Currently, the percentage of Americans who go without coverage for their healthcare needs exceeds that of any other advanced economy. As for individuals who have private coverage, costs remain a heavy growing burden. While this issue is largely undiscussed, this is a huge chunk of the market the pharmaceutical industry could target with 100% nation-wide coverage.

The healthcare sector in the US has long been the root of dispute among citizens and political parties. With the fast approaching upcoming elections in November 2016, new candidates have new policy propositions to change the American healthcare system. It seems both sides agree on one common theme: the American healthcare system is flawed, to say the least.

The fragmented bargaining power of the separate insurance companies, states, and federal government (which by law are unable to negotiate) is causing prices to remain substantially higher than the cost incurred by other developed economies.

The dispute still remains on whether the answer to the health care controversy lies with the government or the private sector, along with the enduring struggle between leftist views of a single-payer system and the right’s belief in the free market.

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The Republican Nominees

It is not groundbreaking that the Republican Party has ultimately advocated repealing and replacing the Affordable Car Act, also known as Obamacare, but what does the party discord mean for the future of our healthcare system? In 2014, Medicare spent $143 billion on drugs, while total sales for the pharmaceutical industry surpassed $317 billion. Spending on Medicare accounted for 14% of the federal budget and 22% of total national health spending in 2013.

As of March 2016, pharmaceuticals comprised of 38.85% of the health care sector, with biotechnology following shortly after at 22.36%. This is a substantial amount, which could greatly affect many pharmaceutical and other medical companies. In a survey conducted in August, of 1,200 adults, 72% have deemed drug costs unreasonable. One notable drug highlighted during this survey was Biogen Inc.’s multiple sclerosis treatment Avonex, who’s revenue more than doubled to $2 billion over a 10 year time span, despite unit volume declines each year. Biogen has a current price target of $345.20 according to TipRanks, with a 33.54% upside.

Previously a Republican presidential candidate, Florida Senator Marco Rubio, claims pharmaceutical companies are engaging in “pure profiteering” and that high prices threaten to “bankrupt our system.” Rubio has also mentioned that pharmaceutical companies will raise the prices of its medicines to offset declining consumer demand due to its products losing market share to newer rival treatments. Rubio explains, “You ask yourself, how is this possible? There are less prescriptions being written for that drug and yet you’re making more money on it than you ever have, the answer is they’re raising the prices dramatically, and the reason they’re raising the price dramatically is because they can…The market will bear it. It’s just pure profiteering.” What are the remaining candidate’s positions?

Donald Trump – 739 Delegates

Republican presidential candidate Donald Trump endorsed a proposal plan allowing government-run Medicare to set drug prices to reduce the growth in healthcare costs. Trump elaborated at a campaign event in New Hampshire earlier this month, explaining, “When it comes time to negotiate the cost of drugs, we are going to negotiate like crazy.” Trump went on to suggest that hundreds of billions of dollars could be saved in through bargaining.

This is largely due to the fact that Trump is generally unaffected by the establishment, or by the quarter billion dollars spent on lobbying by the pharmaceuticals sector in just 2015. Surprisingly, while the frontrunner has often voiced his disdain for Obamacare with quotes such as “We’re going to repeal and replace the horror known as Obamacare, it is a horror,” reading between the lines reveals that Trump is for a global healthcare for all Americans.  In an un-republican announcement he was quoted saying “you can’t let ‘em [uninsured people] die on the streets.”

Winners? Unknown.

We know for sure a Trump election will create more volatility and speculation, but which way the industry will move is hard to say.

Ted Cruz – 465 Delegates

Ted Cruz is appealing to those who hate Obamacare and would like to see the sector revert to the way it was before Obama’s election. He wants to repeal Obamacare, “empower consumers and patients to make healthcare decisions with their doctors, and disempower the government from getting between doctors and patients.”

As a candidate, Cruz is nothing but good news for healthcare companies, giving pharmaceutical companies complete freedom in the market. If Trump is unable to capture the 1,237 votes needed for the nomination, Ted Cruz might win the nomination through the convention. Due to the fact the Trump is rather neutral and Cruz is positive for the sector, a primary leading to a convention will have a positive effect on the market.

John Kasich – 143 Delegates

Far behind in delegates, John Kasich could only potentially win the election through a convention. His stance is rather neutral in that it supports repealing Obamacare for a more sustainable system. However, it has little to do with regulating or negotiation with the pharmaceutical sector. Based on his neutral stance one will have to assume that Kasich will have little effect on the market in either direction.

The Democratic Nominees

State Medicaid programs have shown concern regarding the rising costs of medicine, namely the high-cost of hepatitis C treatments. For example, last year Texas refused to pay for Gilead Sciences (GILD) drug Sovaldi, a powerful treatment against the liver disease, priced at $84,000. Gilead has since replied that the price of its drugs reflects its value to patients and the health system. The per patient net price of hepatitis C drugs has decreased this year as Gilead has given greater reductions in response to competition from AbbVie Inc.

Both candidates in the race need 2,383 delegates to snag the nomination, and they have both been very vocal about their plans to combat the rising prices.

Hillary Clinton – 1,712 Delegates

The clear frontrunner has already collided with the health care sector targeting Valeant Pharmaceuticals in late January. The candidate called for an end to “predatory pricing” after reading a letter claiming the cost for a medication had risen from $180 in the 1980s to $15,000. At the time, shares for the company traded at approximately $86, but have since fallen about 61%. Currently, according to TipRanks, Valeant Pharmaceuticals has a price target of $54.88 with a 76.52% upside. Clinton has further stepped up regarding actions of Martin Shkreli, ex-CEO of Turing Pharmaceuticals, whose company purchased Daraprim, a lifesaving HIV drug, and raised the price by over 5,000%.

Clinton has further released a series of proposals attempting to limit the rising cost of pharmaceuticals. The candidate intends to empower Medicare to directly negotiate drug prices, require pharmaceutical companies to exercise a certain level of R&D, and place a $250 cap on out of pocket costs for prescription drugs.

Wall Street pharmaceutical analysts shed some insight regarding their thoughts on Clinton’s proposed measures. Bank of America Merrill Lynch’s Ying Huang and Catherine Hu mention, “We believe it will be difficult to further increase the level of R&D investments by biotech companies. The seven large caps spent about $1.7B or about 28% of revenues on average in 2014 and the biopharmaceutical industry as a whole spent about $51.6B in 2013 (according to PhRMA). This criticism may be directed towards companies that have gained valuation more through pure M&A than drug development. Biotech stocks have long been a favorite of momentum traders, with the Nasdaq sector index lapping the S&P 500 since the start of 2013. However, over the past two sessions, the group has given back a hefty 6 percent.”

Since Clinton spoke out against high prescription-drug prices, The Nasdaq Biotechnology Index has fallen more than 11%. More so, these regulations have created stock-market instability for many companies within the biotech and pharmaceutical sectors.

Hillary Clinton’s plan could likely stifle innovation in the pharmaceutical industry. The candidate’s plan may prevent competitors from creating multiple, already established drugs by requiring that new drugs provide a “substantial improvement” to existing drugs. This measure may discourage competition and could thereby raise prices.

Clinton’s strong stance on this suggests her to be the largest threat to the healthcare sector. She is likely to make cutting the industry’s profit margins one of her top priorities. An imminent Hillary nomination is likely to result in a bear healthcare market movement.

Bernie Sanders – 1,004 Delegates

The candidate just snagged a three overwhelming victories on March 26th in Alaska, Washington, and Hawaii. As opposed to Clinton, would like to build and expand on Obamacare, Sanders strongly advocates for a single-payer health care system.

Taking the often less popular path, Sanders has explained from where the money will come to insure the remaining 29 million Americans left behind. Two groups will pay: the rich and the healthcare companies. A strong central US body will completely moderate the industry and ensure fair pricing backed by a strong negotiation power.

Many argue his positions are too radical for the US. While democrats often agree with his position, they believe Hillary is more suited for the job due to her experience in finding the middle ground with her political opponents.

A Sanders nomination will likely send the market haywire. On one side he poses the largest threat to the sector’s revenues; on the other side can he actually take his words and implement them into action?

So what now?

The already crushed healthcare sector (down 7% since 2016) is not looking much stronger. As the primaries heat up towards the general election volatility seems imminent. A Trump/Clinton or Trump/Sanders race would likely see the sector get crushed even further. Alternatively, a Sanders/Cruz race could see the sector take off and possible recover from what many consider to be oversold territory.

Investors use a strategy knows as sector rotation to pinpoint the moment when you should transfer your investment and ETF such as the Health Care Select Sector SPDR Fund (XLV). By rotating between sectors you adjust to their cyclical nature as is done here. Investors were been able to generate a market alpha of over 100% by using the strategy knows as GoSector.