Doubt of the benefit

13 December 2016 By Jeffrey Goldfarb Follow @jgfarb

The U.S. medical insurer’s CEO now says cost cuts following its Humana acquisition are forecast at $3 bln a year, not the original $1.25 bln. Extra efficiencies conveniently help Aetna with its antitrust defense. The big revision should feed skepticism about all such estimates.

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Aetna Chief Executive Mark Bertolini testified in court on Dec. 12 that Aetna's initial estimate of $1.25 billion in synergies from buying Humana had been raised to some $3 billion, because of combined technology systems, potential layoffs and other strategies.

In a pretrial brief, Aetna filed a presentation estimating $2.8 billion in annual savings from the transaction by 2020. Nearly $2.4 billion are defined as "cognizable efficiencies," which are merger-specific and verifiable and don't occur as a result of any anticompetitive reduction in services.

The U.S. healthcare insurance companies are defending themselves against a lawsuit filed on July 21 by the Department of Justice to block the merger on competition grounds. Aetna announced on July 3, 2015, that it had agreed to buy Humana for $33 billion.

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