For the past two weeks, the U.S. Justice Department has clashedwith Anthem Inc. in a blockbuster antitrust trialrife with conflict.

|

Related: Anthem's Cigna takeover may draw $3B BlueCross fine

|

The government is fighting to block a $48 billion health caremerger that Anthem’s tie-up partner—Cigna Corp.— appears to nolonger want.

|

The drama of that trial, where Cigna’s chief executive hardlyhid the strain between the insurer and its suitor, isn’t expectedto be mirrored when Aetna Inc., on Monday, begins to defend its $37billion takeover of rival Humana Inc.

|

Two cases simultaneously in front of different judges

The two cases—the biggest antitrust trials in Washington inyears—will now play out simultaneously on separate floors in frontof different judges. The Justice Department filed both cases simultaneously in July tothwart what regulators described as “unprecedented consolidation inthe health insurance industry.”

|

Pennsylvania, Georgia and Florida were among eight states, alongwith the District of Columbia, that joined DOJ's complaint against Aetna.

|

Jones Day partner John Majoras will lead Aetna’s defense.Majoras represented AB Electrolux last year when the JusticeDepartment challenged the Swedish company’s proposed $3.3 billionacquisition of General Electric Co.’s appliance business. Thedeal collapsed in December 2015, when GeneralElectric pulled out of the sale in the middle of trial.

|

Justice Department lawyers argue the proposed tie-up betweenAetna and Humana would “harm two groups of consumers especiallyvulnerable to enhanced market power and reduced choice”: seniorcitizens on Medicare Advantage plans and individuals younger than65 who seek coverage on Affordable Care Act plans.

|

|

Humana, based in Kentucky, is the largest Medicare Advantageprovider, and Connecticut-based Aetna is, as the government put it,“the rapidly growing fourth largest.” The two companies arecompetitors for the sale of individual health insurance on publicexchanges in 17 counties in Florida, Georgia and Missouri.

|

Related: Health care mergers should be blocked,says AMA

|

“Aetna sought to prevent this court from even considering theeffect of the merger on the exchange markets by announcing, soonafter the complaint was filed, that it would withdraw from theexchanges in Florida, Georgia, and Missouri—the very states thatare the subject of plaintiffs’ claims,” Justice Department lawyerswrote in their pretrial brief. “But the court should not allowAetna to avoid antitrust scrutiny by essentially shuttering itsfactory.”

|

Aetna’s lawyers reject the government’s claim that the company’splanned retreat from health care exchanges next year was a responseto the antitrust suit. “[T]his case is about effects oncompetition, not intent, and those effects must be assessed inlight of actual market facts and current competitive conditions,”Aetna’s attorneys said in their papers.

|

Aetna: ‘Real questions’ about viability of exchanges

Aetna’s legal team said it’s “beyond dispute that the ACAexchanges are threatening to collapse under their own weight.” Theinsurer’s lawyers promised to show that “these economicrealities—and the difficulty of setting prices, forecasting profitsand losses, and assessing risk in such a volatile marketplace—havenot been lost on the federal government.”

|

Aetna argued in pretrial filings that the government “is leftasking the court to look into the fog of the future, and to divinewho will be competing on the exchanges, where they will becompeting, and all of the other market conditions that would benecessary to assess competitive impact.”

|

The company’s lawyers wrote: “That is a speculative requestindeed, since there are real questions whether the exchanges willexist at all after ACA opponents assume control of the executiveand legislative branches early next year.”

|

|

Indeed, President-elect Donald Trump vowed on the campaign torepeal or otherwise replace the Affordable Care Act— a task easier said than done. Trump later said he wasopen to keeping parts of the ACA.

|

The Jones Day lawyers defending Aetna don’t have any clearconnection to Trump, but the firm itself does.

|

Trump last week named Jones Day partner Donald McGahn II, a toplawyer for the campaign and transition team, as White Housecounsel. Jones Day partner Gregory Katsas and associate JamesBurnham are leading the Justice Department transition with Kirkland& Ellis partner Brian Benczkowski, who previously worked forU.S. Sen. Jeff Sessions, R-Alabama, Trump's pick for U.S. attorneygeneral.

|

The transition of power isn’t likely to have a major effect, ifany, on the Aetna and Anthem antitrust cases. U.S. District JudgeJohn Bates is expected to issue a ruling before or shortly afterTrump takes office on Jan. 20, and the judge presiding over theAnthem trial, Amy Berman Jackson, also anticipates ruling in thattime frame.

|

Under the terms of Aetna’s deal, Humana can abandon the saleafter Dec. 31 and receive a $1 billion breakup fee. In August, theJustice Department’s Craig Conrath, a seniorlawyer in the Antitrust Division, said Aetna and Humana are“getting along with each other.”

|

Aetna and Humana’s lawyers played hardball to preserve theirdeal, accusing the Justice Department of "serious delay andmisconduct" in the discovery process.

|

The insurers asked for sanctions that would prevent JusticeDepartment lawyers from calling employees from the Centers forMedicare and Medicaid Services as witnesses or introducingdocuments from the health agency.

|

Bates has yet to rule on the request for sanctions.

Complete your profile to continue reading and get FREE access to BenefitsPRO, part of your ALM digital membership.

  • Critical BenefitsPRO information including cutting edge post-reform success strategies, access to educational webcasts and videos, resources from industry leaders, and informative Newsletters.
  • Exclusive discounts on ALM, BenefitsPRO magazine and BenefitsPRO.com events
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.