The health care industry is expected to sustain stable growth over the next decade for a variety of reasons. Advances in medicine have prolonged the average lifespans of most people, requiring more health care treatments over longer terms. In years past, once people turned 65 and enrolled in Medicare, they were expected to live another 10 to 20 years. Today, it is not uncommon for some to live well into their 90s, needing over 30 years of health care services. The biggest growth potential in the health care industry is due to the largest segment of the population, the baby boomers, having begun entering retirement. As the baby boomer generation gets older, companies in the health care industry will see more clients and more potential for revenues.
UnitedHealth Group, Inc. (NYSE: UNH) is the largest health care services company in the world, serving over 50 million individuals in the United States as of late 2018 and 5 million in Brazil. The company provides a wide range of health care products and services, such as health maintenance organizations (HMOs), point of service plans (POS), preferred provider organizations (PPOs), and managed fee-for-service programs.
UnitedHealth has the largest and most diverse membership base within the managed-care organization market, which gives it significant competitive advantages. It also has built its prescription drug business through its OptumRx division, which recently acquired Catamaran. This should now help the company grow, as it currently has 1 billion in annual prescription claims. UnitedHealth Group was the top ranking company in the Healthcare: Insurance and Managed Care category in Fortune magazine's 2019 list of the "World's Most Admired Companies."
Medtronic plc (NYSE: MDT) is a global device manufacturer that develops pacemakers, defibrillators, orthopedics, diabetes management tools, and many other medical devices. The company has a 50% market share of the core heart devices industry. It is also a leader in spinal products, insulin pumps, and neuromodulators for chronic pain.
In 2015, Medtronic completed its acquisition of Covidien, creating a powerhouse in the medical equipment industry. Pairing Medtronic’s diversified product portfolio aimed at a wide range of chronic diseases with Covidien's breadth of products for acute care in hospitals should bolster Medtronic's position as a key partner for its hospital customers. Medtronic looks very positive in 2019, especially with its pipeline for treatments of atrial fibrillation, aortic stenosis, and neurological disorders.
Abbott Laboratories (NYSE: ABT) is a diversified health care products company that focuses on nutrition, diagnostics, generic drugs, and medical devices, following the spinoff of the AbbVie prescription pharmaceuticals segment in 2013. The company has recently implemented cost-cutting plans that should propel bottom-line growth.
Abbott's Xience stent remains the superior choice in the stent market, due to its established record of safety and efficacy. Analysts are also optimistic about Abbott’s new FreeStyle Libre blood glucose monitor and its acquisitions of CFR and Veropharm. This should provide growth for the company, especially in the emerging areas of Latin America and Russia.
Thermo Fisher Scientific
Thermo Fisher Scientific, Inc. (NYSE: TMO) offers analytical instruments, laboratory equipment, software, services, consumables, reagents, chemicals, and supplies to pharmaceutical and biotech companies, hospitals and clinical diagnostic labs. The conglomerate was created by the 2006 merger of Thermo Electron Corporation and Fisher Scientific to create a company with an extensive product offering with diverse geographic coverage. Thermo Fisher is a one-stop shop that allows scientists, researchers and health care professionals to order products through its extensive internal development or developments by recent acquisitions. The company has a target market of over $95 billion, so it has room to expand upward, even though its annual sales of $17 billion make it one of the largest suppliers in the industry.
McKesson Corporation (NYSE: MCK) is the largest pharmaceuticals distributor in the U.S. and provides drugs, medical products, and health care information technology. With over $100 billion in annual revenue, McKesson is positioned favorably as a powerhouse in the industry. Its size allows scale and pricing negotiations that its smaller peers cannot compete against. In early 2014, McKesson acquired a 76% stake in Celesio, an international wholesale and retail company, for $4.5 billion in cash. This move allows McKesson to expand into the mature market of Europe, where it sees huge growth potential.
CVS Health Corporation (NYSE: CVS) joined the ranks of the world's largest health care concerns with its 2018 merger with health insurer Aetna, Inc. The deal enables the newly merged company to offer a broad range of traditional, voluntary and consumer-directed health insurance products and related services. Aetna's health care segment offers HMOs, POS, PPOs and indemnity benefits products to nearly 40 million members as of late 2018. The company has a relatively large membership base, which was recently enhanced by its acquisition of Humana. The size of the company gives Aetna significant competitive advantages, such as the ability to scale its fixed costs, maintain underwriting expertise and gain greater pricing leverage. Aetna also has solid operations within the group market niche, which positions the company well in one of the most profitable health insurance segments.
Cigna Corporation (NYSE: CI) is one of the largest investor-owned employee benefits organizations in the U.S., providing HMOs, POS, and PPOs to millions of customers across 16 states. Cigna is one of the market leaders in the commercial self-funded fee market, which is where most of the growth will originate for the large-group insurance segment. In December 2018, Cigna completed the acquisition of Express Scripts Holding Company, the largest U.S. pharmacy benefits manager, offering prescription services via retail market and home delivery. There is an increasing need for health care and pharmaceuticals, as advances in these industries are helping Americans to live longer and healthier lives. Express Scripts stands to profit from this growth, especially in the specialty drug market, where consumers are looking to reduce costs as much as possible. With its dominance in the pharmacy benefits management market, Express Scripts looks to be a good investment for Cigna's long-term growth.
Stryker Corporation (NYSE: SYK) makes specialty surgical and medical products, such as orthopedic implants, endoscopic items, and hospital beds. The company is known for its long record of innovation in key markets, which has led it to earn great profits. Stryker aims to diversify itself from its competitors through its focus on reconstructive implants. Hospitals and health care systems have begun to consolidate suppliers, which should benefit Stryker. The company also recently acquired Trauson, which should extend Stryker's presence in China and open it to the country's fast-growing orthopedics market.
Cardinal Health, Inc. (NYSE: CAH) is one of the leading wholesale distributors of pharmaceuticals, medical supplies, and surgical supplies. The company distributes to chain drug stores, hospitals, alternate care centers, and supermarket and mass merchandiser pharmacies. Cardinal plays a critical role in the pharmaceutical industry; many supply chain participants depend on its services for streamlined product distribution and procurement. In an effort to procure a cheaper supply of generic products, Cardinal has partnered with CVS Caremark. This joint effort should enhance Cardinal's negotiating power and fixed-cost scale and allow both companies to see wider margins over the long term.