A key goal of pharmacogenetics--the use of genetic variation to elucidate inter-individual variation in drug treatment response--is to aid the development of predictive genetic tests that could maximize drug efficacy and minimize drug toxicity. The completion of the Human Genome Project and the associated HapMap Project, together with advances in technologies for investigating genetic variation, have greatly advanced the potential to develop such tests; however, many challenges remain. With the aim of helping to address some of these challenges, this article discusses the steps that are involved in the development of predictive tests for drug treatment response based on genetic variation, and factors that influence the development and performance of these tests.