How Did the Presidential Debate Affect Life Science Stocks?

- September 28th, 2016

Healthcare stocks on the S&P 500 fell more than one percent just prior to the presidential debate—a sure sign of investor unease. But what happened the next day?

Healthcare stocks on the S&P 500 fell more than one percent just prior to the presidential debate—a sure sign of investor unease. The sector has already been hit hard by the campaign, which may explain why some investors seem skittish. (Consider Hillary Clinton’s tweet about price gouging, which sent biotech and pharmaceutical stocks plummeting!)
But interestingly, drug-pricing did not come up in the debate on September 26, 2016—despite being a hot topic in the months prior. Here’s what each candidate has said on the subject … plus the scoop on how Monday shook down.

Donald Trump on drug pricing

The Republican nominee has denounced the power drug companies currently hold in the United States. He’s critical of the fact that they can sell their products to the government without any kind of competitive bidding, which would bring down expenses.
To that end, Trump has been vocal about his belief that pharmaceuticals manufactured abroad should be sold domestically. He has also insisted that Medicare be empowered to negotiate drug prices, a belief his opponent shares—but not, generally speaking, his party.
“Trump is defying Republican dogma,” physician Charles D. Rosen wrote for Stat, “but he’s honestly and forthrightly calling Big Pharma on its Big Baloney.” Douglas Holtz-Eakin, former policy director for John McCain’s campaign, put it more diplomatically: “He’s an extremely innovative Republican. Let’s just leave it at that,” he told Stat.

Hillary Clinton on drug pricing

The Democratic nominee became the face of this issue during the Turing Pharmaceuticals scandal. Her tweet—“Price gouging like this in a specialty drug market is outrageous. Tomorrow I’ll lay out a plan to take it on”—was followed by sharp drops in pharmaceutical and biotech stocks. In fact, the NASDAQ Biotechnology Index plummeted 4.7 percent.
What does that plan entail? Clinton also advocates for Medicare bargaining power. She too supports bringing in drugs manufactured abroad, allowing Americans access to cheaper treatments still proven to be safe. And she wants to penalize drug companies for making unreasonable price hikes. Her plan includes a series of fines that will make drug companies accountable for their pricing decisions.
“It would represent a serious shift in Washington’s relationship with the pharmaceutical business,” Jordan Weissman explained in Slate, labelling the whole plan “quietly bold.”

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No news is good news

But as mentioned, drug-pricing didn’t come up in the presidential debate—perhaps because the candidates seem, in many ways, to agree on the topic. Instead, the discussion focused on cybersecurity and the economy.
Other sectors responded. Tuesday saw the gold market drop by more than one percent, for example. And several private prison companies also took a loss, falling between three and seven percent.
But as for the healthcare market’s reaction? It was minimal.
The sector’s exchange-traded funds have been doing well in the weeks leading up to the debate, The Wall Street Journal reported. And while Tuesday didn’t see them make any great leaps forward, they also didn’t lose any of those gains.
The next presidential debate is scheduled for October 9, 2016. Taking the form of a town hall, both voters and the moderator will have the opportunity to ask questions. Will drug pricing be one of the issues on the table this time? And if so, how might the market respond?
Don’t forget to follow us @INN_LifeScience for real-time news updates.

Securities Disclosure: I, Chelsea Pratt, hold no direct investment interest in any company mentioned in this article.

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