On January 23, 2017, United States District Court for the District of Columbia granted the Department of Justice, Antitrust Division (the “DOJ”), request for an injunction blocking Aetna’s proposed $37 billion acquisition of Humana. The DOJ sought to block the transaction on the grounds that it would lead to higher health insurance prices, reduced benefits, less innovation, and worse service for over a million Americans. The DOJ specifically alleged that the transaction would substantially lessen competition in Medicare Advantage plans and in certain public exchanges, and their complaint was joined by eight states – Delaware, Florida, Georgia, Iowa, Illinois, Ohio, Pennsylvania and Virginia – and the District of Columbia.

The court held, in a 156 page opinion authored by Judge John D. Bates, a President George W. Bush appointee, that the combination of Aetna and Humana would “likely substantially lessen competition in Medicare Advantage in all 364 complaint counties and in the public exchanges in the three complaint counties in Florida.” Importantly, the court rejected Aetna/Humana’s arguments that the Medicare Advantage is in the same antitrust product market as “Original Medicare” because the parties’ documents and the econometric evidence showed that Original Medicare was not a sufficiently close substitute such that it would constrain the parties’ pricing in Medicare Advantage plans post-merger. Also, the court rejected the parties’ arguments that the coordination and efficiency incentives created by the Affordable Care Act would transform Original Medicare into a model more similar to that of Medicare Advantage. According to the court, the parties have significant share of, and are especially close competitors in, the Medicare Advantage market, with Aetna’s having plans for “rapid growth” in the market absent the merger. Thus, the merger created significant potential anticompetitive harm in that market, which would not be sufficiently mitigated by the parties’ proposed divestiture to Molina Healthcare, federal regulation of Medicare Advantage, or outweighed by the deal’s efficiencies.