Valentine’s Day can bring some partnerships closer, while others move farther apart. And some partnerships are simply forbidden – such as in the case of some of the largest payers in the U.S.
Earlier this month, it appeared several of the country’s largest five insurance companies might partner up, reducing the pool of big players in the payer world to three, until federal judges blocked both the Aetna-Humana and the Cigna-Anthem merger attempts. With Aetna and Humana announcing today they will not appeal the decision, at least two more players are back in the game.
That makes today’s announcement a happy Valentine’s Day indeed for consumers, providers and manufacturers, who all benefit from a competitive payer market.
THE ARGUMENTS
Both suits were brought on last summer by the Obama-led Department of Justice, and both were blocked due to the likelihood that they would reduce competition and--despite the payers arguing otherwise--ultimately both judges agreed with the DOJ that the mergers would likely increase the cost burden on consumers. Payers argued that the mergers would have helped them negotiate lower drug prices, negotiate lower rates with providers and hospitals, and become more efficient operationally. The courts said those arguments were not as strong as the DOJ’s.
THE BREAKUP
Whereas the Aetna-Humana deal was blocked due to its impact on competition in the Medicare Advantage market, the Anthem-Cigna merger was prevented because of the likely reduction of choices for large employer groups.
Anthem--the company behind the Blue Cross Blue Shield plans in big markets like New York and California--also said the merger with Cigna would help it withstand the volatility of the exchange marketplace, suggesting it may pull out of the exchanges if the deal fails. Anthem made it clear it intends to appeal the decision.
BEWARE OF THE REBOUND
Despite this victory, it would be dangerous for providers, manufacturers and patients to rest on their laurels, however. While these two deals were attempted during the Obama administration, future deals (even a swap of these, such as Humana and Cigna joining forces) will likely be pursued in a more merger-friendly Trump world, although provider organizations are advocating against the trend.
These relationships are of particular interest to pharmaceutical companies, according to recent research by HIRC. That’s because payer consolidation is a huge driver of change in pharmaceutical companies’ managed markets strategy and staffing, along with the need to respond to price controls and changes in government regulation.
While Trump has spoken up for price controls in the past, of these three trends the only one manufacturers need to worry about from a Republican-dominated federal government is probably payer consolidation.
Manufacturers and other stakeholders would be wise to keep a close eye on these love birds lest they elope, taking competition and bargaining power with them.
Read more at:
https://www.wsj.com/articles/aetna-humana-mutually-end-merger-agreement-1487074314
http://www.healthcaredive.com/news/anthem-cigna-merger-national-account-market/435179/
http://www.healthcarefinancenews.com/slideshow/healthcare-mergers-and-acquisitions-2016-running-list
