Origins:
Healthcare as an organized industry is a reasonably new entrant. For most of the 19th century and early 20th century, medicines were largely home remedies. Before the discovery of antibiotics, with penicillin in 1928, medicines were aimed at generalized pathologies. The shift to a therapeutic focus whereby individual healthcare became the focus spawned the modern healthcare industry. Research and development progressed at a breakneck pace leading to a proliferation of ancillary companies. According to data from WHO, worldwide healthcare spending stood at $8.3 trillion in 2018, representing almost 10% of the global GDP. It is expected to grow to over $10.0 trillion by 2024.
Here is a snapshot of healthcare spending by the OECD nations:

Source: OECD (2021)
Healthcare companies represent a significant portion of the global companies and are the second-largest component by weight in the S&P 500 index, as seen below:

Categories:
The Healthcare industry's broad classification are healthcare services and facilities, medical devices and equipment, medical insurance & affiliated services, and finally, pharmaceuticals.

Healthcare services and facilities include hospitals, nursing, and residential care services, outpatient centers. Some of the famous companies in this area are HCA Healthcare (HCA), Universal Health Services (UHS), and Tenet Healthcare (THC).
Medical devices include electro-medical appliances, surgical instruments, ophthalmic goods, endoscopes, and other devices and equipment. Top names in this group are Medtronic PLC (MDT), Johnson & Johnson (JNJ), and Abbott (ABT).
Medical insurance and other services include preferred providers, Medicare and Medicaid, medical waste disposal services, etc. Few top companies in this field are United Health (UNH), Anthem Inc (ANTM), and Centene (CNC).
Pharmaceuticals is the fourth category. Pharma itself is a significant sub-sector with drugs, therapeutics, biotech, and other sub-industries. Some of the leading companies in this field include Gilead Sciences (GILD), Pfizer (PFE), Regeneron Pharma (REGN), and Vertex Pharma (VRTX).
Geographical Spread:
Among the nations of the world, the US, and Western European countries are home to the largest healthcare companies. India is a significant force in generic drugs, while Thailand, Malaysia, and some Latin American countries are famous for their medical tourism-oriented industry. Few of the leading non-US healthcare companies include Novartis AG (NVS), Philips NV (PHG), from Europe, AstraZeneca (AZN) of the UK, Takeda Pharma (TAK) of Japan, Dr. Reddy’s (RDY) of India, BeiGene (BGNE) of China, Teva Pharma (TEVA) of Israel, and Aslan Pharma (ASLN) of Singapore.
Industry Performance Snapshot:
While healthcare as a sector is defensive, within it, there is a disparity. The biotechnology sub-industry has typically been more volatile than its counterparts, such as healthcare services or general pharma.
Here is a snapshot of the performance of sector indices within the healthcare space over the last decade. The Biotech index has higher returns, but more significant swings in its price.

Source: Morningstar
Effect of Covid19:
As humans continue to improve upon their quality of life through healthcare, the industry has grown fast over the years. The Covid pandemic has had a significant impact on the industry in a short period. With hospital occupancy rates increasingly suddenly, areas with inadequate facilities have struggled. A bulk of spending in the future would likely go towards improving the infrastructure in these regions. On the other hand, others have benefitted from the pandemic. mRNA vaccine, a breakthrough new technology, was fast-tracked to arrest the spread of the virus. As a result, more mRNA-based treatments and solutions are likely to become widespread in the future.
Investing Options:
Representing a large weight in the major stock indices, healthcare plays a large role in most portfolios. Investing into the healthcare industry can be done primarily by investing into stocks. However, ETFs offer a wider choice to gain exposure to a diversified basket of healthcare stocks.
Healthcare ETFS can be broad category ones that offer exposure to the entire healthcare industry. Examples are Health Care Select Sector SPDR (XLV), and Health Care Vanguard ETF (VHT):

Source: Morningstar
Sub-sector funds offer a concentrated access to a slice of the healthcare industry and are apt for investors looking to gain specific exposure. Examples of these include iShares Biotechnology ETF (IBB), iShares U.S. Medical Devices ETF (IHI), S&P Health Care Equipment SPDR ETF (XHE), PowerShares Dynamic Pharmaceuticals ETF (PJP), and S&P Health Care Services SPDR ETF (XHS).

Source: Morningstar
Globalise investors also have the access to the Biotech Innovation Globe, a curated portfolio that provides thematic exposure to the technological innovation in the global medical and pharmaceutical sectors.
Ramkumar Venkatramani
Head of Investment Products