What Does Hillary Clinton Have Planned For Biotech? Here Are Three Things To Consider

• Biotechnology stocks got killed on Monday, after Democratic presidential candidate Hillary Clinton tweeted, “Price gouging like this in the specialty drug market is outrageous. Tomorrow I'll lay out a plan to take it on.”
• The iShares NASDAQ Biotechnology Index (ETF) IBB lost 4.48 percent on Monday.
• In a research note issued on Monday afternoon, RBC Capital Markets analysts Michael J. Yee and Judy Liu warn that “Hillary and healthcare pricing will get noisy,” and advise investors to get ready.

Biotech indices fell about 3-5 percent on Monday, while the S&P 500 gained 0.46 percent.

Related Link: Biotechs Are Getting Killed Because Of Hillary Clinton's Response To This Drug Price Hike

According to RBC’s report, “This is a perfect storm today along with a NY Times article about a separate private company dramatically increasing the price of their drug, another BIIB PML case confirmed, energy/crude prices rallying (biotech has been trading inversely to crude), and the IBB index bumping down against the 200dma - a key technical level it is trying to hold.”

The analysts reiterate their warning for investors to get braced for a period of “pricing volatility and noise” for drug pricing going into 2016. In fact, they note that the noise surrounding drug pricing could increase next year as elections loom, and that this could lead to increased "headline risk" to the biotech industry.

Related Link: Don't Worry Investors, Hillary Can't Change Drug Pricing As President

The experts highlight three things to consider:

1) Investors should expect Clinton to discuss healthcare, drug pricing and her “new plan” in her campaign.

2) The main question: Is this more noise than reality (given that Republicans control the Congress)?

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."

“Healthcare drug pricing is a key long-term risk and fear that generalist investors and portfolio managers have long cited as an issue that can cause them to stay away from the space given political unpredictability and causes too much uncertainty in long-term models and DCF's,” the report concluded. While RBC believes major reforms are unlikely to go though a predominantly Republican Congress, the analysts point out “is still a risk factor to ‘money flow’ in healthcare.”

Disclosure: Javier Hasse holds no stakes in any of the securities mentioned above.