Gilead Sciences has had a rough time in the market over the past few days in the wake of comments made by presidential candidate, Hillary Clinton. Today, we’ll talk about what Clinton had to say and why it’s affecting the stock. We’ll also take a peak at the most recent scientific data out of the company and talk about why I believe that GILD should be headed in the upward direction.
Comments Made By Hillary Clinton
Hillary Clinton took to Twitter a few days ago to inform voters that, if elected, she plans on reforming health care in an attempt to end “excessive profiteering” taking place on the chronic illness stage. The tweet started as a response to Daraprim, a drug designed to treat parasitic infections that normally affect cancer and AIDS patients. After being acquired by Turing Pharmaceuticals, the cost of Daraprim was immediately increased and in a big way. Turing increased the price of Daraprim from $13.50 per pill to $750 per pill. As a result, Hillary Clinton seeks to cap prescription drug costs for chronically ill patients at $250 per month.
Why This Has An Affect On Gilead Sciences
While Hillary Clinton’s comments were aimed at Daraprim and Turing Pharmaceuticals, they had an affect on the entire biotech market, especially Gilead Sciences. That’s because while her comments were aimed at a specific company and medication, they also pinpoint just about every company that creates medications for chronically ill patients including Gilead Sciences. After all, GILD is the leader in treatments for chronic hepatitis C virus. The cost for their treatment for chronic HCV patients is $84,000 and, depending on combinations with Sovaldi, that cost can grow. As a result, investors are concerned that if Clinton was able to pass a bill to limit monthly expenses on prescription medications, it would cut deep into Gilead Sciences’ bottom line.
Innovation Costs Money
The bottom line is that innovation in medicine costs quite a bit of money and Gilead Sciences is a key innovation company in the field. For example, they recently released data from four international phase 3 studies known as ASTRAL-1, ASTRAL-2, ASTRAL-3 and ASTRAL-4. In these studies, GILD proved that through their combination treatment, there will likely be no need for genotype testing in HCV patients in the future. The bottom line is that their combination treatment was effective in all 6 known HCV genotypes! However, the development of this combination treatment didn’t come without a cost; as a result, the treatment itself will likely have a high price tag when it hits the market. I’m saying this because I’m concerned that if there was a cap on monthly prescription costs for chronically ill patients, it could hinder future treatments from ever being found which, in my opinion, is more scary than spending money!
The Bottom Line
There is going to be some kind of reform in healthcare costs, but capping monthly expenses at $250 doesn’t make sense – especially when insurance companies cover the vast majority of these costs. The bottom line here is that medical innovation costs billions and these caps will bring that innovation to a stop! The good news is that for this to take place, Hillary will have to take office and, even if she does take office, this kind of innovation will require a vote. While I have little faith in politicians these days, I don’t think that consumers in the great United States are ignorant enough to let that happen. With that said, GILD and other highly innovative companies are likely to take a beating in the market for the short term, but I still believe in these companies and believe that they will grow long term.
What Do You Think?
What is your opinion on Hillary Clinton’s cap? Let us know in the comments below!
[Image Courtesy of Irish Times]