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Court blocks Aetna-Humana deal

by Thomas Dworetzky, Contributing Reporter | January 24, 2017
Business Affairs
The $37 billion Aetna-Humana megamerger has hit a roadblock in federal court.

U.S. District Judge John D. Bates stressed in his 156-page ruling after the 13-day trial that “the proposed merger is likely to substantially lessen competition in Medicare Advantage in all 364 complaint counties and in the public exchanges in the three complaint counties in Florida,” according to The Palm Beach Post.

The Justice Department was joined in its suit by eight states and the District of Columbia, USA TODAY reported.

The ruling quickly garnered praise from opponents of the merger, notably the American Medical Association.

“Creating even larger goliaths would be unacceptable,” AMA President Dr. Andrew W. Gurman, said on the association's blog, adding that “Federal and state officials have a strong obligation to enforce antitrust laws to protect patients by ensuring a competitive marketplace that operates in patients’ best interests.”

He added that “With the same drive that put us through late nights in med school, carried us through the intensity of our residencies and continues to push us every day to go the extra mile for our patients and their families, we took these mergers on—and our voices were heard.”

Aetna is considering an appeal, spokesman T.J. Crawford told the paper. The deal would create the biggest seller of Medicare Advantage plans – with over 4.1 million customers.

But "I would not bet my money on the companies winning an appeal," Thomas Lang, Haynes and Boone Law Firm antitrust lawyer told USA TODAY, noting that "Judge Bates wrote a thorough and well-reasoned opinion ... where he carefully examined the parties own internal ... documents and evidence, as well as carefully considering the econometric evidence offered by each side’s economic experts."

If the deal dies, Humana could reap as much as $1 billion from Aetna as a breakup fee.

“Elderly patients were the big winners today,” said Gurman.

The merger drew heat from the government when it was first announced – and matters just worsened for the deal after a controversial letter came to light in August, 2016.

That letter to the DOJ, signed by Chairman and CEO Mark T. Bertolini said, in part, “Specifically, if the DOJ sues to enjoin the transaction, we will immediately take action to reduce our 2017 exchange footprint. We currently plan, as part of our strategy following the acquisition, to expand from 15 states in 2016 to 20 states in 2017. However, if we are in the midst of litigation over the Humana transaction, given the risks described above, we will not be able to expand to the five additional states. In addition, we would also withdraw from at least five additional states where generating a market return would take too long for us to justify, given the costs associated with a potential break- up of the transaction. In other words, instead of expanding to 20 states next year, we would reduce our presence to no more than 10 states. We also would not be in a position to provide assistance to failing cooperative exchanges as we did in Iowa recently.”

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