Medco's gene-based medicine push looms for Pharma

NEW YORK (Reuters) - The promise of tailoring medicine to a person's genetic makeup is poised to bear fruit in a major way in the next few years. But not necessarily for drugmakers.

Medco Health Solutions Inc MHS.N, the large U.S. manager of prescription drug benefits, is investing in significant clinical studies that examine the role of individual's genes and medicine in health outcomes.

Part of Medco's effort involves determining whether using a generic drug works as well as or better than brand-name competitors for people who carry certain genes.

Its first such study involves the blood clot treatment Plavix, the world's second-biggest-selling medicine. Plavix is sold by Bristol-Myers Squibb (BMY.N) and Sanofi-Aventis (SASY.PA) but is expected to be available as a low-cost generic in the United States by 2012.

Medco's program could provide a new obstacle for the pharmaceutical industry, which is already expected to see sales slump in the next few years as many brand name drugs lose patents and become available as generics.

For example, Medco's study pits Plavix against Eli Lilly's (LLY.N) Effient, one the drugmaker's most important new products. Should the study show significant benefits for Plavix users, Effient could lose market share.

The Medco program "really has the potential to pull patients away from branded drugs and drive them toward generics," said Seamus Fernandez, a pharmaceutical stock analyst with Leerink Swann.

Medco, which processes prescriptions for over 60 million Americans, says the Plavix study could yield annual savings of more than $200 million -- and it is planning more studies.

"There's really nobody out there investing in understanding the older drugs," Robert Epstein, Medco's chief medical officer, said in an interview.

"Since so much of our business is in generics...we felt it was important for our clients and our members to get a better understanding of that, and if there's an opportunity to protect the generic market share through genetics, then all the better."

Medco and other pharmacy benefit managers (PBMs), which profit from increased use of generics, have shown they can efficiently convert patients to the lower-cost copies of brand-name drugs.

If genetic tests keep developing and Medco boosts use with its programs, "it would basically assign a risk to pharma that I think isn't really well perceived right now," Fernandez said.

Aside from the science behind the genetics, Medco's overall investment is "the single biggest development in bringing personalized medicine to broad sections of the population," said Edward Abrahams, executive director of the Personalized Medicine Coalition, an education and advocacy group.

Though Medco may be making the biggest splash, another major PBM, CVS Caremark Corp (CVS.N) last month said it would start offering clients more genetic services next year under a deal with Generation Health Inc.

According to Medco, more than 70 percent of the population are estimated to do well at metabolizing Plavix because they have a functioning version of the gene known as CYP2C19. People with a variant of that gene that prevents them from efficiently breaking down the medicine may be more at risk of blood clots that lead to heart problems.

The Plavix-Effient study is enrolling more than 14,000 patients with acute coronary syndrome and comparing the rate of cardiovascular deaths, and nonfatal heart attacks and strokes over six months.

Results are expected by early 2012 -- around when Plavix goes generic. Medco currently serves about 1 million users of Plavix. "If you move some market share around, it does add up pretty quickly," Epstein said.

A spokeswoman for Eli Lilly said genetic variations have not shown to have any clinically relevant impact on metabolizing Effient, which Lilly has studied in its large clinical trial against Plavix. Other factors, including a patient's age, weight and disease history, need to be considered, Lilly spokeswoman Tammy Hull said.

"There's a lot more that physicians have to take into account than genetic variations, although that can be important," Hull said.

Medco also is studying carriers of another gene, KIF6, who evidence suggests are at higher risk of heart disease and stand to benefit more from statin cholesterol drugs.

That study involves medicine compliance, but it could pave the way for another study ahead of the launch of generics of Pfizer's (PFE.N) huge-selling Lipitor pill in 2011. Such a study could make the case for taking Lipitor and other generic statins over brand-name pills.

Other Medco personalized medicine studies on the breast cancer treatment tamoxifen and blood thinner warfarin may shake up sales in those categories, even though they do not explicitly pit the older drugs against brand-name medicines.

Medco is able to mitigate costs of often-expensive large clinical trials because patients are already taking the drugs.

"It's really a fraction of what the industry is accustomed to seeing," Epstein said.

And it could have a big payoff. For Medco and other PBMs, Jefferies & Co analyst Arthur Henderson said, "any kind of data they can use to push a generic version over a branded version is going to result in higher margin potential for them."

Conversely, Henderson said, "If the genetic data shows the generic version can be used, that's going to definitely be a headwind that the manufacturer may not like."

(Reporting by Lewis Krauskopf, editing by Dave Zimmerman)