| David Balto, Richard Brunell
Health & Pharmaceuticals, Mergers, Public Enforcement
The American Antitrust Institute joined with numerous consumer groups to file an amicus brief urging the D.C. Circuit Court of Appeals to affirm the district court decision blocking the merger of Anthem and Cigna Corp. The proposed merger would be the largest in the history of the health insurance industry, combining two of the four national carriers. The AAI has been at the forefront of efforts to block the merger, which the district court found would substantially lessen competition, raise prices, and reduce innovation.
On appeal, Anthem is not challenging the district court’s finding that the merger would have anticompetitive effects, but rather is contending that the court failed to properly consider its efficiencies defense. Specifically, Anthem claims that it would be able to achieve significant savings by reducing reimbursements to health care providers, which would be passed on to national employers that are self-insured and would exceed the higher fees resulting from the elimination of competition between Anthem and Cigna.
The district court rejected Anthem’s defense on the grounds that the supposed medical cost savings were not verified and could be achieved without the merger. Alternatively, the court found that if the savings were achieved they would undermine the quality of the insurance product offered by Cigna, which emphasizes collaborative relationships with providers to reduce health care expenditures and improve patient health. The district court also concluded that Anthem’s effort to reduce reimbursements was not an “efficiency” at all, but rather reflected the exercise of market power by a dominant insurer.
The amicus brief agrees with the district court’s conclusions and rejects Anthem’s argument that the demanding standard for proving an efficiencies defense should be relaxed.
The brief also takes issue with Anthem’s contention that the district court rejected a “consumer welfare” standard. On the contrary, the brief argues that even accepting Anthem’s premise that medical cost savings would be achieved and passed through to employers, it is no bargain for consumers if they come at the expense of reduced options and quality and the myriad consumer benefits that competition spurs.
The appeal is being heard on an expedited basis, and oral argument is scheduled for March 24, 2017.
The brief was spearheaded by AAI Vice President & General Counsel Rick Brunell and AAI Advisor David Balto with Matthew Lane in David Balto’s office. AAI Advisor George Slover on behalf of Consumers Union also provided significant assistance. The brief is available here.
