Some investors believe that the biotech group began to roll over when Hillary Clinton's tweet sparked conversations of price gouging in the industry. But in truth, Cramer saw the big downturn start when many of the developmental stage biotechs with no earnings started to peak. They had too many IPOs and secondary offerings.
Many of the drugs that cost a lot of money are called orphan drugs. They are created for a small group of people suffering from rare diseases. However, these medications are often alternatives to death or an extremely expensive lifetime maintenance that would be far more expensive than these high-priced drugs.
So, is the era of high-priced drugs over?
"I think there will be some companies that won't be able to pass along onerous markups, but really, we are in a 'when the smoke clears' situation where the smoke is headline risk," Cramer.
The real problem is that the smoke has now spread to other portions of the health care group that have nothing to do with higher drug prices at all. Companies like McKesson, AmerisourceBergen and hospital stocks all took a beating.
At this point, Cramer thinks the downdraft of biotechs that are crushing companies not related to high drug prices is getting a little absurd.
"This kind of selling is way overdone, and it smacks of wholesale liquidation of anything that has higher growth than other cohorts," Cramer said.
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Meaning, the highest growth stocks often trade together. That could be why the damage has spilled over to stocks like Chipotle, or some of the semiconductors like Avago and Skyworks Solutions.
Ultimately, Cramer says that the biotech infection is just a localized infection and nothing more. That doesn't mean it won't do damage, because it can. However, it also does not mean investors won't make money if they start buying health care stocks now.
Looking back, every time Cramer has seen a squall like this one, stocks will eventually get so cheap versus their growth rates that investors will have to act.
"I believe we are real close, if not there already," Cramer said. (Tweet this)