$37 billion deal of Aetna to purchase rival insurer Humana has been blocked by a federal judge on Monday, thwarting one of 2 large mergers that would reshape the U.S. healthcare landscape. Aetna claimed that it was considering an appeal. Federal Judge has blocked the intended acquisition of Humana.
The transaction would breach antitrust laws by decreasing competition among insurers, U.S. District Judge John D. Bates in Washington ruled. With the deal defeated, Aetna owes Humana a $1 billion breakup fee under the terms of the merger agreement. Federal Judge has blocked the intended acquisition of Humana.
“We are analyzing the opinion now and giving critical consideration to an appeal after putting forward a compelling case,” T.J. Crawford, an Aetna spokesman, claimed. A Humana spokesman did not instantly respond to a request for comment.
The ruling is another victory for antitrust enforcement attempts started by the Obama administration. A separate Justice Department challenge, against Anthem’s $48 billion bid for Cigna, is also awaiting a ruling.
“If the judge blocked this deal, there is very little, if any, possibility that the Anthem-Cigna deal gets cleared,” Jason McGorman, a Bloomberg Intelligence analyst, stated by e-mail. He added that analysts and investors had considered that the Aetna-Humana deal “had a better opportunity of settlement/clearance” than Anthem-Cigna.
The Obama Justice Department annoyed a slew of mega-mergers amid a wave of record deal-making, involving Comcast’s attempted takeover of Time Warner Cable, deal of Halliburton for Baker Hughes and AT&T’s bid for T-Mobile US. The Trump administration is taking over inquiries into AT&T’s deal for Time Warner and Bayer AG’s proposed combination with Monsanto Co.
The government case against Aetna-Humana merger concentrated on the market for private health policies for the elderly, termed as Medicare Advantage. The U.S. explained that the Aetna-Humana deal would have eliminated competition between the insurers in 364 counties in 21 states and likely would force senior people to pay higher premiums for Medicare Advantage plans. It also threatened competition on the insurance exchanges developed under Obamacare, the Justice Department claimed.
Aetna countered that the Medicare market is much higher than the Justice Department claims because it involves both Medicare Advantage plans and original Medicare, giving more choice for seniors than the government portrayed. Competition on the exchanges is not a problem, they said, because Aetna withdrew from all seventeen counties at issue in the government’s case. Federal Judge has blocked the intended acquisition of Humana.
The judge sided with the view of government of the Medicare Advantage market. “In that market, which is the key focus of this case, the merger is presumptively unlawful—a conclusion that is highly supported by straight evidence of head-to head competition as well. The companies’ rebuttal arguments aren’t persuasive,” Bates wrote.
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