DOJ Approves Wellpoint’s Acquisition of Amerigroup

On November 28, 2012, the DOJ announced that Amerigroup’s sale of its subsidiary, Amerigroup Virginia Inc., to Inova Health System Foundation (“Inova”) addressed the agency’s concerns with WellPoint’s proposed $4.9 billion acquisition of Amerigroup.

The DOJ said that the merger, as originally proposed, would have lessened competition substantially in the provision of Medicaid managed care plans in Northern Virginia.  The deal was announced in July and the DOJ issued a Second Request to investigate the merger in August.  The DOJ noted that it worked closely with the Virginia state Attorney General on its review of the acquisition.  WellPoint, a licensee of the BCBSA serving more than 65 million members with 2011 revenues of $60.7 billion, and Amerigroup, serving more than 2 million members with 2011 revenue of more than $6 billion, were the only two providers of Medicaid managed care plans in Northern Virginia.

The Virginia Medicaid managed care program provides enrollees with access to preventive and coordinated care through managed care organizations, including WellPoint and Amerigroup.  Congress recognized the importance of choice to Medicaid beneficiaries by generally requiring that states give beneficiaries a choice of at least two Medicaid managed care entities if the state requires beneficiaries to enroll in managed care plans.

According to the DOJ, WellPoint’s proposed acquisition of Amerigroup would have resulted in a merger to monopoly in Medicaid managed care in Arlington, Culpeper, Fairfax, Fauquier, Frederick, Loudoun, Prince William, Rappahannock and Warren counties, plus the cities of Alexandria, Falls Church, Fairfax and Manassas Park.  No new Medicaid managed care plan entered these areas since 2005.  To resolve the DOJ’s antitrust concerns, Amerigroup subsequently announced that it would sell its Amerigroup Virginia subsidiary (which included its Northern Virginia Medicaid business) to Inova, which operates five hospitals in Northern Virginia.

Acting Assistant Attorney General Renata Hesse, who leads the Antitrust Division, announced that “the divestiture of Amerigroup Virginia will ensure continued competition in the markets for Medicaid managed care plans in Northern Virginia,” and that because the divestiture “addresses the department’s concerns,” the Antitrust Division would no longer object to the combination.  The divestiture ensured that Medicaid beneficiaries in Northern Virginia would continue to have a choice of at least two Medicaid managed care entities.

Lessons Learned

The DOJ’s acceptance of a divestiture of Amerigroup’s Medicaid manage care business in Northern Virginia to Inova is noteworthy for three reasons.  First, the DOJ had not previously identified Medicaid managed care plans as a relevant product market.  Second, the DOJ was able to complete its investigation relatively quickly.  Indeed, it completed its investigation within three months of issuing the Second Request.  Third, the DOJ did not require a consent order or a settlement agreement rather it accepted the parties’ solution of a complete divestiture during the investigation as a sufficient remedy to resolve its competition concerns.

Andre Barlow
(202) 589-1838
abarlow@dbmlawgroup.com