Nov. 5 (Bloomberg) -- Medco Health Solutions Inc. forecast higher 2009 profit and expects to gain from President-elect Barack Obama's plans to expand health insurance coverage and generic drugs, Chief Executive Officer David B. Snow Jr. said.

Medco, the largest U.S. manager of drug benefits, will reach new clients if Obama succeeds in expanding health coverage to the 46 million uninsured Americans, Snow said during a conference call today with analysts and investors. The Democratic president- elect's policies will increase the use of lower-priced generic drugs and allow copies of expensive biotechnology medications, which would be more profitable for Medco, Snow said.

``We're very comfortable with the health care platform that's been articulated up until now by Obama,'' Snow said on Medco's third-quarter earnings call. ``We expect Medco will be a beneficiary.''

The Franklin Lakes, New Jersey, company authorized buying as much as $3 billion of its shares through November 2010, funded by cash. The company also forecast earnings next year, adjusted for one-time items, of $2.67 to $2.77 a share, 15 percent to 20 percent higher than this year.

The shares jumped $3.47, or 9.1 percent, to $41.47 in composite New York Stock Exchange trading at 4:01 p.m. The company lost 25 percent this year before today.

Medco said net income rose 38 percent in the quarter, to $295.7 million, or 58 cents a share, boosted by new contracts and rising generic and mail-order prescriptions. Excluding a charge related to its 2003 spin off from Merck & Co, Medco's profit of 63 cents a share topped by a penny the average estimate of analysts surveyed by Bloomberg.

Democratic Policies

``Overall, quarterly results reflect continuing strong momentum,'' said Randall Stanicky, a Goldman, Sachs & Co. analyst in New York, in a note to clients today. He recommends buying Medco.

Medco, which manages drug benefits for private employers, labor unions and government workers, also will gain if Democrats in Washington embrace the use of computerized medical records and electronic prescribing, Snow told analysts on the call. Both would reduce expenses by cutting medical errors and steering more people to generics, he said.

Snow said he expects Obama's administration to legalize copying biotechnology drugs, expensive medicines that can't legally be duplicated now. Generic drugs typically cost 70 percent less than the name-brand version.

Medco won't start reaping higher profit from Obama's health- care policies until 2012 or 2013, Snow said.

How Bad?

While Medco will benefit from the slowing economy as more people choose the ``cost-saving benefits of mail-order and generics,'' a long recession could cut drug use, Snow said.

``There could be a point, if the economy continues to deteriorate, where consumers actually start to treat their non- discretionary drugs as discretionary,'' Snow said. ```We can't say how bad the economy could become next year.''

Medco benefited from two new contracts in the quarter, covering New York State and U.S.-government workers, said Charles Boorady, a Citigroup analyst in New York, in a note to clients before today's announcement.

Third-quarter revenue rose 15 percent to $12.6 billion. Medco also affirmed its 2008 profit forecast of $2.10 to $2.13 a share.

To contact the reporter on this story: Alex Nussbaum in New York anussbaum1@bloomberg.net.

Last Updated: November 5, 2008 16:54 EST