Wall Street must be ignoring the latest Orange Alert as the markets have vaulted 20% since the Spring doldrums. That pales in comparison to the 45% increase in biotechnology shares. Even the controversial ImClone, which landed Martha Stewart in Federal Court this week, has seen its price double. Though the FDA has tilted towards drug approvals recently, biotech hype has always been supported by the deep pockets of the pharmaceutical industry. There is always, the story inevitably goes, a huge drug company willing to pay for the right to market the next magic pill. Thus the high risk biotech you just bought at 3000 time earnings will never run out of cash.

Think again. The Supreme Court has affirmed States’ ability to beat down drug prices for uninsured citizens by threatening to cancel Medicate contracts. Schering-Plough is under federal investigation for peccadilloes like bribing doctors to peddle their meds, selling drugs for non-FDA approved conditions such minor technicalities as obstructing justice. Big pharma is fast becoming big tobacco with the AMEX drug index badly lagging the broader market. At some point the biotechs will follow suit.