As the political cycle matures in 2016, the political posturing continues to plague the entire healthcare cohort. Utilizing the biotech sector and drug pricing as a scapegoat for political gains has translated into the sector posting sharp declines over the past year. Using the iShares Biotechnology Index ETF (PACF:IBB) as a proxy for the biotechnology sector, this cohort has fallen from $401 in July of 2015 to $240 in February of 2016 or alternatively a 40% decline. This sharp decline coincided with heated political rhetoric aimed at the collective cohort of healthcare and more specifically biotech-related companies. This cynical sentiment by political frontrunners was largely rooted in the pricing of drugs. It’s noteworthy to highlight that this specific segment of the industry (i.e. drugs) comprises less than 10% of the total cost of healthcare. As candidate threats via legislative action geared towards reining in the costs of drugs unfolded, these actions negatively reverberated through healthcare and biotech stocks alike. The political posturing surrounding potential plans to reign in drug costs are now largely priced into many stocks within the healthcare umbrella. I contend that after the roughly year-long political sell-off the biotech cohort looks attractive at these levels. Once the political cycle is complete later this year, these stocks will likely benefit from the mere absence of political headwinds. Taken together along with the difficulty of enacting any legislative action to regulate the industry this may represent a buying opportunity that’s been presented by extraneous political events. Continue reading "Political Posturing Continues To Pummel Biotech"
