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What happened

According to data from S&P Global Market Intelligence, Biogen's (NASDAQ:BIIB) shares lost 7% in 2016. The underlying reason for this dip is the biotech's inability to shake off the political turmoil surrounding specialty-drug prices last year. And that's not exactly surprising, given that Biogen's flagship multiple sclerosis drug Tecfidera relied heavily on price increases to drive sales growth in the U.S. in 2016. 

So what

Despite the recent FDA approval of Biogen and Ionis Pharmaceuticals' (NASDAQ:IONS) spinal muscular atrophy drug Spinraza that holds blockbuster sales potential, the biotech remains heavily dependent on Tecfidera for growth. This single-specialty medicine, after all, makes up over 40% of the biotech's annual revenue, meaning that Biogen's top line could be at serious risk if the political ruminations on drug prices turn into legislative action. 

Now what

Instead of shying away from controversial pricing schemes, however, Biogen doubled down on its strategy by pricing Spinraza at a jaw-dropping $125,000 per vial, making it one of the most expensive orphan drugs on the market. Spinraza's price tag, if it gets past payers, should nevertheless help the biotech's top line grow a modest 4.4% this year, giving the stock a fairly attractive forward price-to-earnings ratio of around 14. 

While Biogen's valuation may appear compelling on paper, though, it is built on the questionable assumption that lawmakers and payers aren't going to finally say enough is enough. Payers, after all, have already started limiting access to high-priced specialty medicines by either requiring prior authorization or kicking them off their formularies altogether.

And at some point, the tremendous burden these drugs place on the U.S. healthcare system is going to force lawmakers to take action, and not just tweet about it. That's why investors may want to take a cautious approach with Biogen in this highly uncertain political environment -- even though its stock does appear primed for a rebound after last year's anemic performance.