Key Drivers of the Healthcare Industry
Companies in the healthcare sector are subjected to rigorous government regulation regarding the products, which they produce and then have to subsequently test. Furthermore, their profitability can be affected by government restrictions on reimbursement for medical expenses. Companies in this sector rely heavily on obtaining, developing and defending patents for innovative products. The government and independent investigations also heavily scrutinize the liability of their products.
Similar to the Technology ETF, products in this industry usually require a significant amount of Research and Development and early stage investment. This process leads to a cyclical process in which the companies post steady revenue figures for several quarters followed by a high revenue quarter if a product is successfully released into the market. This industry is one that is constantly evolving and innovating new products on a weekly basis.