Is Bernie Sanders weighing on biotech stocks?

The drug industry has had a rough week on Wall Street, with the biggest biotech index down nearly 10%. That swoon coincided with a town hall meeting in which Sen. Bernie Sanders’s pitch for single-payer health care went over quite well, and thus the narrative became “Medicare for All is killing biotech stocks.”

As EvercoreISI analyst Umer Raffat noted, “many portfolio managers seem to think that this Bernie town hall was effectively the same as Hillary Clinton tweet in 2015.” But, as Jefferies’s Michael Yee pointed out, the XBI index is still up nearly 20 percent for the year, and the weeks leading into first quarter earnings reports, which are just on the horizon, tend to be weak for the sector regardless of politics. Furthermore, Yee wrote, the hardest-hit stocks belong to the likes of Merck, Eli Lilly, and Pfizer, all of which were arguably over-performing to begin with.

To Yee, the likelier explanation is this: Generalist investors, who lump biotech in with insurers in an amorphous bucket labeled “health care,” are reacting to the risks Medicare for All would pose to insurers.