In early January, the 7th Circuit Court of Appeals issued its decision in Omnicare v. UnitedHealth Group, holding that UnitedHealth’s exchange of information with PacifiCare prior to their merger did not violate the antitrust laws. Echoing the lower court’s analysis, the 7th Circuit concluded that Omnicare had failed to come forward with sufficient evidence that UnitedHealth and PacifiCare had conspired pre-merger to reduce the reimbursement rates they paid to Omnicare for its services. Instead, the parties’ exchange of information was equally consistent with what they claimed to be its purpose – due diligence in connection with the proposed merger. As such, the decision provides useful guidance to merging parties on the information that may be exchanged between them as part of their due diligence review.
The action arose as a result of contract negotiations over reimbursement rates that Omnicare had with both UnitedHealth and PacifiCare in 2005, prior to their merger. Omnicare contended that UnitedHealth and Pacificare embarked upon a joint strategy whereby PacifiCare would “play hardball” in the negotiations, seeking terms better than those that UnitedHealth had agreed to, with an agreement between UnitedHealth and PacifiCare that post-merger UnitedHealth would terminate its contract with Omnicare and assume the favorable terms that PacifiCare had negotiated. Ultimately this was exactly what occurred – PacifiCare succeeded in obtaining better terms from Omnicare, and after the merger was completed UnitedHealth terminated its contract with Omnicare and assumed PacifiCare’s more favorable terms for the combined entity.
In support of its claim that UnitedHealth and PacifiCare had conspired to achieve this result, Omnicare pointed to the information exchanges between the parties pre-merger. Specifically, Omnicare contended that the purpose for the exchanges was to advance their anticompetitive agreement. The 7th Circuit, however, rejected Omnicare’s argument, affirming the lower court’s decision. The court stated that while “Omnicare’s narrative is complex and compelling” it “cannot get to trial based on the elegance of its theory alone.” Thus, “after considering the totality of Omnicare’s evidence,” the Court held that “we cannot conclude that it would permit a reasonable jury to dismiss the inference that UnitedHealth and PacifiCare were acting in their independent interests.” Accordingly, summary judgment for the defendants was affirmed.