Credit: Shutterstock photoWhile concerns over pricing on life-saving drugs has long been a problem, recent actions from Turing Pharma have put this back into the spotlight in a big way. The privately-held company recently raised prices for its drug, Daraprim, from $13.50 a pill to $750, overnight.
Needless to say, many people weren't too happy about this development, and especially those who were taking the drug. After all, a price increase of over 50-fold in a weekend is going to be a tough pill to swallow for anyone.
The move, and the drug industry's practices in general, was also of concern to presidential hopeful Hillary Clinton who discussed the problem on Twitter ( TWTR ) on Monday morning. In her tweet, Clinton called the action 'price gouging' and noted that she was going to offer up a plan soon to fight on this problem. We should also note that the tweet was written by her and not her social media team, as is the case when she ends a message with '-H', carrying extra weight for the message:
Investor Reaction
Since Hillary Clinton has to be considered a front-runner to be the next President of the United States, investors in the biotech sector didn't react too favorably to this news and are clearly fearful of more government regulation or pricing interference in the near future. In fact, there was actually a pretty big sell-off in anything biotech related following her tweet (read Biotech ETF Investing 101 ).
Major biotech ETF IBB , which zeroes in on large cap stocks in the space, was off close to 4.5% on the session while volume was nearly triple the daily average. Investors also saw moves of at least 3% lower for other popular biotech funds like FBT , while pharma funds were not spared from the downturn as PJP and IHE were also hit with heavy losses on the session.
Seemingly the worst hit was funds that focused on the small cap side of the spectrum as these tend to be more volatile than their large cap counterparts anyway. The most popular fund here is XBI and this ETF was down nearly 5.4% on high volume, but a duo of new small cap focused ETFs that hold companies in the more exploratory-focused area of the sector, BBC and SBIO , were the worst in Monday trading, tumbling more than 6% each (see SBIO vs. BBC: 2 Innovative Biotech ETFs Head-to-Head ).
Time to Panic?
Today's reaction by investors seems a little over the top, and especially considering that we do not even know what Clinton's plans are for the space yet. Perhaps once she reveals more details on how she looks to fight this and which companies will be impacted this kind of sell-off will be warranted. However, this is what can happen in a very frothy market and it is hard to argue that biotechs are at least approaching bubble territory at this point given their incredible growth over the past few years, so even minor hiccups can get blown out of proportion (see the Intro Guide to Leveraged Biotech ETF Investing ).
And while we can point to Clinton for the recent volatility, biotech companies have few people to blame but themselves, as such sudden - and massive-price increases are bound to be examined very thoroughly in this politically-charged climate. So perhaps a dose of better public relations is the way to go if biotech firms want to continue riding the wave higher no matter who wins the presidency next year.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
