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The 'Health' of our Healthcare funds are no longer Healthy for conservative equity holdings

edited July 31 in Fund Discussions
Healthcare and some related sectors have provided conservative 'cover' when other equity areas have been funky. In recent months, that trend has disappeared. Legislation regarding Medicaid and now Pharma, has placed a lot of pressure on various companies in this space.....hospitals, insurance companies, service vendors and manufacturers.
We've already off-loaded some of FHLC (Fido health). Looks like there will be more to come.

Healthcare is included in many broad funds, too. Add with the sloppy market today, healthcare and pharma losses will have added to the down mode. Globally, healthcare and related sectors were down -2.5 through -3%.

Anyway, our 25% of total portfolio in healthcare, is now a much smaller number today.

--- On July 31, 2025, President Donald Trump sent letters to the CEOs of 17 major pharmaceutical companies, including Eli Lilly, Pfizer, and Merck, demanding they take steps to reduce drug prices in the U.S. within 60 days. These letters follow an executive order signed by Trump in May 2025 aimed at implementing a "most-favored-nation" (MFN) drug pricing policy.
The letters called on the companies to:
Provide their full portfolio of existing medicines to Medicaid patients at the lowest prices offered in other developed nations (the MFN price).
Guarantee that newly launched drugs will be offered at MFN prices to Medicare, Medicaid, and commercial payers.
Negotiate harder with foreign nations to raise prices internationally, and repatriate increased revenues abroad to lower drug prices for Americans.
Adopt models that sell medicines directly to consumers or businesses at MFN prices, effectively eliminating middlemen.
The letters state that if the companies refuse to comply, the administration will "deploy every tool in our arsenal to protect American families from continued abusive drug pricing practices". The deadline for a binding commitment to these terms is September 29, 2025.
Drug manufacturers have largely resisted the MFN policy in the past, arguing it could stifle innovation and hurt the industry's ability to develop new therapies. Some companies responded to the latest demands by stating they are willing to work with the administration to improve access and affordability. The industry's largest trade group, PhRMA, took a stronger stance against the proposed changes, arguing that "importing foreign price controls would undermine American leadership, hurting patients and workers".

Comments

  • Drug companies donate a lot of free $peach. I suppose we're going to find out if it has done them any good.

    Just don't use the P word. Ain't got nothing to do with your investments.
  • edited July 31
    From January 1, 1998 through June 30, 2025, the pharmaceuticals/health products industry
    spent significantly more money lobbying than any other industry.
    During this period, it spent $6.47B while the "second-place" industry (insurance) spent "only" $3.82B.
    I'm very much in favor of lower overall prescription drug prices for Americans.
    I doubt prescription drug prices will decrease in a meaningful way since the pharmaceuticals/health products
    industry wields so much influence via their legal bribery lobbying expenditures.
    This is one instance where I hope to be proven wrong.

    https://www.opensecrets.org/federal-lobbying/industries?cycle=a
  • Hi @Observant1 I fully agree about the lobbying; and the money that is spent on 'ads'.

    Part of our thoughts about where to invest comes from where is the demand?
    We knew and watched prior generations and the monies that were going towards health related....providers, insurance, technology, etc. We followed the money.
    A fairly conservative equity path and decent dividends. And we maintain other equity with growth; as well as MMKT and IG bond fund.

    We sincerely are in favor of lower drug prices, while allowing for nominal profits.

    LAST for tonight. SOON the U.S. will be surrounded by the TARIFF curtain.

    A good evening to all.
    Catch

  • edited August 1
    Hi @catch22,

    To be clear, I wasn't questioning your healthcare investment decisions or sincerity in lowering drug prices.
  • Hi @Observant1 NO. I didn't feel you were 'picking' on the health investments. I was more or less writing 'out loud' how we have attempted to justify investment sectors for our overall portfolio of 'everything', which includes all the other stuff, too......owned real estate, retirement benefits....the whole big pile. It's always an adventure, eh?
  • I don't mind lower prices either, but, well, never mind.

    Anyway, I'm holding on to FSMEX in the taxable. I got a nice price for it in June of 2018, so I don't feel bad about it.
  • Hi @WABAC
    At that price point period you're doing fine with the annualized return.
    We hold the similar sector with the etf, IHI.
  • I cashed out my healthcare fund today for a break even after a 5-yr hold.However I still maintain my singular ABBV position. I might possibly add to it but I'd like to see how the pricing demands and loss of Medicaid/Medicare coverage effects valuation going forward.
  • I had PRHSX for decades. I dumped most of my healthcare holdings before I lost too much of the outsized gains I had accumulated. The weakness started in early 2022.
  • We have owned PRHSX since Jan 2013. I would put the underperformance relative to the S&P500 as starting in Sept 2015. It has still made money, just not as much as a good index fund.
  • Yes, late 2015 through 2016 was another rough patch for PRHSX.
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