Hillary Clinton's promise of a clampdown on biotech drug pricing Monday is already causing consternation in the sector.
After Clinton tweeted that she was going to on Monday, the biotech ETF (IBB) closed down -4.48 percent, its worst daily performance since December 23, 2014 when it lost -4.66 percent.
The former Secretary of State, who is currently campaigning for the Democratic Presidential nomination in 2016, appeared to have been spurred on by a 5,000 percent rise in the price of a medicine known as Daraprim, which has been on the market for decades, after it was purchased by Turing Pharmaceuticals. She will outline her plans later on Tuesday.
"All of our intelligence says that it is going to be very hard for Hillary, or any other candidate, to really have a profound impact on drug pricing," Brent Saunders, chief executive of Allergan, told CNBC Monday.
"That being said, we have to take this very seriously because it creates a lot of pressure on the system."
Both pharmaceuticals and biotech stocks, after initially taking a hit from the introduction of the Affordable Care Act, in 2010 also known as Obamacare, have rallied in recent years.
Biotech medicine prices have been on the rise as companies move into more specialized diseases, which have a smaller patient population, and try to get back the money back which they have spent on research and development via higher pricing. This has meant that $100,000 plus drug courses have become closer to the norm for the most advanced treatments.
The U.S. is almost always the market which pays the highest prices, as in other countries with fewer potential payers those payers can negotiate harder on price.
However, the U.S. also tends to be the market which gets the most innovative new treatments first.
Part of the reason for the big declines seen in stocks on Monday may be that there has been some froth in the market, spurred on by what is shaping up to be a record year for mergers and acquisitions.
Deals worth nearly $300 billion have already been announced this year, up nearly 50 percent from the same time in 2014, according Dealogic data.
This also looks set to be a record year for fundraisings in the sector, with a total of $8.5 billion raised so far this year – the previous full-year record for the sector is $11.6 billion in 2010.
Medical device companies have also seen increased interest, with both UBS and Moody's issuing positive notes on the sector recently. This is in part because of a surge in M&A activity, and also because of the increase in hospital admissions following the Affordable Care Act, which seems to be offsetting some of the losses felt following an extra tax imposed as part of the ACA.
Nonetheless, there is still plenty of life in the sector. Despite yesterday's falls, biotech stocks are still outstripping the performance of the rest of the Nasdaq year-to-date. And, of course, Clinton may not win next year – she hasn't even secured the Democratic Party's nomination yet.
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