Pharmacogenetics--the effect of genotype on drug response--holds the promise of safer and more effective drug therapy. Genetic tests would be routinely given to patients prior to prescription of a drug, with therapeutic decisions based on the patient's drug-response profile. This paper examines the operational changes and the ethical, legal, and policy challenges that pharmacogenetic medicine poses for key actors in the health care system. Adaptation by drug companies, regulatory agencies, physicians, patients, insurers, and public funding agencies will be necessary to integrate pharmacogenetic medicine into health care.