Reports emerging this past Monday after the close of last week’s DC Federal District Court hearings in indicate that the CVS-Aetna merger may be nixed by Judge Richard Leon. This may result in the full unwinding of the already-closed merger, a derailing of the settlement which involved selling the Aetna Medicare Part D business to government-plan insurer WellCare, or something in between.
The original report was in Monday’s New York Post. A source working with CVS and Aetna stated “I think Leon rules against us. If he rejects the settlement, we would have to figure out the next steps.” That settlement is significant because it represents the only major overlap between the CVS and Aetna businesses. In other words, there’s nothing left to divest or concede.
Judge Leon, based on reports, was consistently irritated with the Department of Justice, questioning everything from the Part D divestiture to the effects of adding 21 million Aetna customers to CVS’s pharmacy benefits management (PBM) business not being revealed in DOJ documents to him. Conversely, the sale of the Part D business to WellCare was batted one way–as not enough to reduce CVS’ market control and not competitive–and then the other, as WellCare remains a CVS PBM customer for 2.2 million members in its health plans. What was also clear from his selection of expert witnesses that Judge Leon was more interested in the anti-competitive effects of the merger than any of the benefits.
It is obvious both from Judge Leon’s in-court actions (such as not permitting DOJ attorneys to cross-examine any witnesses), assorted remarks, and delay for now over six months, that this merger is coming to a pre-ordained conclusion, at least by this judge. This is already a first under the Tunney Act enacted in 1974. A negative decision will certainly be appealed by CVS-Aetna and DOJ, which will drag out any finalization even if successful–and the sale of the Part D business, important to WellCare as part of its own pending acquisition by Centene–to the end of the year and possibly beyond.
With this background and oral arguments delayed until 17 July, according to Judge Leon, the legal teams on all sides won’t have much of a summer. Also Barrons, video on NBR.
[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2014/04/Thomas.jpg” thumb_width=”150″ /] Breaking News. Not with a bang, but a whimper.
Late Wednesday 8 Feb, the anticipated decision derailing the $54 million Anthem-Cigna
merger was released by the Federal District Court, District of Columbia. Judge Amy Berman Jackson’s decision denying the merger was very much along the anti-competitive and anti-trust rationales contained in the 19 January advance report
by the New York Post
. There’s little that hasn’t already been explored in our prior reports, so we will leave the rehashing to sources like CNBC
. The general consensus is that the four Big Payer Merger participants (Aetna
merger denied [TTA 24 Jan
]) will be moving on, perhaps to their advantage as most of the premises for merging, based on ACA’s effects, are expected to change, drastically.
Cigna must also be relieved after its reported ‘merger remorse’ after too many rumored disagreements with Anthem. According to Bloomberg, Cigna is sitting on $7 to $14 billion deployable capital, with the high end including extra debt. (Does this include the $1.85 bn breakup fee that Anthem owes to Cigna? Stay tuned on how Anthem tries to get out of this.) And the American Medical Association is beyond delighted (release).
Of course, there’s a lot of speculation about all that loose cash being deployed on new merger targets, which include the Usual Suspects of Humana, WellCare, Centene and Molina. Some free advice: all these companies should, for the next year, sit quietly and breathe deeply (as many employees who would be redundant in any merger are). They should also take care of business (TCB!), refocus on serving their policyholders, make their processes far less onerous on providers, and let it all shake out rather than rushing out to find out Who To Buy. (New Attorney General Jeff Sessions was sworn in this morning, and many changes are coming in both healthcare policy and the judiciary.) Also Neil Versel’s pointed take in MedCityNews.
Breaking News from Washington Judge John B. Bates of the Federal District Court for the District of Columbia ruled today (23 Jan), as expected, against the merger of insurance giants Aetna and Humana. Grounds cited were the reduction in competition for Medicare Advantage plans, where both companies compete. “In this case, the government alleged that the merger of Aetna and Humana would be likely to substantially lessen competition in markets for individual Medicare Advantage plans and health insurance sold on the public exchanges.” The decision could be appealed in the US Appeals Court for the DC Circuit, or could be abandoned for different combinations, for example a rumored Cigna-Humana merger, or smaller companies in the Medicare/Medicaid market such as Centene, WellCare, and Molina Healthcare. Certainly there is money about: Humana would gain a $1 bn breakup fee from Aetna, and Cigna $1.85 bn.
No decision to date has been made in the Anthem-Cigna merger, but the general consensus of reports is that it will be denied by Federal Judge Jackson soon. [TTA 19 Jan]
Healthcare Dive, Bloomberg, Business Insider, Benzinga
Of course, with a new President determined to immediately roll back the more onerous regulatory parts of the ACA, in one of his first Executive Orders directing that Federal agencies ease the “regulatory burdens” of ObamaCare on both patients (the mandatory coverage) and providers, the denial of these two mega-mergers in the 2009-2016 environment may be seen as a capital ‘dodging the bullet’ in a reconfigured–and far less giving to Big Payers–environment. FoxNews
Breaking News. The anticipated shoe has dropped. With all the US news concentrating on the Republican convention, the US Department of Justice, late today, without much fanfare beyond the presser, lobbed lawsuits at Aetna and Anthem to stop their respective acquisitions of Humana and Cigna. US Attorney General Loretta Lynch was joined by Principal Deputy Associate Attorney General William Baer, who had been the DOJ’s point person for this anti-trust review.
According to CNN’s report, Mr Baer said “the two mergers would leave consumers at risk by reducing benefits and raising premiums. He also stressed that the most vulnerable would be hit the hardest and that competition would be reduced. “These are so-called solutions that we cannot accept,” Baer said. He added that the mergers are a “convenient shortcut to increase profit for these two companies,” and that the DOJ had “zero confidence” that they would benefit consumers.”
Reuters reported that Aetna and Humana expect “to vigorously defend the companies’ pending merger,” Anthem’s response was “more muted”, as industry observers expected, as it has been more problematic not only in size and with Medicare Advantage divestiture, but also with reports of disagreements on management and governance.
If these mergers were successful, the Big Five in US health insurance would be reduced to the Big Three, with the $48 bn Anthem-Cigna matchup besting UnitedHealthCare for the #1 pole position with 45 million covered persons.
Why is this important to those of us in telehealth, telemedicine and telecare? We are still seeking ‘who pays for it’ (remember our Five Big Questions/FBQs?) and when five becomes three, and things are unsettled….negotiations grind to a halt. (This Editor will reference the post-2008 years where health tech US deals and development came to a screeching stop as we waited to find out what was in that mystery ACA bill. Recovery/reset took years….)
Earlier reports via Bloomberg News and Reuters noted that both sets of insurance companies faced substantial opposition from the start. (more…)