Updated with new information at 1:33 pm EDT.

NEW YORK (TheStreet) -- The bloodletting in biotech stocks continued Monday with aggressive selling erasing the year's gains in a key sector exchange-traded fund. Another closely-followed ETF is barely hanging on to its outperformance.

Fears that the next president or Congress might push through legislation to rein in ever-escalating drug prices is the immediate trigger for the biotech sell off. But the sector has been on shaky ground since this summer because of lofty (some say over-inflated) stock valuations and troubles in the global markets.

The latest confidence shaker came mid-day Monday when Democrats in Congress sent a letter to Valeant Pharmaceuticals (VRX) requesting CEO Michael Pearson's appearance at a hearing investigating drug price increases. Valeant shares have lost 12% to $175.46.

At midday, the iShares Nasdaq Biotechnology ETF (IBB) - Get Report was losing 7%. The fund is now in the red for 2015 and is down 27% from its July peak.

Likewise, the SPDR S&P Biotech ETF (XBI) - Get Report is off 8% Monday and is just barely hanging on to a tiny gain for the year. From its July peak, the XBI is down 31%.

Biotech analysts tried to calm investors' jangled nerves Monday morning with reams of research notes and conference calls arguing the fundamental strengths of the biotech sector remain intact and the odds of politicians doing anything to regulate drug prices remained low.

Generalist investors piling into biotech stocks seeking growth and outsized returns have kept the biotech bull market run alive for several years. But non-stop headlines and political posturing about drug-price controls raises the risk of a generalist flight from the biotech sector, says J.P. Morgan biotech analyst Cory Kasimov.

"Generalists are more concerned that these headlines will keep a lid on broader sector performance," Kasimov wrote in a Monday research note. "As a result, we also hear from some specialists concerned not about pricing, but rather that generalists will look elsewhere to invest for the balance of 2015 and into 2016."

So far, bio-pharma executives and their representative lobbying groups in Washington, D.C. have done little to staunch fears about the implementation of drug-price controls, other than to slam Turing Pharmaceuticals CEO Martin Shkreli for raising the price of an obscure infectious disease drug by 5,000%.

On Friday, Biogen (BIIB) - Get Report CEO George Scangos said Turing's business strategy was a "perversion of the system" and criticized Shkreli's actions as "arrogant" and "naive" in an interview with Bloomberg.

But Scangos' own company raises the price of its decades-old multiple sclerosis drug Avonex every year, sometimes twice a year. Avonex now costs more than $60,000 per year, up from less than $10,000 per year when it was first approved in 1996. Newer, more effective MS drugs have reached the market recently, but Biogen and its competitors continue to raise the price of their older MS drugs in lockstep with each other.

In addition to running Biogen, Scangos is about to take over the chairmanship of the pharma industry's main lobbying group, the Pharmaceutical Research and Manufacturers of America. In recent years, PhRMA and the biotech industry group BIO have worked to prevent Medicare from being granted the power to negotiate for drug-price discounts. The lobbying groups have also sought to slow down the development of generic versions of biologic drugs.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.