1 00:00:00,160 --> 00:00:03,800 Speaker 1: The proposed fifty four billion dollar Signa Anthem merger would 2 00:00:03,800 --> 00:00:06,720 Speaker 1: be the largest healthcare merger in United States history, and 3 00:00:06,760 --> 00:00:09,399 Speaker 1: the federal government's lawsuit to block the merger on anti 4 00:00:09,400 --> 00:00:12,680 Speaker 1: trust grounds is on trial right now. But testimony at 5 00:00:12,680 --> 00:00:15,760 Speaker 1: the trial is raising questions about whether SIGNA CEO David 6 00:00:15,800 --> 00:00:18,720 Speaker 1: Cordani thinks the merger is a good idea. An Anthem 7 00:00:18,800 --> 00:00:21,960 Speaker 1: CEO Joseph Swedish is testified that Anthem kept its efforts 8 00:00:22,040 --> 00:00:25,040 Speaker 1: to plan the integration of the two companies secret from SIGNA. 9 00:00:25,160 --> 00:00:27,840 Speaker 1: We'll be discussing one of the companies themselves are undermining 10 00:00:27,840 --> 00:00:30,720 Speaker 1: their chance of merging with Jennifer Ree, a senior litigation 11 00:00:30,720 --> 00:00:36,360 Speaker 1: analyst for Bloomberg Intelligence, Jennifer Um. There's a lot that's 12 00:00:36,440 --> 00:00:39,880 Speaker 1: really interesting in the testimony of these two CEOs. Let's 13 00:00:39,920 --> 00:00:43,839 Speaker 1: start with the doubts expressed by David Cordani of Signa. 14 00:00:43,960 --> 00:00:47,200 Speaker 1: He's publicly defended the merger, but now he's under oath 15 00:00:47,240 --> 00:00:49,560 Speaker 1: in court and he seems to be saying something different. 16 00:00:49,560 --> 00:00:52,480 Speaker 1: What what's he's saying in court now, Well, what he's 17 00:00:52,479 --> 00:00:55,080 Speaker 1: saying is that Um, in terms of some of the 18 00:00:55,440 --> 00:00:58,760 Speaker 1: pre closing integration planning, that the companies were undergoing which 19 00:00:58,760 --> 00:01:00,600 Speaker 1: is typical you know has come needs are going through 20 00:01:00,600 --> 00:01:03,400 Speaker 1: a merger review to start thinking about the integration that 21 00:01:03,400 --> 00:01:06,240 Speaker 1: they'll be doing after they closed, that there were problems 22 00:01:06,319 --> 00:01:09,039 Speaker 1: between the companies and that they were in particular, Um, 23 00:01:09,040 --> 00:01:12,039 Speaker 1: what I read was that he felt that some of 24 00:01:12,040 --> 00:01:15,119 Speaker 1: the plans that Anthem had instituted or we're thinking about 25 00:01:15,160 --> 00:01:17,920 Speaker 1: would harm harm Signa and would benefit the Blue Cross 26 00:01:17,959 --> 00:01:22,800 Speaker 1: Blue Shield Association more so than Signa. Jen, what is 27 00:01:22,880 --> 00:01:26,080 Speaker 1: the judge looking for? What kind of search is she 28 00:01:26,280 --> 00:01:30,920 Speaker 1: doing for? What kind of facts? Well, first of all, 29 00:01:31,000 --> 00:01:32,679 Speaker 1: you know, what the d J has done is they 30 00:01:32,760 --> 00:01:35,280 Speaker 1: they've had to allege several different kinds of markets where 31 00:01:35,319 --> 00:01:38,480 Speaker 1: there might where this deal could substantially less in competition. 32 00:01:38,880 --> 00:01:40,880 Speaker 1: So the first thing really that she has to do 33 00:01:41,040 --> 00:01:43,440 Speaker 1: is understand what those markets are and listen to what 34 00:01:43,520 --> 00:01:46,160 Speaker 1: the economists have to say about, you know, whether those 35 00:01:46,160 --> 00:01:48,280 Speaker 1: are appropriate markets or not. And that's a big issue 36 00:01:48,320 --> 00:01:51,480 Speaker 1: in this trial because they've alleged the DOJ has alleged 37 00:01:51,520 --> 00:01:54,640 Speaker 1: harm to a national market for you know, large national 38 00:01:54,680 --> 00:01:58,080 Speaker 1: insurers and Anthem Insigna have refuted that that's an appropriate 39 00:01:58,120 --> 00:02:00,640 Speaker 1: market to think about in which there could be harm. 40 00:02:00,720 --> 00:02:02,720 Speaker 1: So that's one of the first things. But you know, 41 00:02:03,280 --> 00:02:05,120 Speaker 1: going back to what Michael had just asked, one of 42 00:02:05,160 --> 00:02:07,640 Speaker 1: the other very big things are the efficiencies claims of 43 00:02:07,680 --> 00:02:10,680 Speaker 1: these companies, because that is a defense to a merger. 44 00:02:10,720 --> 00:02:12,360 Speaker 1: That can be a defense, I should say, to a 45 00:02:12,400 --> 00:02:15,560 Speaker 1: merger that may have some anti competitive effects in the market, 46 00:02:15,720 --> 00:02:18,600 Speaker 1: if that could be outweighed according to the guidelines that 47 00:02:18,639 --> 00:02:21,720 Speaker 1: the d o J uses by efficiencies, then perhaps the 48 00:02:21,760 --> 00:02:24,120 Speaker 1: merger could be allowed to clear. And this is something 49 00:02:24,160 --> 00:02:26,480 Speaker 1: that the companies are relying on here that they believe 50 00:02:26,520 --> 00:02:29,480 Speaker 1: it's very efficient and could lead to lower costs for consumers. 51 00:02:29,919 --> 00:02:33,400 Speaker 1: Um and and and this testimony by Signals CEO undermines 52 00:02:33,440 --> 00:02:36,240 Speaker 1: that defense well. And it sort of undermines the idea 53 00:02:36,320 --> 00:02:39,280 Speaker 1: that the merger would bring a lot of benefits to 54 00:02:39,400 --> 00:02:42,960 Speaker 1: customers who might otherwise choose Signet, doesn't it. Yeah, absolutely, 55 00:02:43,080 --> 00:02:44,799 Speaker 1: you know, it undermines I think in a couple of 56 00:02:44,800 --> 00:02:47,200 Speaker 1: different ways. First of all, if they're just not getting 57 00:02:47,200 --> 00:02:49,920 Speaker 1: along about the way they're going to integrate, it suggests 58 00:02:49,960 --> 00:02:52,360 Speaker 1: that they won't even achieve the efficiencies or might have 59 00:02:52,440 --> 00:02:56,000 Speaker 1: difficulty achieving the efficiencies they allege that will come from this. 60 00:02:56,440 --> 00:02:58,840 Speaker 1: From this combination. That's the first thing. And the second 61 00:02:58,880 --> 00:03:00,639 Speaker 1: thing is this is a of g issue that the 62 00:03:00,720 --> 00:03:03,200 Speaker 1: d o J has said, this is going to keep 63 00:03:03,240 --> 00:03:06,880 Speaker 1: SIGNA from competing as Signa competes today, um and and 64 00:03:06,960 --> 00:03:10,840 Speaker 1: this supports that in a way. So as the trial 65 00:03:10,880 --> 00:03:13,880 Speaker 1: has progressed, is the d o J making a good case? 66 00:03:15,280 --> 00:03:17,240 Speaker 1: You know, I haven't been attending the trial, but from 67 00:03:17,240 --> 00:03:19,040 Speaker 1: what I've been reading and the papers I've read that 68 00:03:19,040 --> 00:03:20,600 Speaker 1: have been filed that, you know, it seems like they're 69 00:03:20,600 --> 00:03:24,360 Speaker 1: making a good case um and and their economists are 70 00:03:24,360 --> 00:03:26,679 Speaker 1: supporting where they're alleging about the markets and harm to 71 00:03:26,720 --> 00:03:30,519 Speaker 1: the markets. Um It's so far it seems like the 72 00:03:30,600 --> 00:03:33,720 Speaker 1: judges bit a bit skeptical of the defendants of the 73 00:03:33,720 --> 00:03:36,200 Speaker 1: insurance companies here and seems to be supporting the d 74 00:03:36,400 --> 00:03:39,160 Speaker 1: j's national market definition, which I think is a big 75 00:03:39,200 --> 00:03:41,960 Speaker 1: deal here because in past insurance cases, this hasn't been 76 00:03:42,000 --> 00:03:44,840 Speaker 1: a market definition that the d J has relied on 77 00:03:44,960 --> 00:03:48,600 Speaker 1: to get settlements and mergers. Well, another unusual thing that 78 00:03:48,640 --> 00:03:51,640 Speaker 1: seems to have happened in the cases that the Anthem 79 00:03:51,720 --> 00:03:57,160 Speaker 1: CEO testified that they've kept their planning process secret from 80 00:03:57,600 --> 00:04:00,320 Speaker 1: the company, signal that they were merging with what what's 81 00:04:00,360 --> 00:04:02,400 Speaker 1: that all of them? Yeah, you know, it's it's very 82 00:04:02,440 --> 00:04:06,160 Speaker 1: strange now now pre closing integration planning is a weird 83 00:04:06,200 --> 00:04:09,240 Speaker 1: thing because you know, before companies closed, but after they've 84 00:04:09,240 --> 00:04:12,160 Speaker 1: signed a merger agreement, they technically still have to behave 85 00:04:12,200 --> 00:04:14,760 Speaker 1: in the market as competitors. So this whole integration planning 86 00:04:14,760 --> 00:04:17,520 Speaker 1: thing is always something that the antitrust lawyers are watching 87 00:04:17,760 --> 00:04:20,799 Speaker 1: very carefully because there is something that's called gun jumping 88 00:04:21,040 --> 00:04:23,640 Speaker 1: that companies can be fined for and can also delay 89 00:04:23,640 --> 00:04:26,120 Speaker 1: Emerger's closing. That if they integrate a little too much, 90 00:04:26,120 --> 00:04:28,400 Speaker 1: they get a little too close and what they're doing 91 00:04:28,680 --> 00:04:31,800 Speaker 1: can actually be an antitrust violation in and of itself. So, 92 00:04:32,000 --> 00:04:35,599 Speaker 1: you know, it seems like Signa's lawyers were probably saying, hey, 93 00:04:35,640 --> 00:04:37,960 Speaker 1: you know, it looks like we're facing this challenge and 94 00:04:37,960 --> 00:04:39,800 Speaker 1: and maybe you should slow down on what you're doing 95 00:04:39,839 --> 00:04:41,839 Speaker 1: with integration. And it seems like Anthem kind of took 96 00:04:41,880 --> 00:04:44,039 Speaker 1: off and did their own thing and kept its secret 97 00:04:44,080 --> 00:04:47,520 Speaker 1: from Signa, and you know it, it's definitely strange. Although 98 00:04:47,839 --> 00:04:50,520 Speaker 1: some integration planning can take place in secret, but it 99 00:04:50,600 --> 00:04:53,200 Speaker 1: still just doesn't bode well for these companies being able 100 00:04:53,240 --> 00:04:56,200 Speaker 1: to achieve these efficiencies. Does it seem as if they're 101 00:04:56,279 --> 00:05:00,360 Speaker 1: learning more as the trial goes on and perhaps wanting 102 00:05:00,440 --> 00:05:03,600 Speaker 1: this merger less even Well, you know, that's a good question, 103 00:05:03,640 --> 00:05:06,400 Speaker 1: an interesting question, because I think there's been speculation for 104 00:05:06,480 --> 00:05:08,600 Speaker 1: quite a long time that SIGNA is not that interested 105 00:05:08,640 --> 00:05:10,840 Speaker 1: anymore in this deal, that there was trouble at the 106 00:05:10,880 --> 00:05:14,280 Speaker 1: beginning even getting into a purchase agreement, into an agreement. 107 00:05:14,560 --> 00:05:16,680 Speaker 1: A lot of controversy about that it took them a 108 00:05:16,680 --> 00:05:19,160 Speaker 1: long time to come to an agreement. Um, some think 109 00:05:19,200 --> 00:05:21,640 Speaker 1: it was just in reaction to ETNA humanity, you know, 110 00:05:21,760 --> 00:05:24,200 Speaker 1: deciding to emerge. That was kind of a race to 111 00:05:24,320 --> 00:05:28,720 Speaker 1: get into a mergered yourself and SIGNA will get if 112 00:05:28,720 --> 00:05:32,000 Speaker 1: if the deal is blocked for because of regulators, because 113 00:05:32,000 --> 00:05:35,599 Speaker 1: of antitrust, SIGNA would get one point eight five billion 114 00:05:35,680 --> 00:05:40,680 Speaker 1: dollars a fee from Anthem. But SIGNA has to continue 115 00:05:40,720 --> 00:05:43,159 Speaker 1: to defend and support this deal all the way through 116 00:05:43,160 --> 00:05:44,800 Speaker 1: to their end date, which is I think in the 117 00:05:44,800 --> 00:05:47,400 Speaker 1: first quarter or second quarter of two thousand seventeen, in 118 00:05:47,520 --> 00:05:50,279 Speaker 1: order to get that fee. So do you think that 119 00:05:50,440 --> 00:05:53,599 Speaker 1: maybe there's some speculating a bit here, But do you 120 00:05:53,600 --> 00:05:55,599 Speaker 1: think that there's some motivation on the part of the 121 00:05:55,640 --> 00:05:59,200 Speaker 1: SIGNA executives. But you know, including their CEO, perhaps not 122 00:05:59,240 --> 00:06:02,000 Speaker 1: to be is enthusiastick here as they might otherwise be. 123 00:06:02,920 --> 00:06:05,160 Speaker 1: I it could be, It could be. Now, the thing 124 00:06:05,240 --> 00:06:07,080 Speaker 1: is they have to they have a fine line they 125 00:06:07,080 --> 00:06:10,400 Speaker 1: have to tread because according to their purchase agreement, they 126 00:06:10,400 --> 00:06:13,920 Speaker 1: will not be able to collect that reverse termination fee 127 00:06:13,920 --> 00:06:17,080 Speaker 1: that's what it's called when the buyer pays the seller um. 128 00:06:17,120 --> 00:06:19,279 Speaker 1: They won't be able to collect that fee if the 129 00:06:19,400 --> 00:06:22,560 Speaker 1: failure to get regulatory approval is due to a willful 130 00:06:22,600 --> 00:06:25,320 Speaker 1: breach by SIGNA. So you know, they don't want to 131 00:06:25,360 --> 00:06:27,800 Speaker 1: put themselves into a position where that kind of an 132 00:06:27,800 --> 00:06:30,359 Speaker 1: allegation could be made. And at the very least ANTHEM 133 00:06:30,400 --> 00:06:33,200 Speaker 1: could later, let's say this all falls apart and they say, 134 00:06:33,240 --> 00:06:35,680 Speaker 1: you know, you ows this termination fee, that Anthem could 135 00:06:35,680 --> 00:06:37,479 Speaker 1: then try to fight that and have some grounds to 136 00:06:37,520 --> 00:06:42,159 Speaker 1: fight that. Why is the judge bifurcating or making the 137 00:06:42,240 --> 00:06:46,799 Speaker 1: trial into two separate many trials? I believe the judge 138 00:06:47,000 --> 00:06:49,120 Speaker 1: probably did that because the d o J sort of 139 00:06:49,120 --> 00:06:52,120 Speaker 1: alleged two different kinds of buckets of harm here and 140 00:06:52,240 --> 00:06:55,279 Speaker 1: they're quite different. So one bucket of harm is in 141 00:06:55,360 --> 00:06:58,480 Speaker 1: this national market where where the d o J envisions 142 00:06:58,520 --> 00:07:01,440 Speaker 1: some large company with employ ease spread across the country 143 00:07:01,720 --> 00:07:05,719 Speaker 1: wanting to contract negotiating contract with just one entity to 144 00:07:05,760 --> 00:07:09,080 Speaker 1: serve all their employees across the country, particularly for self 145 00:07:09,120 --> 00:07:13,200 Speaker 1: insured employers like Bloomberg Um, that in in that market 146 00:07:13,200 --> 00:07:15,840 Speaker 1: there will be harm. But the DJ is also alleged 147 00:07:15,920 --> 00:07:19,080 Speaker 1: separately in the more traditional insurance markets that in local 148 00:07:19,280 --> 00:07:22,640 Speaker 1: metropolitan areas I think thirty five they claim where these 149 00:07:22,640 --> 00:07:25,960 Speaker 1: two companies compete head to head to you know, ensure 150 00:07:26,040 --> 00:07:28,880 Speaker 1: large group employers in those local regions, that that's a 151 00:07:28,920 --> 00:07:31,440 Speaker 1: different bucket of harm. And so the kind of economic 152 00:07:31,480 --> 00:07:34,520 Speaker 1: analysis and and data that the judge has to evaluate 153 00:07:34,600 --> 00:07:37,600 Speaker 1: will be different depending on whether it's this national market 154 00:07:37,800 --> 00:07:40,440 Speaker 1: for you know, self insured employers or whether it's just 155 00:07:40,480 --> 00:07:47,040 Speaker 1: your typical regional um commercial large group employers. So, Jennifer, 156 00:07:47,080 --> 00:07:50,760 Speaker 1: you have had some doubts about whether this merger was 157 00:07:50,800 --> 00:07:54,600 Speaker 1: going to be approved for some time. We're part way 158 00:07:54,600 --> 00:07:58,600 Speaker 1: through the trial now, we've got had some pretty interesting testimony. 159 00:07:58,640 --> 00:08:00,160 Speaker 1: What do you think is going to happen as we 160 00:08:00,240 --> 00:08:03,480 Speaker 1: move towards the judge's decision. Yeah, I don't think it 161 00:08:03,520 --> 00:08:06,280 Speaker 1: looks good for the insurers. I think that the argument 162 00:08:06,320 --> 00:08:10,600 Speaker 1: they're making is not usually a winning argument. That efficiencies 163 00:08:10,600 --> 00:08:13,080 Speaker 1: will win out the day where there are otherwise are 164 00:08:13,120 --> 00:08:16,000 Speaker 1: anti competitive effects. This this is something that needs to 165 00:08:16,040 --> 00:08:18,160 Speaker 1: be evaluated in mergers, and it is meant to be 166 00:08:18,240 --> 00:08:21,240 Speaker 1: sort of a mitigating factor, but it just doesn't generally 167 00:08:21,240 --> 00:08:25,000 Speaker 1: win the day where there will be some lessening of harm. 168 00:08:25,040 --> 00:08:27,720 Speaker 1: And you're talking about healthcare markets, and you're talking about 169 00:08:27,720 --> 00:08:30,120 Speaker 1: people's health and their costs for doctors, which is a 170 00:08:30,240 --> 00:08:33,080 Speaker 1: very sensitive area right now, and and one of the 171 00:08:33,120 --> 00:08:35,400 Speaker 1: ways that the companies claim that they'll be able to 172 00:08:35,400 --> 00:08:39,000 Speaker 1: lower consumers costs looks like it's because they'll have better 173 00:08:39,080 --> 00:08:41,840 Speaker 1: clout as a combined company to be able to reduce 174 00:08:41,880 --> 00:08:45,280 Speaker 1: the reimbursement rates they're paying to providers like doctors, hospitals. 175 00:08:45,679 --> 00:08:48,480 Speaker 1: You know, that is not really a great argument to make. 176 00:08:48,840 --> 00:08:52,040 Speaker 1: Where the issue is when you start squeezing these doctors 177 00:08:52,040 --> 00:08:55,280 Speaker 1: and dictating terms, it could reduce the quality of healthcare. 178 00:08:56,520 --> 00:08:59,960 Speaker 1: Thank you very much to Jennifer re As, senior litigation 179 00:09:00,000 --> 00:09:04,040 Speaker 1: analysts for Bloomberg Intelligence, talking about the Anthem Signal merger 180 00:09:04,080 --> 00:09:06,240 Speaker 1: and the unusual testimony of the c E. O s 181 00:09:06,720 --> 00:09:09,520 Speaker 1: at that trial, which raised some questions about whether this 182 00:09:09,600 --> 00:09:11,800 Speaker 1: merger has got any chance of going through at all.