After U.S. biotechnology stocks on Mar. 21 suffered their worst day since October 2011, investors raised questions as to whether the sector is finally running out of momentum.

The selloff started early, following news that lawmakers had asked Gilead Sciences to explain the $84,000 price tag of its new hepatitis C drug Sovaldi, which is encountering resistance from health insurers and state Medicaid programs.

"Once the Congress gets involved, there is a risk for the whole sector, especially if the focus of the action is primarily on pricing," Tim Ghriskey, chief investment officer of Solaris Asset Management, told news agencies.

"The sector has also gotten more vulnerable after this huge rally and with valuations above historic averages," there is going to be selling pressure for at least several weeks," Ghriskey added.

The selloffs could be problematic for biotech, a sector that has jumped more than 250 percent over the past five years, observers say. Investors in the options market have shifted activity to bets on further gains over the past year, and more analysts have buy ratings on biotech names than any other sector.

Short interest in the top 10 performers in the biotech sector in 2014 stood at about 6.2% on average as of end of February, according to data compiled by the news agency Reuters.

Despite the recent decline, the biotechnology sector is still up nearly 9% for the year. It has risen in five straight years, for a total gain of 253%, Reuters' figures show.

A study looking at options activity in the top 50 biotech performers in 2014 showed fewer bearish bets placed compared to a year ago. According to analysts, this suggests that sentiment has grown more positive as investors are more fearful of missing gains than protecting against losses.