A federal judge has greenlighted AT&T's takeover of Time Warner, a ruling expected to spur a wave of corporate takeovers. If the decision plays out as the markets anticipate, Anthem may consider a bid for Humana, writes Bloomberg's Max Nisen in an op-ed.
The market believes that CVS Health's purchase of Aetna and Cigna's deal to buy Express Scripts have a greater chance of winning regulatory approval since the June 12 decision. If these deals get the go-ahead, Anthem and Humana would have to compete with three major rivals that have pharmacy benefit managers — Aetna, Cigna and UnitedHealth Group.
As a result, Anthem may consider purchasing Humana to bolster its offerings to stay afloat in an increasingly competitive market, argues Mr. Nisen. And Anthem's previous failed merger attempt may prove to be helpful experience for a second attempt.
In 2017, both Anthem and Humana had merger deals squashed by the federal government. Anthem attempted to purchase Cigna and Aetna tried to take over Humana but both were prevented. But despite these failed attempts, healthcare mega-mergers are more realistic today in light of the ruling, argues Mr. Nisen.
According to Mr. Nisen, an Anthem-Humana deal would create less market concentration than the two failed horizontal merger attempts last year. It would have a smaller presence in the Medicare Advantage market than an Aetna and Humana deal, and Humana would have minimal impact on Anthem's commercial business, whereas a merger of Anthem and Cigna would have turned it into a behemoth.
Now, why would Anthem want to buy Humana?
Humana offers a possible lifeline because it would give Anthem the potential to become a larger player in the growing Medicare Advantage market. Humana has a PBM, and it would help Anthem's budding efforts to build one of its own. Those qualities could convince Anthem to gamble on a horizontal deal.
"There isn't another deal option I can see that would be as appealing or impactful, and any shift in perceived risk and reward could be enough to push Anthem into action," writes Mr. Nisen.
Read the full op-ed here.