CVS Caremark Corp. on Monday took another step toward combining its drug benefit management services with patients' genetic profiles, as it hired the president of genetic benefits manager Generation Health to lead its struggling Caremark business.
CVS is also increasing its stake in Generation Health but did not provide further details.
The president and CEO of Generation Health, Per Lofberg, will take over the Caremark business on Jan. 4. The companies formed a partnership in November to research pharmacogenomics, or the interaction between medications and a patient's genes, which can determine whether a drug works for specific patients.
That could improve treatment and reduce costs for Caremark, as patients could avoid drugs that would not work for them. CVS has said it will start offering some pharmacogenomic services starting in the second quarter of 2010. It said its first priorities will include cancer, heart disease, and HIV.
Lofberg said CVS will counsel patients with certain diseases to undergo genetic tests. It will focus first on diseases where genes are known to play a role in which drugs work. The company said those patients can be encouraged to use a drug that has been proven to work on people with similar genetic profiles.
"This will eventually become all pervasive in the way pharmaceuticals are developed and administered," he said.
The Caremark pharmacy benefits management business has lost $4.8 billion in business in fiscal 2010. Most of those losses have occurred in recent months. CVS President and CEO Tom Ryan has been running the division since late November, when President Howard McLure retired.
Lofberg, 62, is a former head of Merck-Medco Managed Care, which became Medco Health Solutions in 2003. He also led a Merck & Co. venture capital company. He said pharmacogenomic testing is only one of the issues he will deal with at Caremark.
"There is a lot to work on," he said.
Jefferies analyst Scott Mushkin said Lofberg knows the pharmacy benefits management industry and probably won't make any huge changes at Caremark. Mushkin said the choice indicates that CVS does not think a big shakeup is necessary to get the business back on track. He agreed with that decision.
"I think it's a shrewd move, I think it's smart. I think it's going to end up being a very good thing," he said.
Wall Street appeared to favor the announcement, and shares of Woonsocket, R.I.-based CVS rose $1.12, or 3.6 percent, to close at $32.30. The broader markets edged up about 1 percent.
Meanwhile, Generation Health said co-founder Rick Schatzberg will become its new president and CEO. The Upper Saddle River, N.J., company will remain independent from CVS.