DOJ Seeks Dirt as Anthem, Cigna Squabble

The Department of Justice has revealed that the two health insurers are accusing each other of breaching their agreement to merge in a $48.2 billion deal.

With the Department of Justice digging deep to find evidence of antitrust and the bride and groom bickering, the chances that the two biggest health insurers in the country will unite as one are dwindling.

Anthem, Aetna Merger Suits Separated by Judge

Anthem and Cigna face a formidable opponent in the Department of Justice, and now it seems they can't along with each other either.

Anthem stands to lose big if their deal falls apart, with the merger agreement requiring that Anthem pay Cigna a $1.85 billion breakup fee if they part ways. If they stay together but the court blocks the merger, however, Anthem may be off the hook.

The DOJ has revealed that the two insurers are accusing each other of breaching their agreement to merge in a $48.2 billion deal. The spat is detailed in documents filed in the District Court for the District of Columbia, where the DOJ is suing to block the mega merger.

Anthem and Cigna were both unhappy about the dispute being released to the DOJ, arguing that the document should fall under the common interest rule, which protects the communications between two parties that are jointly defending themselves.

The court disagreed, pointing out that the common interest rule does not apply to "adversarial communications."

"Such communications are not in furtherance of a joint defense strategy, and Defendants cannot have a joint legal interest in accusing each other of breaching a contract," the court said.

The government's interest in the correspondence between the two companies shows how hard it is working to block the merger, says Randal Schultz, a partner at the law firm of Lathrop & Gage and chair of the firm's Healthcare Strategic Business Planning Practice group.

But the question of whether the companies are breaching their own agreement is not really germane to the DOJ's antitrust case, he says.

A Smoking Gun?

"Why would [DOJ] need those documents unless [it] think[s] there's some kind of smoking gun in those documents that says, 'we're really doing this because we can generate a whole bunch of extra money and increase prices because of our size'?" Schultz says.

The DOJ was essentially arguing for the release of documents that it said would be of no use to it, he explains.

If the documents are only about the companies fighting with each other and not relevant to their joint defense, as the court decided, it follows that the DOJ would find nothing to use against the insurers. Nevertheless, Schultz suspects that the DOJ will press the strategy, especially now that it is emboldened by success.

In some circumstances it is justified to allow the prosecution access to communication between the joint defendants, and the DOJ is hoping that just one of those times there will be something useful. Even though there shouldn't be.

It's Complicated

"It's a very complicated question from a discovery perspective," he says. "It's going to pit the joint defense concept against the government's right to access information in a deposition where the discussions between the two parties could be directly relevant to the subject of the litigation."

Schultz does not expect the merger will happen.

If the government successfully blocks the merger, the companies are likely to continue arguing about who failed to honor their agreement and who owes the other a lot of money, he says.

Either party, however, could respond by saying that the DOJ's efforts to block of the merger made their agreement invalid.

"You can't make a contract to do something illegal. You and I can't sign an agreement to go rob a bank and then expect a court to uphold the terms of that agreement," Schultz explains.

"If the court blocks the merger because it would violate antitrust laws, that means you couldn't have a contract to engage in anticompetitive activities in the first place. So the agreement can't be enforced."