Antitrust approvals for the $48 billion proposed merger between Anthem and Cigna could be delayed or derailed by squabbles between the two insurers, according to a series of letters reviewed by The Wall Street Journal.
If completed, the Anthem-Cigna merger would create a health insurer with $117 billion in annual revenue. With more than 54 million members, the combined entity would be the largest insurer in the U.S. by number of members.
However, the deal may not come to fruition, as people on both sides say disagreements between the two companies could hinder antitrust approvals and have already delayed the deal's timeline.
Here are three areas of contention between Anthem and Cigna, according to WSJ.
1. Anthem's lawsuit against Express Scripts. Cigna disagrees with Anthem's lawsuit against Express Scripts — the nation's largest manager of prescription drug benefits. Anthem sued Express Scripts in March in an attempt to renegotiate its contract with the company and gain more savings on prescription medicine. In an April 9 letter to Anthem's board, Cigna Chairman Isaiah Harris Jr. said the suit could hurt the prospects for regulatory approval of the Anthem-Cigna merger. He also expressed concern that the suit could cause damage to the combined company's value. In response, Anthem said the possibility of a suit against Express Scripts was disclosed during the early stages of their merger negotiations, and that getting better prices from Express Scripts would be beneficial, according to WSJ.
In late April, Express Scripts refuted Anthem's claims and countersued the insurer. With the litigation pending, a heated exchange occurred between Cigna and Anthem's lawyers. Anthem General Counsel Tom Zielinski said he did "not intend to correspond further" about the litigation in a May 5 letter to Cigna General Counsel Nicole Jones. She responded by saying, "Suffice it to say that we disagree with just about every characterization that you make with respect to the matters raised in your letters — other than your suggestion not to continue a correspondence," according to WSJ.
2. Closing date discrepancies. Although initial estimates claimed the Anthem-Cigna merger would close in the second half of 2016, Cigna told investors in early May that the transaction might not close until 2017. At a conference in Las Vegas May 10, Cigna CFO Tom McCarthy said the insurer underestimated the depth and complexity of antitrust review. However, Anthem stuck with the original timeline. "Although our merger agreement with Cigna gives us until April 30, 2017 to obtain regulatory approvals, we continue to believe that we will obtain such approvals and close in the second half of 2016," Anthem spokeswoman Jill Becher told Reuters.
While the insurers disagreed publicly about the closing date, they argued about the issue behind the scenes. The day Cigna made its filing with the Securities and Exchange Commission pushing back the closing date, Mr. Zielinski sent a letter to Ms. Jones, accusing Cigna of trying to "spook the market," according to WSJ.
3. Slipping behind in review process. The letters between Anthem and Cigna's lawyers reveal the companies are worried their deal is falling behind the proposed merger between Aetna and Humana in the regulatory review process. The deal is thought to have better odds if reviewed alongside Aetna-Humana, according to WSJ.
Each company blames the other for the merger slipping behind. In the letters, Anthem accused Cigna of submitting data in the wrong format and missing DOJ deadlines, while Cigna accused Anthem of being slow to formulate a plan if regulators require divestitures for the transaction to go through.
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