Recalibrating Your ETF Healthcare Strategy Amid Major Policy Disruption

The White House’s announcement of “The Great Healthcare Plan” on January 15, 2026, fundamentally reshapes the investment landscape for anyone holding ETF healthcare positions. This sweeping policy addresses three interconnected challenges: reducing prescription drug costs through Most-Favored-Nation (MFN) pricing mechanisms, redirecting insurance subsidies directly to consumers rather than insurers, and imposing transparency mandates that reshape how the industry operates. For ETF investors, these changes mean one critical reality—some healthcare holdings will thrive while others face structural pressure. The policy essentially redistributes profit pools across the entire healthcare ecosystem, from pharmaceutical manufacturers down to retail pharmacy operators, forcing investors to reassess their ETF allocations with urgency.

Market Winners and Losers Under the New Healthcare Framework

The policy creates a stark bifurcation in healthcare investment prospects. Understanding which segments benefit and which face headwinds is essential for anyone managing ETF healthcare exposure.

Emerging Beneficiaries in the Restructured Healthcare Market

Retail Pharmacy and Consumer Health Players are positioned as primary winners. Proposals to expand over-the-counter (OTC) medication availability directly benefit companies like Walmart [WMT], which operates both massive retail networks and growing clinic services. The policy shift drives consumers toward OTC aisles while reducing dependence on traditional insurance-based prescription channels, creating a powerful tailwind for retail-focused healthcare businesses.

Fintech-enabled Healthcare Solutions represent another growth vector. Companies like HealthEquity [HQY], which operates as the leading Health Savings Account (HSA) custodian, stand to benefit substantially. By channeling subsidies directly into individual HSAs rather than pooling them through insurance intermediaries, the policy creates explosive growth potential for HSA-custodian businesses and related fintech platforms.

Select Pharmaceutical Manufacturers that have voluntarily adopted MFN pricing agreements gain a unique advantage. Companies including Johnson & Johnson [JNJ], Eli Lilly [LLY], Merck [MRK], AstraZeneca [AZN], and Novartis [NVS] position themselves as partners with regulatory authorities rather than adversaries. These manufacturers secure certain protections—including tariff relief and platform advantages on initiatives like TrumpRx—in exchange for specific pricing commitments, providing both regulatory certainty and strategic credibility.

Healthcare Intermediaries Facing Structural Pressure

Pharmacy Benefit Managers (PBMs) emerge as the policy’s primary targets. These intermediaries have historically earned significant revenue through kickback arrangements with insurance brokers—a practice the plan explicitly aims to eliminate. Companies like UnitedHealth Group [UNH], Cigna [CI], and CVS Health [CVS], which operate massive PBM operations, confront fundamental business model disruption. The elimination of kickback economics removes a substantial revenue stream that has historically cushioned their profitability.

Traditional Health Insurers face the most transformative challenge. The plan’s most radical element diverts billions in taxpayer subsidies away from insurers themselves, redirecting this capital directly to individual consumers. For major insurers like Centene [CNC] and Molina Healthcare [MOH], this fundamentally destabilizes their risk pools and eliminates guaranteed revenue streams that have traditionally supported their business models.

Why ETF Healthcare Investors Must Reposition Now

The policy shift creates a clear strategic imperative: investors holding broad-based or PBM-heavy ETF healthcare positions face uncompensated risk, while those positioned in growth-oriented healthcare segments gain exposure to genuine tailwinds. Rather than holding generic healthcare ETF baskets vulnerable to uniform regulatory pressure, strategic investors should concentrate exposure in specific healthcare subsectors positioned to benefit from the restructuring.

ETF Healthcare Allocation Toward Growth Opportunities

iShares U.S. Pharmaceuticals ETF [IHE] This $968 million fund provides concentrated exposure to 55 U.S. pharmaceutical manufacturers, many actively engaged in MFN negotiations. With top holdings of Johnson & Johnson (22.98%), Eli Lilly (22.69%), and Merck (4.84%), the fund captures exposure to companies positioned to benefit from regulatory partnerships. The fund charges a 38-basis-point annual fee, providing professional portfolio management for investors seeking pharmaceutical sector exposure without requiring individual stock selection.

State Street Consumer Staples Select Sector SPDR ETF [XLP] Possessing $16.26 billion in assets, this fund offers diversified exposure to 36 consumer staples companies, including retail pharmacy operators and OTC healthcare product distributors. Its portfolio includes Walmart (11.54%), Costco (9.36%), and Procter & Gamble (7.46%)—companies benefiting from OTC expansion and direct-to-consumer healthcare trends. At just 8 basis points, this fund represents an exceptionally cost-efficient ETF healthcare allocation for capturing retail-driven opportunities.

iShares U.S. Medical Devices ETF [IHI] With $4.04 billion in assets, this fund diversifies across 47 medical device manufacturers and distributors—a healthcare segment largely insulated from the drug pricing and insurance subsidy battles central to the Great Healthcare Plan. Holding Abbott Laboratories (17.13%), Intuitive Surgical (15.35%), and Boston Scientific (10.57%), this fund serves as a defensive hedge within broader healthcare portfolios. Its 8-basis-point fee structure provides efficient exposure to a healthcare subsector with more stable profit dynamics.

ETF Healthcare Positions Requiring Strategic Reassessment

iShares U.S. Healthcare Providers ETF [IHF] This $750.5 million fund concentrates exposure to 62 U.S. healthcare providers, including insurers and diagnostics companies. Its top holdings—UnitedHealth Group (22.2%), CVS Health (12.29%), and Elevance Health (10.26%)—represent precisely the PBM-heavy intermediaries facing regulatory pressure. At 38 basis points, this ETF healthcare product exposes investors to concentrated risk from companies whose traditional business models face structural obsolescence. Current investors should carefully evaluate whether this position aligns with their risk tolerance.

State Street SPDR S&P Health Care Services ETF [XHS] Managing $101.4 million in assets, this fund provides exposure to 59 healthcare service providers, with significant weightings toward vulnerable insurance intermediaries. Centene (2.35%), Molina Healthcare (2.32%), and Alignment Healthcare (2.29%) represent insurers confronting the policy’s most disruptive elements. At 35 basis points annually, investors holding this ETF healthcare product should consider whether maintaining exposure to these specific business models remains strategically justified given the policy landscape.

Strategic Takeaway for ETF Healthcare Investors

The Great Healthcare Plan represents a watershed moment for ETF healthcare investing. Rather than maintaining passive or broad-based healthcare ETF positions, investors should thoughtfully reposition toward ETF healthcare products capturing genuine beneficiary exposure while reducing concentration in intermediaries facing unified regulatory pressure. The healthcare sector’s profit reallocation creates distinct winners and losers—successful ETF investing requires positioning accordingly.