McKesson reported a large miss on the top and bottom lines, and then cut full-year earnings guidance by 8 percent. But it was the commentary on the conference call that truly terrified investors.
"You need to understand that this whole industry seems to be under attack from within," Cramer said.
For years, the drug wholesalers have been a fairly quiet oligopoly. McKesson, Cardinal and AmerisourceBergen control approximately 97 percent of the market and didn't try to compete too hard against one another. That is changing.
So, for a long time there was equilibrium in the drug distribution space as each major player tried not to compete too hard. Now that the supply of branded drugs going generic has shrunk, and the drug wholesalers have started to compete on price, Cramer is worried.
"In that kind of situation, everyone gets hurt and there is no telling when the pain ends. Based on what we heard from McKesson today, I think this could be a very tough situation, which is why you should continue to steer clear of this group, and health care altogether, at least until after Election Day," Cramer said.
On the flipside, Avon Products has made a remarkable comeback this year, up 63 percent. After spending years in a hideous spiral, the stock finally came back to life, leading Cramer to wonder what could be driving the move.
The first catalyst began when Sherri McCoy came from Johnson & Johnson and took over as CEO in 2012. The rebound for the stock gained traction in December of 2015, when McCoy announced a major partnership with private equity firm Cerberus.
The turnaround was clear when Avon reported second quarter results in August and posted an earnings beat, higher than expected sales and took major steps to clean up its balance sheet by issuing $400 million in debt to help pay down $650 million in debt.
However, while the turnaround for the stock is underway, Cramer still advised investors to be careful.
"If you don't own any, I recommend putting on a small position in Avon before it reports next week, and then wait until after the quarter to buy more just in case it gets pounded on some imperfect numbers," Cramer said.