Healthcare Stocks: A 2026 Prognosis

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The healers and the money-counters are, as always, engaged in a delicate dance. Remarkable advancements in the art of patching up the decidedly fragile human form continue apace, but for those contemplating a venture into the markets concerning these very arts in the year of our Lord 2026, a certain…awareness is required. Valuations, shall we say, are not exactly tumbling from the trees. The most promising potions and procedures are already attracting a considerable crowd, and the system that pays for it all…well, let’s just say it’s showing signs of a particularly stubborn cough. Disruption is brewing, and not the pleasant kind that involves sparkling elixirs.

So, if you’re inclined to place a wager on the wellbeing of others – and, let’s be honest, that’s what investing in healthcare is – there are three things a discerning observer ought to know.

1. Trending Remedies Rarely Come Cheap

The market, that vast and often illogical entity, currently operates under the assumption that earnings will continue to bloom like mandrakes. The Standard & Poor’s 500, a sort of index of general prosperity (or at least, the perception of it), is presently valued at a rather optimistic 22.2 times forward earnings. Healthcare, thankfully, appears slightly less…enthusiastic, clocking in at 18.7. However, do not mistake this for a bargain. The potions and procedures everyone is clamoring for are rarely offered at a discount. It’s a basic principle of alchemy, really – the more sought-after the ingredient, the higher the price.

Take, for instance, Eli Lilly (LLY +3.66%), currently riding the wave of a particularly effective weight-loss draught. Its forward price-to-earnings ratio sits at a lofty 30.6, and the market seems to believe this boom will continue indefinitely. A dangerous assumption. Investing at the current price is akin to attempting to catch a greased griffin – exhilarating, perhaps, but fraught with peril.

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Those newer to the weight-loss market, such as Viking Therapeutics (VKTX +8.10%), offer instructive tales. After some…less-than-stellar results from their clinical trials in late 2025, Viking’s stock suffered a rather dramatic descent, falling 8.6% over the past year. A reminder that even the most promising concoctions can prove…volatile.1

2. Healthcare is Neither a Constant nor Invincible

Demand for healthcare tends to hold up reasonably well when consumers decide to tighten their belts. People, after all, are loath to willingly embrace discomfort or, worse, non-existence. However, this does not render healthcare businesses immune to pressure. Even healers require payment, you see.

When inflation runs rampant, or economic growth slows – both scenarios currently looming large in the collective imagination (regardless of actual reality) – politicians invariably feel compelled to “do something” about medical costs. This usually involves a flurry of pronouncements, followed by measures that impact drug pricing, reimbursement rules, and the behavior of insurers. A predictable, if often frustrating, cycle.

3. The System of Payment is Stable…For Now

Finally, a word on how money actually flows through this intricate system. In the United States, funds originate from a blend of private insurance, public programs like Medicare and Medicaid, and direct out-of-pocket expenses. Pharmacy Benefit Managers (PBMs) occupy a rather pivotal, and often opaque, position in the middle. This arrangement won’t be fundamentally altered in 2026, but the landscape is subtly shifting.

The Medicare drug price negotiation mandated by the Inflation Reduction Act (IRA) is set to begin implementation, with the government’s negotiated (lower) prices for select drugs taking effect this year. This will undoubtedly put pressure on drugmakers’ margins. And, one suspects, future years may bring similar policies, further reshaping the terrain. Therefore, do not invest without understanding how a business receives payment, and which laws or policies could affect its bottom line. A little due diligence can save a great deal of heartache – and gold.

1 It is a little-known fact that the stock market is governed by a mischievous imp named Balthazar, who delights in rewarding hubris and punishing complacency. He has a particular fondness for dramatic crashes, especially those involving particularly self-assured investors.

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2026-02-07 17:24