In a new report, Deutsche Bank analyst George Hill discusses the new lawsuit that Anthem Inc ANTM has filed against Express Scripts Holding Company ESRX. According to Hill, the lawsuit was likely inevitable, and it’s not good news for Express shareholders.

“We view the lawsuit as an escalation of the dispute between the companies and the potential for damages increases the financial risk profile of Express Scripts,” he explains.

Anthem is suing to recover damages for what it believes is excessively high pharmacy pricing and for its right to terminate its contract with Express. Anthem believes it has been overpaying Express by about $3 billion per year. While Deutsche Bank estimates that Express faces a potential profit hit of around $2 billion if the Anthem contract is terminated, the prospect of damages makes the ultimate outcome of the lawsuit much more difficult to predict.

Overall, Hill sees…

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