The health care sector is critical to the health and well-being of the almost 330 million people who live in the U.S. And access to good medical care has contributed to the increase in the average American’s life expectancy over the last several decades. But this sector is also essential to the economy, employing millions of people and making up almost one-fifth of the total economic output of the U.S.

What is the health care sector?

In 2019, Americans spent a total of $3.8 trillion on health care, or $11,582 per person, an increase of 4.6% from the previous year. Health care spending accounts for 17.7% of the Gross Domestic Product (GDP) of the U.S. One of the biggest employers in the country, this sector employed 20.5 million people, culminating in a payroll of more than $1 trillion.

The health care sector in the U.S. includes many different industries and businesses that work together to provide medical care to people: 

• Companies that manufacture medical equipment— everything from scalpels to MRI machines—are part of this sector. The leading businesses in the medical equipment industry are Medtronic, with a revenue of $28.91 billion, Johnson & Johnson with $25.96 billion in revenue, and Abbott Laboratories with a revenue of $19.95 billion.
• The health care sector also includes pharmaceutical companies that make the prescription drugs needed to treat cancer, diabetes, depression, and more. Brand name pharmaceutical manufacturing is a $205 billion industry, led by AbbVie, Bristol-Myers Squibb, Johnson & Johnson, Merck & Co., Amgen, and Pfizer.
• There are hundreds of biotechnology companies in the U.S. that produce medicines, therapeutic treatments, and other medical products through the development of biological and chemical processes. Biotech firms are responsible for a great deal of the innovation in the health care industry, experimenting with new treatments for illnesses. Biotech companies such as Moderna, Novavax, and Gilead have been at the forefront of the development of vaccines and treatments against Covid-19. In the U.S., the biggest biotech companies by market capitalization are Moderna ($66 billion), Vertex Pharmaceuticals ($56.4 billion), and Regeneron Pharmaceuticals ($55 billion). 
• Health care facilities and professionals are critical to the health care sector. There are more than 6,000 hospitals throughout the U.S. and consumers spend more than $1.2 billion on those facilities annually. 

Regulation in the health care sector

Health insurers are also important to the health care sector in the U.S. The health insurance industry is a $1.1 trillion market, growing 5.1% on average per year between 2016 and 2021. Health insurance is intended to protect you from incurring massive, unplanned costs from your medical treatment. 

About half of Americans receive health care coverage from private insurers through their employer, according to a 2019 survey from Kaiser Family Foundation. (More than one-third self-purchase government insurance, and the remainder are uninsured. See graphic below.) The largest providers of medical insurance in the U.S. are UnitedHealth, Anthem, and Humana. For those people who don’t receive health care coverage through work, the 2010 Affordable Care Act was created to help make coverage more affordable and accessible.

*Source: Kaiser Family Foundation, 2019

Both state and federal agencies, including the Food and Drug Administration (FDA), the Centers for Disease Control and Prevention (CDC), the Department of Health and Human Services (HHS), and  the Centers for Medicare & Medicaid Services (CMS), regulate the industry to help maintain fair costs and good care for patients.

Since the late nineteenth century, there has been a push to create a public option for medical insurance subsidized by the federal government. Proponents of this movement support universal health care, which would aim to provide the same coverage to all Americans at the same cost. In recent years, politicians such as Senators Elizabeth Warren and Bernie Sanders have thrown their weight behind the movement for Medicare for All, which aims to expand the public option to include all Americans. Opponents of the movement have argued that Medicare for All could further complicate the health care system in the U.S., and prevent people from getting the care they are used to receiving.

Investing in the health care sector

You might decide to invest in the health care sector for a number of reasons. Health care is a necessity for everyone, and the demand for things like equipment and prescription drugs is consistent. Additionally, the health care sector is the second-largest one in the S&P 500.  Adding health care investments to your portfolio can help you diversify. 

Health care stocks tend to be defensive, meaning that they deliver consistent results regardless of how the economy is performing, since people always need health care. For example, as of April, 2020, the health care sector fell only 18% from February 19, 2020 as a result of the pandemic, while the rest of the S&P 500 dropped 27%. 

Still, all investing involves risk, and this sector is no exception. Because the health care industry is heavily regulated by the government, any changes to policy related to health care can affect the performance of those stocks.¹ Additionally, biotech stocks can be volatile, and therefore risky for investors. 

When investing, remember to follow the Stash Way® by investing small amounts of money regularly in a diversified portfolio. Diversifying your portfolio with investments across several different sectors can help protect you from taking on too much risk. With Stash, you can invest in single stocks of health care companies like Abbvie, UnitedHealth, Moderna, and more.² You can also invest in ETFs that include health care companies.

The post How the Health Care Sector Provides Essential Services, and Powers the Economy appeared first on Stash Learn.

Oh no, Flo!

Approximately 1.5 million people are evacuating coastal areas, as Florence brews itself into a Category 4 hurricane, about 500 miles wide, and packing winds up to 150 miles per hour.

Storms can damage houses, highways and power lines, but they can also shut down businesses and grind daily activities to a halt.

In fact, Florence could inflict as much as $25 billion in damage to the local economy, including the potential destruction of $8 billion in coastal property, according to reports.

What’s at stake

Combined, Virginia and the Carolinas are responsible for more than $1 trillion in economic activity.

• Of the three states, North Carolina has the biggest and most diverse economy. Its Raleigh-Durham research triangle is home to some of the leading pharmaceutical companies, including Merck and prominent educational institutions such as Duke University and the University of North Carolina.
• Nearby Charlotte is a financial services center, serving as the headquarters for some of the largest national banks such as Bank of America and US Bank. Tourists also bring about $23 billion annually to the state, as they flock to North Carolina’s forests and sandy beaches.
• Virginia and South Carolina depend on automotive manufacturing, agriculture, aerospace, and research, and tourism brings in billions of dollars to both states.

Storms and the stock market

And hurricanes can do funny things to the stock market. The stocks of some companies that write insurance policies for homeowners reportedly took a hit on Tuesday, as investors thought about the payouts they’re likely to make for damage.

Others, such as retail home improvement companies and even car rentals, got a boost.

Hark back to Hurricanes Harvey and Maria

Last August, Hurricane Harvey slammed Houston, the fourth most populous city in the country, with 2.3 million people, causing $125 billion worth of damage, according to some estimates.

Houston’s economy is worth $503 billion, according to the Bureau of Economic Analysis. The city is an oil, gas, and petrochemical production hub for the U.S., responsible for about 3% of the gross domestic product, according to the New York Times. Houston is also an oil export center for the nation.

Hurricane Maria struck Puerto Rico in October, killing up to 5,000 people and cutting power and water to the island for weeks.

Puerto Rico has still not fully recovered from the storm, which did about $90 billion in damage.

Cumulative damage from natural disasters in 2017, including hurricanes and forest fires, exceeded $300 billion in 2017—a record, according to federal data.

The post Hurricane Florence: How Storms Can Affect the Economy appeared first on Stash Learn.

That’s one reason you may want to pay attention to drug company Gilead Sciences, which announced on Monday that it will purchase Kite Pharma, in a deal worth nearly $12 billion.

Kite, based in Santa Monica, California, produces an immunotherapy drug that reportedly stimulates the body to fight cancer with its own cells.

Why is this a big deal?

• Gilead is one of the largest pharmaceutical drug makers in the world. And by focusing on a biotech company that has pioneered novel therapies for cancer treatment, it’s taking a bet on a new market with a huge potential for growth.
• The biotech market has shown a lot of strength this year, with major indexes that include pharmaceutical stocks increasing in the double-digits. One reason for the gains, financial experts say, is the potentially favorable environment for drug companies created by the Trump administration, which continues to roll back business regulations, and a Food and Drug Administration chief who has promised to speed the approval process for new drugs.
• Gilead hasn’t made a major acquisition of another business since 2011, and this is the company’s largest purchase to date.
• Gilead has reportedly amassed billions of dollars in recent years from top-selling antiviral drugs that help fight HIV, hepatitis B and C, and the influenza.

“The acquisition of Kite establishes Gilead as a leader in cellular therapy and provides a foundation from which to drive continued innovation for people with advanced cancers,” Gilead chief executive officer John Milligan said in press release on Monday.

Key Takeaways: Gilead is one of the largest drug manufacturers in the world, and it’s developed critical drugs to fight HIV, hepatitis B and C, and influenza. Its multi-billion dollar purchase of Kite is a significant bet on new advances in fighting cancer, as well as a further demonstration of the strength of the pharmaceutical industry in recent months.

Want to learn more about investing in healthcare?

Check out the Modern Meds and Doctor, Doctor ETFs on Stash.

The post Gilead to Purchase Cancer Drug Maker Kite Pharma in $12B Deal appeared first on Stash Learn.