Many of the top pharmaceutical names peaked in March and April, and their fall back to earth has been spectacular. The carnage took its toll on some mutual funds, too. Other health-sector funds have suffered a similar fate so far this year.
Analysts point to a number of reasons why drugs have taken a drubbing.
Obviously, these stocks had been richly priced. Then there's the concern that the government's proposals to expand medicare coverage may result in price controls or discounts for the age group that uses drugs the most. Also, patents will begin to expire on many popular brand-name drugs in the first few years of the new millennium. But perhaps the biggest contributor to the weakness in drug prices is that investors see better opportunities elsewhere. Prospects for a strengthened world economy seem better, and that change of fortune has breathed new life into stocks of industrials and other companies tied to the economic cycle, partly at the expense of drug stocks.