ANALYSIS-UPDATE 1-Insurers, drugmakers take hit under Obama plan

*Obama budget targets drugmakers, health insurers

*Shares of insurers fall more than 8 percent

*Drugmaker stock index down more than 2 percent (Adds industry comments, reaction, updates shares)

By Susan Heavey

WASHINGTON, Feb 26 (Reuters) - U.S. President Barack Obama's 2010 budget proposal takes direct aim at drugmakers and health insurers to help fund an overhaul of the U.S. healthcare system.

His plan, outlined Thursday, calls for lowering Medicare payments to private insurers, allowing consumers to buy cheaper medicines from overseas and preventing drug companies from making deals that block generic competition.

Shares of U.S. health insurers suffered, with Humana Inc (HUM.N) down 19 percent, Aetna Inc (AET.N) off 11 percent, Cigna Corp (CI.N) down 7 percent, UnitedHealth Group Inc (UNH.N) off 12 percent and WellPoint Inc (WLP.N) down 9 percent in afternoon trading.

Shares of drugmakers also fell. The American Exchange Pharmaceutical Index .DRG, which includes GlaxoSmithKline Plc (GSK.L), Merck & Co Inc (MRK.N) and Johnson & Johnson (JNJ.N), was down 3.6 percent, underperforming the broader market.

Congress will consider the White House proposal as it spends the coming months crafting a spending plan for fiscal 2010 that begins Oct. 1.