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DOJ Makes Its Case Against Payer Mega-mergers

By John Commins  
   July 26, 2016

A disinterested antitrust litigator discusses the legal merits of the suits brought by the Department of Justice against Aetna and Anthem.

The U.S. Department of Justice filed suit this month to block two proposed mega-mergers of health insurance giants Aetna with Humana and Anthem with Cigna, claiming the consolidations would stifle competition and innovation and lead to higher costs for healthcare consumers and providers. 

In an interview with HealthLeaders Media, antitrust litigator Jay L. Levine with the Washington, DC office of Porter Wright Morris & Arthur, LLP offers his disinterested analysis on the Department of Justice's lawsuits to block the two mergers. The following is an edited transcript. 

HLM: What does the government have to prove to win this case?

Levine: The government has to prove the relevant product market, the relevant geographic market, and they have to prove that within those markets competition is going to be substantially lessened as a result of these mergers.

That means that prices are going to go up, innovation and quality is going to go down, and that there aren't any counterbalancing procompetitive benefits.

Nobody in the market or coming into the market would have a competitive response that will compete away these anticompetitive effects, these additional price hikes, and/or reductions in innovation and quality.

On the flip side, almost always the primary focus of defendants in a merger case is to show that the government definition of a market is off.

Therefore, the presumption that the government makes that the merger is unlawful is incorrect because the market shares are invalid, that the real market shares are far less, and that competition will thrive post transaction.

They also want to show that other companies, even if they are not in the market, are poised to enter the market should they see an opportunity if the merging companies raise prices or reduce quality.

HLM: The DOJ suits resonate on a common sense level, in that combining four of the nation's five biggest health insurance companies does not seem to be good for consumers. Will that perception factor into these suits?

Levine: There is a sort of PR aspect to 'Oh my god! Household names are merging!'. Even in the political climate we are in now people are railing against 'big is bad' and 'we aren't doing enough to stop these mega mergers.'

Obviously, a judge looking at this case may be influenced by that, but the framework of the law is not 'big is bad.' You can have No. 1 and No. 2 in an industry merge if there is enough competition around.

The question is not always a visceral reaction to big is bad, but let's get to the details and where exactly will this merger harm competition? The judge still has to dig in and figure that out.

Plus, each merger analysis has to stand on its own. I don't think one can do a lobotomy and not be aware that there is another merger going on that obviously has some implications.

But the judge is going to have to write an opinion that is fact-specific to that merger. He is going to have to find on the facts that stand trial that the government has made out a case that there will be in some relevant market consumers that will be harmed.

John Commins is a senior editor at HealthLeaders.


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