Image source: Getty Images.

What happened

Shares of Jazz Pharmaceuticals PLC (NASDAQ:JAZZ), an Irish-based biopharmaceutical company primarily focused on the development of therapies to treat sleep disorders, fell 10% in October, based on data from S&P Global Market Intelligence. Although it was a pretty quiet month in terms of press releases for Jazz, the culprit appears to be pricing concerns for its lead drug, Xyrem.

So what

One campaign issue that's gained a lot of press since September 2015 is prescription-drug reform. Following Turing Pharmaceuticals' attempt to increase the price of a 62-year-old drug, Daraprim, by 5,500% overnight, some lawmakers on Capitol Hill were calling for reforms on how drugmakers price their products. Successive inquiries into the pricing practices of Valeant Pharmaceuticals and Mylan uncovered substantial drug inflation on some key therapeutics.

What does this have to do with Jazz Pharmaceuticals? According to FiercePharma, between 2007 and its report in 2014, no drugmaker had passed along a bigger price increase to patients than Jazz did with its narcolepsy drug, Xyrem. A 1-milliliter dose of Xyrem cost $2.04 in 2007, based on data from Bloomberg, but that price had risen to $19.40 by 2014, an 841% increase. It's not been uncommon to see Xyrem's volume growth taking a distant back seat to the growth generated from price increases. The thought process here is that Jazz's price bumps on Xyrem could draw unwanted attention, which is worrisome, considering that Xyrem makes up nearly three-quarters of Jazz's total sales.

Image source: Getty Images.

Now what

It's important to note that as of now there's nothing to signal that lawmakers have their eyes on Jazz, or that they're questioning the merit of its price increases for Xyrem. Management believes it's done its part to insulate patients from the price increases by providing copay assistance, and there isn't anything definitive to suggest otherwise.

However, Hillary Clinton has suggested that if she gets to the Oval Office she would pursue, among other things, legislation that would reduce what consumers must pay out-of-pocket each month for certain medications. There are no guarantees that such legislation would make it through Congress, but it's seeming increasingly likely that the idea of prescription-drug reform isn't going to be swept under the rug this time around.

In the meantime, the drop in Jazz's share price has made the company exceptionally inexpensive. It's now trading at less than 10 times next year's EPS consensus on Wall Street, with full-year EPS expected to grow to north of $16 per share for fiscal 2019. Let's not also forget that Jazz, being based in Ireland, is privy to substantially lower corporate income tax rates than in the United States. Even with the pricing risk surrounding Xyrem, I'm a believer in Jazz and consider it to be an attractive value here.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.