Hillary Clinton All Bark, No Bite with Biotech Tweet

Presidential hopeful Hillary Clinton gave biotech investors an early Halloween scare after she took to Twitter to proclaim that specialty pharmaceutical companies are "price gouging."

Mrs. Clinton pointed to a New York Times article which highlights a price increase in Daraprim from $13.50 up to $750 after Turing Pharmaceuticals acquired rights to the drug. Valeant Pharma's (NYSE: VRX) 25% and 212% price increases for heart drugs Isuprel and Nitropress was also mentioned in the article.

"Price gouging like this in the specialty drug market is outrageous," Clinton tweeted. "Tomorrow I'll lay out a plan to take it on."

The tweet sent the stocks of biotech and specialty pharmaceutical companies reeling.

iShares Nasdaq Biotechnology (NYSE: IBB), the ETF of choice among biotech traders, is down 4.6 percent in late afternoon trade. Valeant is currently down 5.2 percent, Biogen (NASDAQ: BIIB) is down 5.9 percent, and Gilead Sciences Inc. (NASDAQ: GILD) is down 3.1 percent, among many other biotech stocks suffering from the Clinton comments.

BMO Capital analyst Alex Arfaei is calling Clinton on her bluff. In a note to clients defending Valeant Pharma, the analyst said Pharmaceutical companies are easy targets in presidential politics, and said these extreme examples provide great talking points.

"Recall, that during a recent Senate Subcommittee hearing, Sen. Claire McCaskill (D-Mo.) had very sharp criticism for Howard Schiller, board member and former CFO of Valeant, regarding the price increases for Isuprel and Nitropress even though that wasn’t the focus of the hearing," he highlights.

While mindful of the negative comments from Mrs. Clinton, Arfaei said "we doubt that they will lead to meaningful price controls in the U.S. Pharmaceuticals market."

The market will continue to set the price, Arfaei said.

"We believe, that ultimately, the price of biopharmaceuticals in the U.S. will be likely continue to be determined by the value that they create by lowering other health care costs (e.g., hospitalizations, physician services etc.) and/or improving patients’ quality of life," he said.

Also biotech investors should keep in mind that first Mrs. Clinton has to win, which is no guarantee. Next, the analyst said, based her comments, she is targeting extreme price increases that she characterizes as “gouging.” Therefore, a proposal may be limited in scope and impact.

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