“The court’s decision was also applauded by Express Scripts Holding Co., the pharmacy benefit management, or PBM, company. PBMs often pit drugmakers against one another to get better prices for their health plan and employer clients,” according to Bloomberg.

Biologic drugs are currently about 22 times more expensive than traditional drugs on average. By 2018, biologics could account for 50% of U.S. prescription drug expenditures.

The increased focus on the space could help biosimilars grow from $2.4 billion in 2014 to $26 billion by 2020 on the expiration of patent protection for blockbuster biologic drugs. Evaluate Pharma calculated that biologics with aggregate U.S. sales of $79 billion will lose their patent protection between 2013 and 2018.

GNRX’s underlying index also includes about a 15% tilt toward biosimilars. Moreover, generic drug companies included in the underlying index are looking into biosimilars as their next growth opportunity.

Some traders may look to leveraged options to potentially capitalize on short-term surprises. For instance, the Direxion Daily Pharmaceutical & Medical Bull 2X Shares (NYSE: PILL) and the Direxion Daily Pharmaceutical & Medical Bear 2X Shares (NYSE: PILS) both follow the Dynamic Pharamaceuticals Intellidex Index, the same index tracked by the PowerShares Dynamic Pharmaceuticals Portfolio (NYSEArca: PJP).

For more information on the pharma sector, visit our pharmaceuticals category.

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