A pending wave of patent expirations for top-selling drugs should lead to sustainable, improved profits and margins for pharmaceutical distributors like McKesson Corp. and Cardinal Health Inc., according to a Citi analyst.

Analyst George Hill said in a Monday morning research note he was upgrading shares of both companies to “Buy” from “Hold.” The analyst also raised price targets for the stock and earnings estimates.

Hill expects sales to contract as pharmaceuticals like Pfizer Inc.’s cholesterol fighter Lipitor, the world’s top-selling drug at nearly $11 billion a year, and Eli Lilly and Co.’s antipsychotic Zyprexa lose patent protection. But generics also should lead to margins and profit levels increasing faster than prices compress.

“Pharmaceutical wholesalers make razor-thin profit margins on the very-expensive branded drugs provided by a single manufacturer,” Hill wrote. “When these products begin to lose patent protection, both margin dollars and percentages rise drastically as competitors enter the market.”

Profit levels can be three to five times those generated on the original, branded drug when five or more manufacturers make a generic, the analyst said.

Hill raised target prices to $51 from $44 for Cardinal shares and to $101 from $90 for McKesson.