Proposed Merger of Aetna and Humana Enjoined

The court relied on the analyses and rebuttal critiques of Cornerstone Research experts and senior advisors, Professor Aviv Nevo and Ms. Christine Hammer, CPA.

Retained by the U.S. Department of Justice Antitrust Division and the Plaintiff States

After a thirteen day trial, the U.S.D.C. for the District of Columbia enjoined the proposed merger of health insurers, Aetna and Humana. In accepting the plaintiffs’ arguments, the court relied on the analyses and rebuttal critiques of Cornerstone Research experts and senior advisors, Professor Aviv Nevo of the department of economics and the Wharton School of the University of Pennsylvania, and Ms. Christine Hammer, CPA. Following the ruling, the parties abandoned the merger.

The court’s opinion relied on Professor Nevo’s testimony in multiple areas.

Professor Nevo analyzed the likely effects of the proposed merger on competition involving Medicare Advantage plans and plans sold on the Affordable Care Act exchanges. He testified in the plaintiffs’ case in chief and as a rebuttal witness. The court’s opinion relied on Professor Nevo’s testimony in multiple areas.

  • Relevant Market. “Professor Nevo has performed a battery of tests that all point to the same conclusion: the sale of individual Medicare Advantage plans satisfies the hypothetical monopolist test and thus is a relevant product market. That result generally holds up whether Nevo uses a critical loss analysis or a merger simulation, and whether he uses his own estimates, [the defendants’ expert’s], or those from the academic literature.”
  • Competitive Effects. “Nevo’s (largely uncontroverted) analysis suggests that there is substantial competition between Aetna and Humana. Given Nevo’s analysis, it is not surprising to find significant evidence of head-to-head competition between Aetna and Humana throughout the country.”
  • Entry: Not Likely. “Hence, based on the expert analysis that the Court finds persuasive [Nevo’s analysis].…entry is not likely enough to allay these concerns.” Not Timely. “The Court finds Nevo’s critique of [the defendants’ expert’s] model for equilibrium and timely entry to be persuasive.” Not Sufficient. “[Nevo’s] analysis is persuasive, and alone is enough to conclude that entry is not likely to be sufficient.”

The court found that Ms. Hammer raised valid issues regarding “several categories of claimed efficiencies.”

Ms. Hammer evaluated whether the defendants’ efficiency claims were verifiable and merger-specific, among other areas. The court found that Ms. Hammer raised valid issues regarding “several categories of claimed efficiencies” as well as “the companies’ analyses…that serve to further undermine the reliability of the efficiency claims.”

  • Verifiability. “Hammer supported her analysis [of the defendants’ efficiency claims relating to drug rebates] with a series of illustrative examples that, in the Court’s view, raise real concerns about the reliability of the companies’ pharmacy rebate maximization efficiencies.”
  • Merger Specificity. “On balance, the Court is unpersuaded that the efficiencies generated by the merger will be sufficient to mitigate the transaction’s anticompetitive effects for consumers in the challenged markets.”