Healthcare stocks were hit hard yesterday following a tweet by Democratic Presidential candidate Hillary Clinton about the pricing of drugs. While biotech stocks were more affected by the tweet with the NASDAQ Biotechnology index shedding 4.41%, pharma stocks were also not spared with the NYSE ARCA Pharmaceutical Index losing 1.47%. (Read how Hillary Clinton Crushed ETFs)

The “Price Gouging” Tweet That Triggered the Slide

“Price gouging like this in the specialty drug market is outrageous. Tomorrow I'll lay out a plan to take it on.” – this is the tweet that triggered the slide in the biotech sector. Clinton was responding to a tweet by The New York Times about a 5,000% hike in the price of a drug, Daraprim (pyrimethamine) that was approved by the FDA way back in 1953.

Turing Pharmaceuticals, headed by ex-hedge fund manager, Martin Shkreli, had acquired rights to Daraprim from Impax Laboratories just last month and reportedly hiked its price from $13.50 to $750 per tablet. Needless to say, this caused a major furor considering growing concerns regarding the pricing and affordability of prescription drugs.

Last year too, the biotech sector had seen a selloff when lawmakers had questioned Gilead Sciences, Inc.’s GILD pricing of its hepatitis C virus (HCV) treatment, Sovaldi. The $84K price tag for a 12-week treatment period was considered too expensive and came under heavy criticism.

Biotech Stocks Affected by Clinton’s Vow

Although most biotech stocks saw their share prices sliding yesterday, here is a look at five large biotech companies that were hit by Clinton’s vow to fight drug pricing.

Biogen Inc. BIIB – Cambridge, MA-based Biogen, well known for its multiple sclerosis (MS) treatments, saw its shares slide 5.56% yesterday. It’s been a challenging year for the company which is facing a slowdown in the growth rate of its oral MS treatment, Tecfidera. To make matters worse, the emergence of a few cases of progressive multifocal leukoencephalopathy (PML), a serious brain infection, in patients using Tecfidera, will continue to weigh on the stock.

Gilead – Gilead is no stranger to the pricing controversy. This Foster City, CA-based company that saw its shares slipping 2.49% yesterday, has often been criticized for the pricing of its HCV treatments, Sovaldi and Harvoni. The company has already raked in $9.45 billion from sales of both drugs in the first half of 2015 despite the entry of AbbVie with its HCV treatment, Viekira Pak, which triggered a pricing war in this segment of the market.

Amgen AMGN and Regeneron REGN – With Amgen and Regeneron gaining approval for their highly awaited PCSK9 inhibitors, Repatha and Praluent, respectively, the stage is set for another round of pricing wars. Pharmacy benefit manager (PBM) Express Scripts, which played a major role in providing costly HCV treatments at a discount, said that despite the limited initial indications for both treatments, PCSK9 inhibitors could end up becoming the most expensive therapy class in the U.S. over the next several years. The PBM is targeting the greatest possible discounts for its clients and patients.

Regeneron’s shares were down 3.81% and Amgen lost 2.32%.

Vertex Pharmaceuticals Inc. VRTX – Boston, MA-based Vertex saw its shares declining 4.81% yesterday. The company that specializes in the development of cystic fibrosis (CF) treatments, gained approval for its second CF product, Orkambi, in Jul 2015. Vertex’s decision to price Orkambi at a wholesale acquisition cost of $259,000 per year also faced opposition.

Skyrocketing Drug Prices to Remain in Focus

Irrespective of who wins the presidential race, drug pricing will remain a topic of discussion among policymakers, the media and the general public. Clinton’s Democratic rival, Senator Bernie Sanders, has also been focusing on the need to control drug prices and making prescription drugs affordable.

Earlier this month, Sanders said that he will introduce legislation to stop soaring increases in pharmaceutical prices. He recently tweeted “We must not only enact a national health care program, but also implement prescription-drug policies that work for everybody.”

According to the Aug 2015 Kaiser Health Tracking poll, most Americans (72%) find drug costs unreasonable and 74% are of the view that drug companies put profits before people. So, drug companies may find it a bit difficult to justify their high prices by citing the years and funds that go into bringing new treatments to market and the need to invest in R&D to bring additional treatments to market.

We expect to see more volatility in this sector as the drug pricing debate continues into election year.

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