During the second quarter of 2019, the Healthcare sector struggled to maintain gains while many other US sectors moved to new all-time highs. The sector has struggled with a series of negative results and continued uncertainty due to political rhetoric regarding drug pricing and transparency. In early April, drug distributors were called to Capitol Hill to be interrogated about pricing practices, insurance rebates, and the overall transparency of costs to patients, pharmacies, and managed care companies. The industry has a target on its back and members of Congress seem eager to focus on drug pricing practices as an area for cost improvements. Additionally, managed care companies and insurance providers were weak after Democratic presidential candidates touted plans for universal coverage. Both issues are certainly risks to the industry, but there were also signs of panic selling during the quarter; there often appeared to be no differentiation between companies or industries during selling bouts. The Saratoga Health & Biotechnology Portfolio has shifted its exposure to areas within healthcare that we believe were down on broader concerns but think are less exposed to some of the risks mentioned above. For example, the portfolio added to medical devices and diagnostics, as well as medical services. These areas are growing largely due to demographics and their sophistication, but we don’t see them as overly affected by pricing or insurance models. We find valuations across multiple areas of healthcare attractive and we expect long-term investors to be rewarded for the recent near-term volatility._____________________________
Information contained herein was obtained from recognized statistical services and other sources believed to be reliable and we therefore cannot make any representation as to its completeness or accuracy. Any statements not of a factual nature constitute opinions which are subject to change without notice.
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