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Medco Has Long, Healthy Life Ahead

When drugs go generic, MedcoHealth Solutions makes money.

So it's good news for the company that, according to Thomson Scientific and IMS Health, drugs that represent $77 billion in sales -- Prevacid, Lipitor, Effexor and others -- will lose their patents over the next five years. Medco gains about $8 million in margin for every $100 million in branded drugs that come off patent, BMO Capital Markets calculated, and that amounts to a $6 billion profit opportunity for the company.

Medco makes its money when drugs come off patent by negotiating lower prices with the generic companies that step into the market. As a pharmacy benefits manager, the company buys its medications in bulk, so Medco already enjoys hefty discounts. But those discounts look like they'll just get better going forward.

And on top of all this, Medco's a defensive play. Healthcare cost-containment companies tend to do well regardless of the market, which will be important if we enter the recession Cramer said he thinks we might.

Thanks to those impending patent expirations, Medco can provide investors with earnings visibility five years out. So, as Cramer said, Medco "is the ideal stock with certain profits for uncertain times."

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