With AI and space dominating many of the market’s most popular investment themes, it can be difficult to find differentiated opportunities. Healthcare is often viewed as one of the more defensive sectors, supported by relatively steady demand regardless of the economic environment. But the sector also offers several sources of growth, including biotechnology, pharmaceutical innovation, weight-loss drugs and other emerging treatments. That combination of defensive characteristics and long-term innovation can make healthcare ETFs an attractive way to diversify a portfolio without giving up growth potential.Long-term Trends Support a Durable Healthcare StoryHealthcare has several long-term demand drivers that support the overall sector story. For instance, adults aged 65 and older now account for a record 18% of the U.S. population. Generally, the aging population requires more frequent medical care, prescription drugs, and procedures, which creates sustained demand across the healthcare system. The strength of the healthcare labor market also reflects that underlying demand. Healthcare employment increased by 2.5% year-over-year in May 2025, even as total nonfarm payroll employment remained relatively flat. Looking further ahead, the Bureau of Labor Statistics expects the broader healthcare and social assistance category to be the fastest-growing major industry sector between 2024 and 2034. Employment is projected to rise 8.4% (around three times the rate for the overall economy) and add approximately two million jobs over the decade.The easiest way to access trends in healthcare is through broad sector funds like the State Street Health Care Select Sector SPDR Fund (XLV A). The fund provides access to large-cap pharmaceutical, biotechnology, medical device, managed care, and healthcare services companies. This gives investors a mix of defensive businesses supported by recurring demand and companies participating in longer-term areas of innovation.
While the healthcare industry can be niche, XLV holds familiar names. As of June 9, its top holdings include Eli Lilly & Co (LLY) at 16%, Johnson & Jonson (JNJ) at 10%, AbbVie Inc (ABBV) at 7%, UnitedHealth Group Inc (UNH) at 7%, and Merck & Co (MRK) at 5%. Pharmaceuticals represented approximately 38% of the portfolio, followed by healthcare providers and services at 19%, biotechnology at 18%, and healthcare equipment and supplies at 16%. (Read more on XLV here.)Biotech ETFs Offer Different Ways to Bet on InnovationBiotechnology ETFs provide more concentrated exposure to medical innovation than broad healthcare funds. Their returns can be driven by clinical-trial results, FDA decisions, drug-pipeline developments, and merger and acquisition activity. That can create significant upside when a treatment succeeds, but it also makes biotech more volatile and company-specific than established pharmaceutical or diversified healthcare exposure.
The iShares Biotechnology ETF (IBB A-) tracks U.S.-listed biotech stocks and tends to have greater exposure to larger, more established biotechnology companies. This can make IBB a relatively more mature approach to biotech, although it still carries the risks associated with the industry. Top holdings include Vertex Pharmaceuticals (VRTX), Amgen Inc (AMGN), and Gilead Sciences (GILD). The State Street SPDR S&P Biotech ETF (XBI A) also focuses on biotech, but its modified equal-weight approach gives smaller companies much more influence than they receive in a market-cap-weighted portfolio. As a result, XBI tends to provide broader participation across the biotech industry and greater exposure to earlier-stage companies, but that means it can also be more sensitive to interest rates, financing conditions, and investor risk appetite.
Some ETFs take a thematic approach to the biotech industry and narrow the industry even further. The ALPS Medical Breakthroughs ETF (SBIO B-) focuses on small- and midcap biotechnology companies with at least one drug in Phase II or Phase III FDA clinical trials. Eligible companies have market capitalizations between $200 million and $5 billion. This gives investors targeted exposure to companies approaching potentially important clinical and regulatory milestones. Successful trial results, approvals, or acquisitions can produce meaningful upside, but failed studies and funding challenges can also create substantial downside. Because of its different methodology, top holdings vary from IBB and XBI. They include Alkermes (ALKS), Kymera Therapeutics (KYMR), and Spyre Therapeutics (SYRE).Pharmaceutical ETFs Target Established DrugmakersPharmaceutical ETFs appeal to investors seeking more targeted exposure to established drugmakers without taking as much clinical-stage risk as biotechnology funds. These companies often have commercial products, recurring revenue, stronger cash flows, and diversified drug portfolios, which can make pharmaceutical funds somewhat more defensive than biotech strategies. The industry can also benefit from aging populations, rising healthcare spending, and demand for treatments that is relatively resilient across economic cycles.
Two of the largest ETFs have a few key differences. The VanEck Pharmaceutical ETF (PPH A-) holds 25 large, liquid U.S.-listed pharmaceutical companies (including production, research, marketing, and sales). It holds international drugmakers through their U.S.-listed shares, giving it a more global large-cap profile. Top holdings include familiar names like Eli Lilly, Novartis (NVS), and Merck. The iShares Pharmaceuticals ETF (IHE B+) focuses specifically on U.S. pharmaceutical companies, making it a more concentrated way to express a view on domestic drug manufacturers and vaccine producers. Its top holdings include Eli Lilly, Johnson & Johnson, and Royalty Pharma (RPRX). It does not include international names like Novartis or Novo Nordisk (NVO). Both PPH and IHE are narrower and more concentrated than a broad healthcare ETF, but they offer a more established and potentially less volatile approach to medical innovation than clinical-stage biotech funds.Weight Loss ETFs Target a Fast-Growing ThemeFor investors seeking a more thematic approach to healthcare’s latest trends, weight loss ETFs can provide targeted exposure to the rapidly developing obesity-treatment market. The success of GLP-1 drugs has expanded investor interest in names like Eli Lilly, which was up almost 8% in the past five days (as of June 9, 2026) due to its new retatrutide drug. (You can also read more on the weight loss theme here.)
The Amplify Weight Loss Drug & Treatment ETF (THNR B-) tracks an index that extends beyond GLP-1 drug developers to include combination therapies and telehealth companies in the weight loss drug space. This gives THNR exposure not only to drug innovation, but also to some of the businesses supporting treatment delivery and adoption. Holdings are limited to 20 companies weighted by market cap. Notably, the industry allocation is split between pharmaceuticals (two thirds) and biotech stocks (one third). Top holdings include familiar drug names like Eli Lilly, Novo Nordisk, and Amgen.
The actively managed Roundhill GLP-1 & Weight Loss ETF (OZEM B-) focuses on weight loss drug stocks, including both pure-play and diversified companies involved in the production or sale of GLP-1s (and other verticals of therapeutics), other weight loss enablers, and supply chain enablers. Active management may be particularly relevant in a rapidly changing market where developments can quickly alter the outlook for individual companies.Bottom LineHealthcare can offer more than just defensive exposure. Broad sector funds provide access to established industry leaders, while pharmaceutical, biotechnology, and weight-loss ETFs allow investors to target specific areas of innovation and growth.
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VettaFi LLC (“VettaFi”) is the index provider for SBIO and THNR, for which it receives an index licensing fee. However, SBIO and THNR are not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of SBIO and THNR.
