The healthcare sector is far from a monolith. Its sub-industries encompass a wide array of businesses, some focused on cutting-edge biotech, others on the routine supplies that keep hospital systems running.
Understanding these distinct verticals is important, especially when evaluating sector-specific ETFs like the Global X Equal Weight Global Healthcare Index ETF, which tracks the VettaFi Equal Weight Global Healthcare Index (VMEDXCN). As detailed in its methodology, this index specifically targets and equally weights the 20 largest healthcare companies that are members of key healthcare industries within developed markets.
Biotech Tools & Diagnostics
The biotech sub-industry includes companies that make the tools and materials that scientists need to discover and develop new drugs including things like lab equipment, testing kits, and specialized chemicals used in experiments. These firms play a foundational role in everything from basic biomedical research to late-stage clinical trials. Their revenue models tend to lean heavily on recurring sales, especially consumables and lab services.
Considerations for this Sub-industry: Research spending trends, partnerships with pharma companies, and regulatory changes around lab-developed tests (LDTs), which the U.S. Food and Drug Administration (FDA) has begun to scrutinize more closely.
Life Science Equipment
Life science equipment makers produce the essential hardware used in biotech labs—things like mass spectrometers, centrifuges, and genome sequencers. These tend to be big-ticket items with long sales cycles and high switching costs.
Companies in this space tend to grow when universities, contract research organizations (CROs), and pharmaceutical firms invest in expanding their lab capacity.
Considerations for this Sub-industry: Government research funding (like NIH budgets), academic lab spending, and global investment in life science infrastructure.
Medical Equipment & Devices
This is the heart of healthcare innovation from a hardware perspective. Companies in this category produce devices used in surgical procedures, cardiac care, imaging, and patient monitoring. Because hospitals tend to embed these technologies into their workflows, device manufacturers often enjoy strong customer loyalty and meaningful pricing power. However, innovation cycles and regulatory approval timelines can introduce volatility.
Considerations for this Sub-industry: Surgical procedure volumes, hospital CapEx budgets, and FDA approval pipelines.
Medical Supplies
By contrast, medical supplies are the essential, everyday items that healthcare providers can’t do without, such as syringes, gloves, catheters, and IV bags.
Considerations for this Sub-industry: Global procurement trends, raw material input costs, and the demand outlook for basic care delivery.
Biotech Therapeutics
This part of the healthcare sector focuses on companies working to develop entirely new kinds of treatments, often for serious or rare diseases like cancer or genetic disorders. These are the firms behind cutting-edge approaches, including gene therapies and other breakthrough drugs.
Biotech companies may see their stock prices jump when a clinical trial goes well. But the opposite is also true: if a key drug fails to show anticipated results or doesn’t get regulatory approval, the impact can be just as dramatic. It’s a high-risk, high-reward space where outcomes are often binary.
Considerations for this Sub-industry: The results of mid-to-late-stage clinical trials, regulatory decisions from agencies like the FDA or EMA, and whether these smaller firms are partnering with or being acquired by larger pharmaceutical companies.
Pharmaceuticals
The more established side of the drug business, pharmaceuticals, is home to global giants like Pfizer, Merck, and Novartis. Pharmaceutical companies develop and sell branded drugs across a wide range of indications and regions.
While the top line can be driven by blockbuster launches, maintaining growth over the long term often requires navigating patent cliffs, pricing pressure, and competition from generics or biosimilars.
Considerations for this Sub-industry: Drug patent expirations, the strength of the late-stage pipeline, and legislation around drug pricing, particularly in the U.S. and EU.
Generic Pharmaceuticals
Generic drug makers play a different game than big-brand pharmaceutical companies. Instead of developing new drugs, they focus on producing low-cost versions of medicines that have lost patent protection. It’s a high-volume business, which traditionally tends to lead to thinner profit margins, so success can depend on efficiency and the ability to quickly bring new generics to market.
Some companies are also moving into biosimilars — near-identical versions of complex biologic drugs.
Considerations for this Sub-industry: How quickly companies get regulatory approval for new generics, how crowded the market is for major drugs, and whether global rules around drug pricing are changing.
For investors looking to understand the real drivers within a broad healthcare allocation, breaking things down by sub-industries can be helpful. As these sectors evolve in response to demographic trends, technological breakthroughs, and regulatory shifts, understanding these nuances will only become more important. At any given time, the index may not include stocks representing all five of the sub industries detailed above.
Commissions, management fees and expenses all may be associated with an investment in products (the “Global X Funds”) managed by Global X Investments Canada Inc. The Global X Funds are not guaranteed, their values change frequently and past performance may not be repeated. The prospectus contains important detailed information about the Global X Funds. Please read the relevant prospectus before investing.
This communication is intended for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to purchase investment products (the “Global X Funds”) managed by Global X Investments Canada Inc. and is not, and should not be construed as, investment, tax, legal or accounting advice, and should not be relied upon in that regard. Individuals should seek the advice of professionals, as appropriate, regarding any particular investment. Investors should consult their professional advisors prior to implementing any changes to their investment strategies. These investments may not be suitable to the circumstances of an investor.
Global X Investments Canada Inc. (“Global X”) is a wholly-owned subsidiary of Mirae Asset Global Investments Co., Ltd. (“Mirae Asset”), the Korea-based asset management entity of Mirae Asset Financial Group. Global X is a corporation existing under the laws of Canada and is the manager, investment manager and trustee of the Global X Funds.
© 2025 Global X Investments Canada Inc. All Rights Reserved.
*VettaFi LLC (“VettaFi”) is the index provider for MEDX, for which it receives an index licensing fee. However, MEDXis not issued, sponsored, endorsed, or sold by VettaFi or its affiliates, and VettaFi and its affiliates have no obligation or liability in connection with the issuance, administration, marketing, or trading of [index]. VettaFi LLC is an affiliate of TMX Group Limited.