Making Personalized Medicine Pay

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Some enzymes change drugs so that they are excreted from the body. Others convert drugs that have no effect when first administered into a medically active form. Because of variations in genes, these enzymes may work quickly or slowly or not at all. One example is tamoxifen, used to prevent breast cancer recurrence. In 20% of people, the enzyme that usually activates this drug is partially or completely ineffective, and the drug provides little or no benefit.

A turning point for Medco came in 2005, when a Food & Drug Administration advisory committee recommended that genetic information be considered in making treatment decisions with warfarin. The blood thinner is widely prescribed to prevent clots, but it's notoriously difficult to get the dose right. "We know that we kill people with warfarin all the time," says Dr. Issam Zineh, associate director for genomics at the FDA's Center for Drug Evaluation Research. Too much warfarin raises chances of bleeding and strokes caused by bleeding; too little allows deadly clots to form. The cost of using the wrong doses is estimated to be in the billions of dollars per year. With a genetic test, doctors can determine if people will need more or less warfarin than the standard 5-milligram dose.

When Epstein looked at Medco's medical records of its million patients on the drug, he discovered something alarming: As many as 25% of them ended up in the hospital within six months of starting on warfarin. "Avoiding one hospitalization could underwrite the cost of the test for 100 patients," Epstein reasoned. Medco worked with the Mayo Clinic to measure the clinical benefits and cost savings from genetic tests for warfarin. The final data won't be released for several months, but Medco found that employers were eager to sign on for the testing service anyway. Now, when Medco sees a prescription coming in for warfarin, it recommends genetic testing to the doctor and patient. In Medco's experience, 67% of doctors and 82% of patients agree to testing.

"THE INCENTIVES ALIGN"

The next drug Medco personalized was tamoxifen. Identifying women who can't metabolize the drug into its active form and putting them on a different drug reduces the cancer's chances of recurrence—and the costs of future treatment. Coming soon is a test for another blood thinner, the blockbuster Plavix. Pinpointing those who benefit will enable Medco to keep more patients on the drug when it goes generic, instead of switching to a more expensive alternative that doesn't require a test. A bonus is that the results from any given genetic test are usually applicable to many drugs. The same variation that determines the response to Plavix, for instance, can help determine how Valium, heartburn drugs like Nexium, and the antidepressant Celexa should be used.

The PBMs' foray into individualized treatments "is where the business rubber meets the road," says Michael Stocum, managing director of consultant Personalized Medicine Partners. "The incentives align. Patients want to get the right drug, and payers are willing to pay if they get a benefit."

Targeting drugs to those who benefit will obviously cut revenues for some drugmakers. But the pharmaceutical industry itself has started to back away from trying to sell the same medicines to everyone, says former Pfizer drug researcher Dr. Bruce H. Littman, now president of consultant Translational Medicine Associates. "The blockbuster mentality is still in place, but drugmakers are coming around," he says.

If they don't, the FDA may not be pleased. In the future, the agency may balk at approving drugs that can't be directed to the right patients—and payers may decline to reimburse. Amgen, for one, strongly backs the use of a test for a gene called KRAS for its $8,400-per-month colon cancer drug, Vectibix. About 40% of people have a variation of KRAS that prevents the drug from working. Drugmakers "see a future business model where they just want all of the smaller market of appropriate patients," says Generation Health's Schatzberg.

Given these trends, the once overhyped idea of personalized medicine "is really starting to get legs," says Dr. Eric Topol, chief academic officer at Scripps Health. "The old way of giving therapeutics will be obsolete."

Carey is a senior correspondent for BusinessWeek in Washington.

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