthem Inc. v. Cigna Corp., No. 2017-114, Delaware Chancery Court (Wilmington) and Cigna Corp. v. Anthem Inc., 2017-0109, Delaware Chancery Court (Wilmington). That's because the companies don't have to merge for customers to gain access to Anthem's lower rates.