Anthem, Cigna merger blocked by judge; Anthem pledges to appeal

Anthem said it will appeal a federal court's decision blocking its $54 billion merger with Cigna, the company said hours after the District Court for the District of Columbia ruled on the deal.

"Anthem promptly intends to file a notice of appeal and request an expedited hearing of its appeal to reverse the Court's decision so that Anthem may move forward with the merger, which was approved by over 99 percent of the votes cast by the shareholders of both companies," the company said in a statement.

The Department of Justice released its decision late Wednesday.

The merger would save consumers more than $2 billion in medical costs annually, said Anthem CEO Joseph R. Swedish.

Blocking it hurts the industry's shift to value-based care and restricts innovation, he said.

Judge Amy Berman Jackson ruled in favor of the Department of Justice in its civil antitrust lawsuit to Anthem's acquisition of Cigna based on the merger's likely impact on the market for the sale of health insurance to national accounts, those  customers with more than 5,000 employees usually spread across at least two states, within the 14 states where Anthem operates as the Blue Cross Blue Shield licensee.

[Also: Anthem 4th quarter profit jumps nearly $190 million over 2015]

Because of this, she did not need to rule on the question of whether the combination will also affect competition in the sale to national accounts within the larger geographic market consisting of the entire United States, Jackson said.

The court also did not need to rule on the allegations in the DOJ's claim that the merger will harm competition downstream in a different product market, she said.

"But the evidence has shown that the proposed acquisition will have an anticompetitive effect on the sale of health insurance to large groups in at least one of those markets: Richmond, Virginia," the judge said.

The court also didn't have to decide whether the merger would also harm competition upstream in the market for the purchase of healthcare services from hospitals and physicians in the same 35 locations, she said.

[Also: Court blocks Aetna, Humana merger]

The trial was held in two parts, one on the regional and one on the national implications of the merger, from Nov. 21, 2016, to Jan. 3.

In July 2016, the DOJ, along with 11 states and the District of Columbia, sued to stop the merger. The complaint alleged that a combined Anthem and Cigna would substantially lessen competition in the health insurance industry in dozens of markets across the country.

The United States was joined in the lawsuit by the District of Columbia and the States of California, Colorado, Connecticut, Georgia, Iowa, Maine, Maryland, New Hampshire, New York, Tennessee and Virginia.

The American Medical Association applauded the decision, which it said stopped an immense corporate entity that would have been too big to regulate and that would have virtually unlimited power.

"In a David vs. Goliath battle between consumers and mega-insurers, a federal judge today ruled that Anthem's proposed acquisition of Cigna poses a clear and present threat to the quality, accessibility and affordability of health care in the United States," the AMA said. "Judge Jackson's findings lay to rest the insurers' spurious argument that the merger's anticompetitive effects for consumers will be mitigated by promised efficiencies. The AMA agrees with Judge Jackson's conclusion that Anthem's strategy of gaining size to strong-arm physicians would not have benefited consumers. Instead, it would diminish prospects for innovation in health care delivery and payment."

Last month, a court also ruled against the merger between Aetna and Humana. Aetna has yet to decide whether it will appeal the block.

Both deals have breakup fees tied to the merger contracts. If Anthem does not have a deal by April, it would owe $1.8 billion to Cigna.

Aetna's breakup fee to Humana is $1 billion if the $37 billion deal is not done by mid-February.

"But the fight against insurance market consolidation is far from over," the AMA said. "The AMA will continue to vigorously oppose any health insurer mergers that will reduce competition and negatively impact physician markets and the quality of patient care."

"Today's decision is a victory for American consumers," said Acting Assistant Attorney General Brent Snyder of the DOJ's antitrust division. "This merger would have stifled competition, harming consumers by increasing health insurance prices and slowing innovation aimed at lowering the costs of healthcare."

"Moving forward, Anthem will continue to work aggressively to complete the transaction while remaining focused on serving as America's valued health partner, delivering superior health care services to our approximately 40 million members with greater value at less cost," Swedish said.

Twitter: @SusanJMorse