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The US healthcare sector is one of the largest and dynamic in the world. It includes top healthcare stocks in the world like Pfizer, Eli Lilly & Co., Abbott Laboratories, and Johnson & Johnson.
The sector has a diverse ecosystem. It includes hospitals, pharmaceutical companies, biotechnology, health tech firms, and medical device firms, making it a booming one. National Health Expenditure data reveals that the US healthcare spending grew 7.5% in 2023, reaching $4.9 trillion, or $14,750 per person. It was $13,493 per person in 2022. Overall, the healthcare sector accounted for 18% of the country’s GDP.
The top healthcare and medical stocks in the US have generated steady returns for investors at lower risk. The S&P 500 Healthcare Index, which includes the best healthcare US stocks, gave an annualized return of 12.37% over the past five years, as of March 31, 2025.
If you are considering to invest in health sector stocks, check out the key trends and factors shaping the US healthcare market.
What are Healthcare Stocks?
Healthcare stocks are shares of companies involved in medical services, drugs, biotechnology, health technology, and health insurance. The best healthcare US stocks are traded on major exchanges like NYSE and NASDAQ.
In the S&P 500 index, the healthcare sector has 11.2% weightage. While the Nasdaq 100 index, which houses the top tech stocks in the US, has 5.96% weightage of health stocks.
These companies play an integral role in the economy due to their essential services and innovation-driven nature.
Types of Healthcare Stocks Why invest in healthcare stocks?
There are different types of stocks in healthcare sector traded in the market. They are as follows:
Pharmaceutical Companies: Their primary focus is on drug development and marketing. For example, Pfizer, Abbott Laboratories, Merck.
Healthcare Providers and Services: This includes hospitals and long-term care facilities. For example, HCA Healthcare, CVS Health, etc.
Medical Equipment Manufacturer: They produce surgical and diagnostic devices. For example, GE Healthcare Technologies, Medtronic, Johnson & Johnson, etc.
Biotechnology Firms: They are involved in genetic engineering, developing cutting-edge treatments. For example, Gilead Sciences and Amgen.
Health Insurance: This includes companies like UnitedHealth Group, Cigna, etc.
Healthcare IT Companies: They provide digital health solutions, tele-health platforms, and data management systems.
Future of Healthcare Stocks
The healthcare sector is considered a recession-proof and growing industry. Because, regardless of the economic condition, people need medical care.
During the pandemic in 2020 and 2021, the health care sector stocks was among the top-performing sectors. The S&P 500 Healthcare Index delivered 13.45% and 26.13% total returns in 2020 and 2021, respectively.
If you consider the current volatile market conditions driven by ongoing trade wars, the S&P 500 Healthcare Index gained 6.54% in Q1, 2025. While the broader S&P 500 index fell 4.27%.
Is Healthcare Investing Right for You?
Investing in the best healthcare US stocks offers long-term growth potential and diversification. Many fund managers and stock market experts use healthcare or pharma stocks for their defensive bets. Meaning, such stocks tend to do well when the broader market underperforms.
The healthcare sector combines growth and stability. It is driven by continuous innovation and rising global expenditure towards healthcare. Many top healthcare stocks and medical stocks have a consistent record of paying dividends.
As of 31st March 2025, the S&P 500 Healthcare Index has an Indicative Dividend Yield of 1.74%, while it is 1.38% for the S&P 500 index.
Benefits of Investing in Healthcare Stocks
The healthcare sector is a growing sector due to rising global population and aging demographics. Here are the five strong reasons to consider investing in healthcare stocks.
Rise of Lifestyle Diseases: Conditions like depression, diabetes, cardiovascular diseases, and cancer are on the rise. According to America’s Health Rankings 2023 Annual Report, such chronic conditions have reached record highs in the US.
Rise of Medical Costs: Innovation in healthcare has also raised costs. Not just hospitalizations, even basic consultations have become expensive. PWC is projecting an 8% increase in medical costs in 2025 for group plans and 7.5% for individual plans.
Health Insurance Growth: As healthcare costs rise, health insurance companies benefit. They can get higher premiums for more coverage, which can improve profitability. Also, AI is helping in claim processing, underwriting, and fraud detection, improving operational efficiency.
Demographic Shifts: The aging US population is a long-term growth driver for the healthcare sector. With rising life expectancy, the demand for healthcare services, medicines, and medical technologies will only rise. The number of Americans aged 65+ will rise by 47% from 58 million in 2022 to 82 million by 2050.
Government and Regulatory Support: Government often supports the healthcare sector with favorable policies and funding for the growth of the sector.
Factors Affecting Healthcare Stocks
Just like any other sector, there are multiple factors that can affect the growth of healthcare stocks. Some of the key factors are:
Policy Changes: Affordable healthcare is the priority for every government. If the government pushes for lower drug prices or changes to the federal medicare plan, it can affect profits.
Federal Medicare Plan: Currently, the share of government health programs like Medicaid and Medicare has increased from 43% in 2019 to 45% in 2023. With an increasing share of the government medicare plan, this limits how much healthcare providers can charge.
Litigation and Legal Risks: FDA approvals, lawsuits, and patent disputes can affect stock prices. One of the most well-known cases is that of Johnson & Johnson. It was the target of multiple lawsuits and faced billions-dollar settlement over faulty hip implants.
Macroeconomic Factors: Change in interest rates, inflation, or events like pandemic can influence the performance of the best healthcare US stocks.
Points to Consider Before Investing
Before investing in top healthcare and medical sector stocks, you need to consider the following points:
Diversification: The Healthcare sector consists of many sub-sectors like pharma, medical device manufacturers, biotechnology, and other related services. Spreading investing across sub-sectors reduces risk and balances exposure.
Company Fundamentals: Looking at the company’s financial health and operational performance is crucial. It includes revenue growth, profit margins, R&D spends. A company with a strong drug pipeline or recent FDA approvals may suggest future growth.
Valuation Metrics: Analyzing key valuation metrics like PE Ratio, PB Ratio, Price-to-Sales ratios, and forward earnings can help to assess whether a stock is fairly priced or not. Comparing within the same sub-sector and peer companies can help to analyze the valuation metrics fairly.
Policy Changes: Healthcare is a rapidly evolving sector influenced by scientific innovation and government policy. Tracking important updates, FDA approvals, policy changes, patent updates, and mergers & acquisitions can be helpful.
Key Trends Shaping the US Healthcare Market
The following are some of the key trends shaping the US healthcare market:
Rise in Oncology: The global spending on cancer medicines is on a rising trend. In 2023, it was $223 billion and is estimated to reach $409 billion by 2028. In 2023, more than 2,000 new oncology clinical trials have started that promises to revolutionize cancer treatment.
Expanding Anti-obesity Drug Market: There has been a sharp growth in the anti-obesity drug market in the US and as well as other developed market. In 2023, the US anti-obesity drug market was valued $2.07 billion, as per Fortune Business Insight. Between, 2024 and 2032 forecast period, the market is estimated to grow at a CAGR of 26.2%. Top players in this segment include Novo Norsdisk, Eli Lilly, Pfizer, AstraZeneca, and Roche.
Digital Transformation: Industry wide push for digital technologies, adoption of Gen AI technologies, and remote monitoring are reshaping healthcare.
Value-based Care: Companies now are shifting from volume-based models to outcome-based care in healthcare delivery.
Personalized Medicine: Use of connected and monitoring tools is growing. In 2024, 43% of consumers used such tools, up from 34% in 2022. These tools improve consumer awareness and also give rise to demand for personalized treatment.
Mental Health Awareness: More companies are focusing on mental health services and wellness programs.
Conclusion
Investment in healthcare sector in US offers a compelling mix of stability, innovation, and growth potential. As global healthcare health priorities evolve and innovation reshape patient care, the healthcare sector is poised for a strong long term growth. Whether you are a seasoned investor or a beginner, understanding the landscape, key trends, and risk factors will help you make an informed decision.
