Medco buys genetic services company DNA Direct

NEW YORK Tue Feb 2, 2010 1:05am EST

Related Topics

NEW YORK (Reuters) - Pharmacy benefit manager Medco Health Solutions Inc MHS.N said it acquired privately held genetic testing services company DNA Direct in a move that will significantly expand Medco's involvement in personalized medicine.

Financial terms of the deal for the company that was founded in 2005 and currently has about 30 employees were not disclosed.

Medco has said it views involvement with personalized medicine as one of its most important growth strategies, especially from 2015 and beyond.

San Francisco-based DNA Direct provides services and counseling to physicians, health insurance companies and patients to help improve understanding of the fast-evolving world of genetic medicine and which tests may or may not be appropriate for particular patients.

"What DNA Direct has done is to find a way to enable greater access to genetic expertise than we've ever had out there before. There's a significant dearth of genetic expertise," DNA Direct founder and Chief Executive Ryan Phelan said in a telephone interview.

"The kind of services that Ryan's company has brought has taken a lot of the confusion out for physicians who don't really know which test to use," said Robert Epstein, Medco's chief medical officer, who joined Phelan in the interview.

A recent national survey conducted by Medco found that more than 90 percent of physicians realize that genetics can play an important role in prescribing treatments but do not have much of an understanding of the subject, Epstein said.

"We've been really excited about how fast this whole field has taken off and we now have more than 200 clients (representing more than 7 million people) who have asked us to help their members get tested in clinical programs," Epstein said.

By acquiring DNA Direct, "we get the depth and breadth of their expertise," Epstein said. "Having genetic counselors is a tremendously important capability that we don't have today."

Pharmacy benefit managers, or PBMs, administer prescription drug benefits for employers and health plans and operate large mail-order pharmacies.

Expanding the understanding of which patients are likely to benefit from specific medicines or treatments could lead to significant healthcare savings.

In 2010, Phelan said, some $8 billion is forecast to be spent on molecular diagnostics in the United States. Of that, about 20 percent will come from inappropriate tests being ordered, she said.

"That's $1.6 billion that could be inappropriately spent and better-utilized to create better healthcare outcomes. It's not a small number," Phelan said.

"Our whole thing at Medco is to get people on the right drug the first time. We can really improve the choice of therapy based on the right test being done," Epstein said.

Prior to this acquisition, clients relied on Medco's personalized medicine programs for information on testing for appropriate use of just a few drugs, such as the blood thinner warfarin and the breast cancer medicine tamoxifen.

"They (DNA Direct) have already done the intelligence around over 2,000 tests. For us it's a synergy that takes us somewhere much faster and much deeper," Epstein said of the deal, which already closed.

While the DNA Direct operation is small, Epstein said Medco has dramatic expansion plans for it over the coming years.

"This is just the start," he said.

(Reporting by Bill Berkrot, editing by Matthew Lewis)

FILED UNDER: