![\"\"](\"https:\/\/www.europesays.com\/uk\/wp-content\/uploads\/2025\/06\/20250620_health_1.png\")
<\/p>\n
Source: FE Analytics<\/p>\n
Yet it is a sector of great importance, not only for the wellbeing of the world but also in particular for UK investors, with pharmaceutical giants GSK and AstraZeneca among the six stocks that make up some 12.7% of the FTSE 100 index.<\/p>\n
\u00a0<\/p>\n
So why has the sector so badly struggled recently?<\/strong><\/p>\n The most recent bout of poor performance has been driven by a mix of regulatory uncertainty, pricing pressures and investor rotation into higher-growth sectors such as technology and artificial intelligence (AI), said White.<\/p>\n \u201cOne of the key drags on performance has been concerns over drug pricing reforms and patent cliffs. The Biden-era Inflation Reduction Act (IRA) allowed Medicare to negotiate prices on select drugs,\u201d he said.<\/p>\n \u201cSigned into law in 2022, the IRA granted Medicare \u2013 for the first time \u2013 the authority to negotiate prices for certain high-cost prescription drugs. This long-contested provision aims to curb federal spending and reduce out-of-pocket costs for millions of Americans.\u201d<\/p>\n In response, pharmaceutical giants, such as AstraZeneca, launched legal battles against the policies but a May 2025 landmark ruling in the court of appeals upheld the law and dismissed the claims.<\/p>\n Additionally, president Donald Trump signed an executive order in April that expanded Medicare\u2019s negotiating power and introduced a controversial \u2018most favoured nation\u2019 pricing model, meaning drugmakers selling into the US would be pushed to match the lowest price paid by other countries.<\/p>\n \u201cIndustry groups argue that pegging US prices to international benchmarks could stifle innovation and lead to drug shortages if companies pull out of less profitable markets. Still, the Trump administration appears undeterred,\u201d said White.<\/p>\n Janus Henderson research analyst Luyi Guo said last month the \u201csheer lack of detail\u201d makes it \u201cdifficult to assess the immediate impact\u201d.<\/p>\n \u201cFor example, the order cites no obvious legal authority to mandate lower drug prices, so it remains to be seen how effectively the Trump administration would be able to enforce the new policy. And it is unclear which insurance programs would be targeted and to what extent,\u201d she said.<\/p>\n Then there are the \u2018Liberation Day\u2019 tariffs, which would impact the profits made by international pharmaceutical companies that export drugs to the US.<\/p>\n \u201cThe administration argues that foreign price manipulation and supply chain vulnerabilities have left the US exposed, especially in times of crisis,\u201d said White.<\/p>\n \u201cHowever, the move has sparked concern among healthcare providers and policy experts. Critics warn that tariffs could exacerbate drug shortages, raise costs for patients and disrupt access to essential medicines.\u201d<\/p>\n While some are lobbying for exemptions, none have been forthcoming at present.<\/p>\n Despite all of this, \u201canalysts remain cautiously optimistic about the long-term fundamentals of the healthcare sector\u201d, said White, citing ageing populations, rising chronic disease burdens and technological innovation as likely to underpin demand.<\/p>\n Although there are short-term price pressures from the policies above, biotech innovation \u2013 particularly in gene therapy, oncology, and AI-driven drug discovery \u2013 is a long-term theme that could boost the industry, he added.<\/p>\n \u201cM&A activity is also expected to pick up, as large companies seek to replenish pipelines and diversify revenue streams. A wave of strategic acquisitions is likely,\u201d the Charles Stanley chief investment commentator said.<\/p>\n This is in addition to the rapid rise of weight-loss drugs such as Ozempic, which David Goodman, fund manager in the Liontrust Global Equities team, described earlier this year as \u201cpioneering treatments\u201d.<\/p>\n He pointed to data from Scott Galloway, professor of marketing at the NYU Stern Business School, which suggested the health phenomenon could have a bigger economic impact on the US than AI.<\/p>\n \u201cThese drugs have the potential to be a transformative force for good in healthcare, the economy and society as a whole,\u201d he concluded.<\/p>\n \u00a0<\/p>\n So what should investors do now?<\/strong><\/p>\n In the short-to-medium term, the outlook is mixed, said White, with the healthcare sector \u201cat a crossroads\u201d.<\/p>\n \u201cShare-price underperformance, policy uncertainty and the threat of tariffs have created a challenging environment for investors and operators alike. Yet the sector\u2019s long-term drivers \u2013 demographics, innovation and global demand \u2013 remain intact,\u201d he said.<\/p>\n \u201cAs the Trump administration\u2019s trade and healthcare policies take shape, the coming months will be critical in determining whether this is a temporary setback or a structural shift. For now, caution \u2013 and close attention to Washington \u2013 remain the order of the day.\u201d<\/p>\n Guo agreed, suggesting healthcare stocks may \u201ccontinue to be prone to volatility\u201d, but added that we could be \u201cslowly nearing the end of the regulatory uncertainty\u201d.<\/p>\n For those who do want to invest, she suggested investors should \u201cstay focused on the attractive fundamentals\u201d and those companies with both defensive characteristics and future growth opportunities.<\/p>\n And there could be a good reason to get in now, with Janus Henderson\u2019s Guo noting the sector is trading at a nearly 20% discount to the benchmark versus the long-term average of a 4% premium.<\/p>\n \u201cThe entry point for long-term investors has rarely been this attractive. Starting from such low valuations, we believe healthcare stocks are primed for gains when there\u2019s positive news,\u201d she concluded.<\/p>\n","protected":false},"excerpt":{"rendered":"Experts look at why healthcare stocks have struggled over the past year and examine if there is hope…\n","protected":false},"author":2,"featured_media":6247,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4316],"tags":[105,4348,16,15],"class_list":{"0":"post-214314","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-healthcare","8":"tag-health","9":"tag-healthcare","10":"tag-uk","11":"tag-united-kingdom"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/114746445344597923","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/214314","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=214314"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/214314\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/6247"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=214314"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=214314"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=214314"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}