Anthem sues to stop Cigna from ending merger attempt

Washington – The messy divorce between Anthem and Cigna took another turn Wednesday in a Delaware court that will be the scene of further expensive legal battling over the insurers’ merger attempt.

Anthem on Wednesday filed a temporary restraining order in Delaware’s chancery court against a lawsuit Cigna lawsuit filed Tuesday aimed at ending the merger agreement, collecting a $1.85 billion breakup fee and seeking at least $13 billion in damages from Anthem.

In a statement, Anthem said, “Cigna’s lawsuit and purported termination is the next step in Cigna’s campaign to sabotage the merger and to try to deflect attention from its repeated willful breaches of the Merger Agreement in support of such effort.”

“Anthem believes that there is still sufficient time and a viable path forward potentially to complete the transaction that will save millions of Americans more than $2 billion in annual medical costs and deliver significant value to shareholders,” Anthem said.

Meanwhile, Cigna is arguing that the merger could never have successfully taken place because of Blue Cross/Blue Shield rules that inhibited the type of consolidation outlined in the merger agreement. Anthem is a Blue Cross/Blue Shield company.

A federal judge last week agreed with the Justice Department that the proposed merger between Anthem and Cigna is anti-competitive and will result in higher premiums and fewer choices in the large employer group market, also known as “national accounts.”

Anthem almost immediately filed a notice of appeal of that ruling and said Wednesday the company “is pursuing an expedited appeal of the District Court’s decision and is committed to completing this value-creating merger either through a successful appeal or through settlement with the new leadership at the Department of Justice.”

There is no evidence, however, that the Trump Administration would support insurer consolidation.

Meanwhile, Cigna, in its filing with the Securities and Exchange Commission, indicated one argument it will press in its lawsuit, which is currently under seal.

“Cigna is disappointed that Anthem has chosen not to honor its contractual obligation to pay the $1.85 billion reverse break-up fee and has instead filed litigation,” Cigna said in its filing. “Cigna believes Anthem’s allegations to be meritless.”

Cigna raised an issue pressed by Justice Department lawyers during the month-long antitrust case in December – that Anthem’s relationship with other Blue Cross/Blue Shield companies increased the antitrust problems of the merger.

“The facts remain that Anthem had the obligation to eliminate the anticompetitive impact of the Blue Cross/Blue Shield Association rules to enable the transaction to proceed and receive regulatory approval and failed to so,” Cigna said in its SEC filing. “Accordingly, there is no viable path to completing this transaction. Cigna intends to vigorously defend against the Anthem litigation and pursue its own action against Anthem for the damages that Anthem has caused Cigna and its shareholders. “

Under the bylaws of the Blue Cross/Blue Shield Association, Anthem could face billions of dollars in penalties if it failed to derive the bulk of its revenues from “Blue-branded” policies after acquiring Cigna, an Anthem executive testified at that trial.

Steve Schlegel, Anthem’s vice president for corporate development, said 23 percent of Cigna’s domestic revenue would have to be rebranded to comply with the rules of the BC/BS association. That rebranding would violate the merger agreement, Cigna says.

Anthem maintained during the trial that it would keep Cigna as a stand-alone entity to compete with other BC/BS association members outside of Anthem’s exclusive territory in 14 states. When asked by a Justice Department lawyer if  Anthem’s intent was to allow Cigna to “wither away,” an Anthem executive responded  “absolutely not.”

Anthem says Cigna never intended to fulfill the terms of the merger agreement, citing U.S. District Court Judge Amy Berman Jackson’s order as evidence.

“Cigna’s obvious efforts to sabotage the merger have been recognized by both the District Court and the national media,” Anthem said in the statement released Wednesday. “As the District Court noted, it could not ignore the ‘elephant in the courtroom’ and the fact that Cigna was ‘actively warning against’ the merger and that ‘Cigna officials provided compelling testimony undermining’” Anthem’s defense. In addition, the District Court noted that it could not overlook ‘the doubt sown into the record by Cigna itself.’”

Last month, a federal judge also blocked a proposed $37 billion merger between Aetna and Humana. Unlike Anthem, Aetna said on Tuesday it is abandoning its efforts to merge and will pay Humana a $1 billion breakup fee.

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