FYI: Biotech investors must have been thinking “not again” today when the group tanked after Hillary Clinton tweeted about the high cost of some drug prices. That’s because a similar event occurred back on July 16th of last year. On that day, Biotech got unexpected attention from Fed Chair Yellen when she singled out the group as an area that has “substantially stretched valuations” in a prepared report that went along with her Senate testimony.
Below is a chart of the Nasdaq Biotech Index with Yellen’s comments highlighted:
Regards,
Ted
https://www.bespokepremium.com/think-big-blog/biotech-chart/
Comments
I do think that companies that are kind of healthcare hedge funds (Valeant being the big one) could be in some trouble.
I'm sure Gilead will be discussed again and again, is a liver transplant not more expensive and potentially risky than a course of pills that cures by the end? A company run by a hedge fund manager where they buy a drug and raise the price 5000%? How do you explain that in a convincing manner? I don't think you can.
If you are not a company that is actively developing any drugs and doing any R & D and is instead simply buying drugs/treatments left and right and raising prices, do you become classified as something else and taxed differently? Obviously, the specifics would need to be worked out, but perhaps something like that is one possibility.
A little surprised that cost containment plays (ESRX, CVS) aren't holding up.
Biotechs are really something that you have to have some degree of belief in from the standpoint of the volatility - even for the large companies - is ridiculous. I thought Gilead (GILD) would calm down a little after starting a dividend but that certainly didn't happen. Still, with the dividend reinvesting and the valuation - not to mention the recent bond issuance and rumors surrounding Gilead - I just don't even think about that. HQL and THQ providing significant distributions, I'm fine simply reinvesting.
May go back into CVS if it gets to the low 90's. May add to Thermo Fisher (TMO).
Once the dust settles, this may be a nice entry point. Pharma has too much sway ( i.e. money) with Congress to have these items put into practice.
http://www.reuters.com/article/2015/09/22/us-usa-election-clinton-idUSKCN0RM08D20150922
The $250 monthly cap will be what people pay, it will not be what companies are selling the drugs for.
http://www.nytimes.com/2015/09/22/business/big-price-increase-for-tb-drug-is-rescinded.html?ref=business&_r=1
And it certainly was a gouge, by any gauge.
Hillary's a politician who needed an excuse to change the media conversation about her away from her emails to another topic to improve her ratings. So she chose a sure-fire populist theme: healthcare pricing, and biotech pricing in particular. As the biotech chart suggests, Hillary's populist attempt to improve her standing with the average person has had a short term effect on the biotech sector. But I think that because healthcare in general and biotech prices in particular are such an easy target for a politician to attack in order to deflect criticism and increase their poll numbers, the issue of drug pricing will become much more talked about a year from now.
Therefore these threats will become more numerous from both sides of the aisle the closer we get to Nov. 2016. Even if the next President does nothing about drug pricing after the election, the threat of doing so before the election will linger over pharma/biotech and negatively affect share prices the closer we get to the election.
Hillary shmillary. She's just using drug prices as a populist tool to help her poll numbers.
I like Walgreens (although they do not have a PBM like CVS does)partly because of their association with Theranos (http://www.engadget.com/2014/11/18/walgreens-blood-tests/), but CVS has a lot going for it as well and I've considered going back into that especially if it heads into the low 90's. Walgreens also has a stake in Amerisource Bergen (ABC). There's been occasional discussion that Walgreens should/will buy ESRX but I can't really see that happening.
"Hillary shmillary. She's just using drug prices as a populist tool to help her poll numbers."
Yep.
And to think that I get accused of being cynical! Sheesh!!
AND to deflect attention from her own issues...private server, Clinton Foundation taking $$ from foreign governments, missing emails, Huma overcharging the govt, Benghazi...the list goes on.
http://www.washingtonpost.com/politics/foreign-governments-gave-millions-to-foundation-while-clinton-was-at-state-dept/2015/02/25/31937c1e-bc3f-11e4-8668-4e7ba8439ca6_story.html
and this is from the Washington Post.
Don't have time to find references for all...on vacation...I'm sure others on the board can help you out there. The Clinton Foundation is just the one that bugs me the most.
Like other global charities, the Clinton Foundation receives support from individuals, organizations and governments from all over the world.
Time will tell.