Shares of biotechnology companies are tumbling over price-control concerns following Democratic presidential frontrunner Hillary Clinton's statement that she will release a plan to address "price gouging" in the industry.
Clinton's announcement on Twitter followed news that drugmaker Turing Pharmaceuticals hiked the price of a 53-year-old drug for a potentially deadly parasitic infection from $13.50 per pill to $750. The U.S. has some of the highest prescription drug costs in the world and pricing controls are a constant concern for the industry.
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The concerns are heightened for biotechnology companies, as their products are normally more expensive than traditional pharmaceuticals. They are produced in living cells. The specialty drugs treat complex, chronic conditions, and usually need to be injected and sometimes refrigerated. Many new drugs for cancer, hepatitis C, rare disorders and even a new class of cholesterol drugs have prices in the range of $80,000 or more for a year or course of treatment.
Shares of Novartis AG fell $1.02, or 3 percent, to $92.90, while GlaxoSmithKline Plc. shares fell $1.24, or 2.6 percent, to $38.76. Celgene Corp. shares fell $2.40, or 1.4 percent, to $117.44 while Biogen Inc. shares fell $4, or 2 percent, to $291.21. Merck & Co. shares fell $1.15, or 2.2 percent, to $49.90.
Still, Jefferies analyst Dr. Brian Abrahams said pricing controls will likely continue to be a headwind for the sector, but brushed off concern that any recent political rhetoric will result in controls for the industry. Government agencies could take small steps to control costs, but any significant change would have to come from Congress.
"Major healthcare pricing legislation would need to initiate from the House, which our consultant believes will likely remain Republican-controlled after the next election cycle, and even if Clinton (or Sanders) were elected President, there is little they would be able to do to entice Republicans to pursue that agenda," he said, in a report to investors.
Meanwhile, trade groups representing pharmaceutical and biotech companies oppose letting Americans buy drugs overseas and have repeatedly said in the past couple of years that price controls would limit the amount of money their companies can spend on research, limiting the number of new drugs developed.