Health Care Reform and Your Health Stocks

Pharmaceutical companies are moving in the direction of specialty non-discretionary drugs because they see reforms coming and don't want to be exposed to areas that will be most susceptible to pricing pressure, says Kolchinsky.

Looking ahead, Miller Tabak's Funtleyder is optimistic. He expects that "stocks will overreact to negative rhetoric but when the reality of what is accomplishable in the near-term becomes evident, the sector should see a tailwind." His team is overweighting biotech and medtech, "but ultimately we believe the sector will overshoot and its true defensive characteristics will prevail longer-term," he says.

For more on what's in store for the health care sector, check out Who Will Run the FDA? as well as our Biotech Stocks section.

To offer your thoughts on the outlook of the sector in light of the economy and impending reforms, please email your feedback.