Investors who are losing money today can thank one man – Martin Shkreli

It looks like the straight-shooting team here at ValueWalk are not the only ones upset with Martin Shrekli’s ongoing effort to gouge needy AIDS and cancer patients by increasing the price of a drug he just acquired by 5000% (50-fold).

Hillary Clinton Tweets About Shkreli's Turing Pharma Price Gouging, IBB Crashes
Source: Flickr

Democratic presidential candidate and former Secretary of State Hillary Clinton has also joined the bandwagon, sending out a tweet late Monday morning pointing to the New York Times article indicting Shrekli’s Turing Pharmaceuticals and others for massively jacking up the prices of older drugs for rare diseases. The scariest part about this whole sleazy episode is the smarmy defense of the perpetrators who have the gall to claim they are just raising the price of an older, inexpensive-to-manufacture drug to “match that of other rare disease treatments.”

What a scam!

Of note, Hillary Clinton’s tweet included a mention that she would soon propose a plan to prevent this kind of “price gouging” by pharma firms.

Biotech indices slammed after Hillary Clinton tweet

Trading activity in NASDAQ Biotechnology Index skyrocketed following Clinton’s tweet, and then the price of the index started to slump based on the large declines in the underlying stocks. As Clinton’s tweet went viral and began reach a wider audience, volume climbed and prices dropped further.

Many of the largest components of the index, such as Biogen, Celgene and Illumina, were all off by at least 4% in mid-afternoon trading. A number of smaller biotechs were off 8% to 10% within an hour or so after the Clinton tweet. The iShares Nasdaq Biotechnology (IBB) was down at 4.82% at the time of this article.

 

Clinton-tweetsGiven that the biotech index has enjoyed big move up over the last few years, it has become very volatile of late, often whipsawing up and down on news. Some analysts have been expressing concerns about rising valuations in the biotech sector, which also tends to add to the volatility.

A flash report from Michael J. Yee and Judy Liu of RBC Capital Markets suggests caution in trading on today’s news. They note that whatever Hillary Clinton proposes in terms of “drug cost reform” in her campaign is extremely unlikely to become law anytime in the next five years given Republican control of Congress.

Specifically, they note:

1) One should expect Clinton to talk about healthcare proposals and drug pricing in her presidential run (long history of this and prior comments she has made) but proposing a “new plan” is new which could include lots of things such as Medicare price negotiation (currently Medicare is the largest purchase of oncology drugs but doesn’t negotiate price….), 2) the key is whether this is more noise than reality, as Congress is controlled by the Republicans so getting anything through and passed would obviously be very challenging, 3) Republicans have long been against any major healthcare reforms (some Republicans still want to repeal Obamacare completely…) and there are already bills proposed to have Medicare negotiate drug pricing but these don’t get very far….