This article was originally published on ETFTrends.com.
The prices of drugs are rising and while this may not be welcome news for patients, it's the perfect elixir for pharmaceutical-focused ETFs to generate profits to help investors cure ailing portfolios and in the case of the Daily Pharmaceutical & Medical Bull 3X Shares (PILL) , it could provide three times the prescription strength.
PILL seeks 300% of the daily performance of the Dynamic Pharmaceutical Intellidex Index, which consists of common shares of companies that are principally engaged in research, development, manufacture, sale or distribution of pharmaceuticals and drugs of all types. In the year-to-date chart, PILL has made a move above its 50-day moving average since mid-May and the success of PI could largely depend on whether government intervenes to cut drug prices.
U.S. President Donald Trump is already lambasting the pharmaceutical industry for the rising costs associated with prescription drugs, notably his criticism of pharmaceutical giant Pfizer. This could give pause to other drug companies when it comes to further price raising.
“By putting pressure on one particular company, I think all the companies are saying: We don’t want to be Pfizer,†said Sarissa Capital Management chief investment officer Alex Denner. “Even if they maybe raise prices in a different way – if they typically raise prices in a different way or do it on a different subset of products, they’re going to be thinking twice.â€
Related: July Could Be a Volatile Month for Pharma ETFs
Nonetheless, industry experts feel that government pressure to lower the cost of prescription drugs is simply par for the course and that drug companies will simply move forward even if prices do eventually come down as a result of governmental regulation.
“Every now and then senior company executives decide that there is so much anger and pressure, and they will show they are good citizens†by promising to restrain prices, said Donald Light, health policy professor at Rowan University’s School of Osteopathic Medicine in New Jersey. “But it only happens for a year or two.â€
If history repeats itself and drug prices continue to rise in "business as usual" fashion, then PILL could stand to benefit--the difference being that it could benefit three times over with respect to its other pharma ETF peers--and that could rid any headaches investors are experiencing with their portfolios. PILL is up 6.36% year-to-date per Yahoo! Finance performance numbers.
For more market trends in pharma ETFs, click here.
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