The novice investor may think that investing in pharmaceutical companies is a sure bet. After all, there seems to be a drug commercial at every television program break. The companies are heavily marketing their goods. Doctors have loads of free samples to help sell the patient on the latest cure. Americans want instant and easy gratification so they don’t have to live a healthy lifestyle. Even so, drug stocks can be dangerous. Here are a few things to consider when investing in these companies.
Pharmaceutical companies get sued often. Any drug that is discovered to be responsible for major health problems and even deaths is like a bulls eye on its manufacturer’s chest. The lawyers are coming, and the courts are awarding big money in restitution and medical fees. A good drug stock can drop like a rock when this happens to a company’s most popular drug. On a less dramatic note, if there’s any scientific or medical skepticism about a particular drug, trade may slow down significantly as traders anticipate it being pulled from the market. Pharmaceutical companies bank on one or two big drugs to pull in the profits. If all financing is in that superstar pill, and then that drug comes into question, the stock value is going down fast.
The current generation of youth is starting to get it. They need to take better care of themselves the old fashioned way. Public health education is starting make a turn around in the way people live their lives. More and more, folks are being forced to practice preventative medicine. That’s because healthcare is too expensive; including drugs. As people use their own common sense to get well, they won’t need as many super drug cures. In the long term, drug stocks probably won’t be that hot. In that case, the long term investor might want to look into some other medical market for healthcare related stocks. Who knows? May stock in a national gym or health food company would make more sense.