Please ensure Javascript is enabled for purposes of website accessibility

Why Diplomat Pharmacy Fell 13% Today

By Todd Campbell - Sep 22, 2015 at 12:45PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors are cutting their exposure to specialty drugs after risks of price curbs climb.

Source: Diplomat Pharmacy

What: The potential for price wrangling on specialty drugs that could slow the pace of their development led to shares in Diplomat Pharmacy (DPLO) slipping by 13.5% earlier today.

So what: Diplomat may not be the biggest market share player in specialty pharmacy (Express Scripts and CVS Health are far bigger), but it does have a fast-growing business that is posting 30% annualized growth.

That business, however, has benefited from an explosion in the development of high-price specialty biologics, complex medicines that are created within living cells and that usually require a fair amount of patient education and oversight in terms of dosing.

Because Diplomat's bread-and-butter business depends on the ongoing expansion of the specialty drug market, recent comments by Presidential-hopeful Hillary Clinton regarding her plans to rein in drug costs is having a ripple effect on Diplomat's shares.

Specifically, investors appear worried that policies designed to limit the costs of medicine would have an unintended consequence of reducing the number of specialty drugs in research pipelines, ultimately leading to fewer drugs that Diplomat can distribute.

Now what: Political whims and whispers are likely to pick up as we move into 2016, and drug pricing is a hot-button topic that is likely to capture a significant amount of media attention. However, before investors press the sell button on Diplomat, they might want to remember that most of the drugs that Diplomat distributes treat rare or life-threatening conditions and that in some cases, the alternative therapies to these specialty medications don't work as well or have more side effects.

Because specialty drugs often mark significant advances in patient treatment, there's far less of an incentive for policy makers to risk stifling their development, than to rein in costs associated with prior generation therapies that are being rebranded with nose-bleed inspiring price tags.

Overall, there's no telling where the political winds will blow or what any specific policy may look like if it ever makes its way through Congress, so it may be best to stick with the long term reasons for owning Diplomat, rather than get hung-up on short-term political machinations. 


Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Diplomat Pharmacy, Inc. Stock Quote
Diplomat Pharmacy, Inc.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/17/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.