One of the most pertinent drivers of the stock market that is often not considered by many investors is the demographic trajectory of the U.S. Currently, the U.S. population is older than ever before in history. For example, between 1980 and 2022, the median age of the American population increased from 30.0 to 38.9.
Almost no market sector will feel the impact of America’s aging population more than healthcare. As a result, healthcare stocks are likely to soar in the next decade.
However, only specific healthcare companies that specialize in medications and services primarily needed by the elderly will have the most increase in revenue and demand. Are you an investor looking for strong long-term healthcare plays? If so, consider the following three healthcare stocks which are likely to become instrumental to the future of American senior citizens.
Bristol Myers-Squibb (BMY)
In 2021, the U.S. Medicare program spent $216 billion on subsidized prescriptions for seniors. Of this expenditure, the biggest chunk, $12.6 billion went to Bristol-Myers Squibb (NYSE:BMY) for their blood-thinning drug Eliquis. Consider that BMY made roughly $46 billion in revenue in that same year. So, it’s significant that over a quarter of its sales came from a government program for senior prescriptions.
Additionally, it underscores another reality for investors. The number will only go up as more people enter the age bracket where blood thinners constitute a necessary preventative medicine. Moreover, BMY’s relationship with Medicare doesn’t end there. In fact, in 2021, Medicare also paid $5.9 billion for Revlimid, BMY’s treatment for multiple myeloma, which is a common cancer in seniors.
Therefore, investors should carefully consider the long-term potential of BMY as its drugs are closely intertwined with the U.S. healthcare system.
Eli Lilly (LLY)
Beyond current success of Mounjaro, the blockbuster weight loss drug, Eli Lilly (NYSE:LLY) has a bright future. While its most recent sales reports might have it falling behind competitors in the obesity drug race, Eli Lilly’s long-term success could be stronger. Similar to BMY, LLY has a strong revenue driver in its relationship with Medicare. Its Trulicity diabetes drug raked in $4.7 billion in Part D-covered prescriptions.
Much like other drugs subsidized under this form of coverage, Eli Lilly was able to negotiate new pricing with the federal government which will take place in 2026. In such cases, large corporations like Eli Lilly tend to have the upper hand. After all, they have their embedded distribution networks and proprietary formulas. While this pricing is not publicly accessible, it will likely favor LLY’s sales to some extent, making it one of the best healthcare stocks in the long run.
Tenet Healthcare (THC)
Tenet Healthcare (NYSE:THC) represents one of the largest, most diversified healthcare service networks. It has over 535 ambulatory surgery centers and surgical hospitals, 52 hospitals and approximately 160 additional outpatient centers and other care sites. The company profits from leaving its owned facilities to healthcare providers who would rather not manage and maintain the complex services, systems and infrastructure of healthcare facilities.
For investors, THC has had a tremendous year, with over 100% share value growth year-to-date (YTD). The company hasn’t yet returned to its blistering highs of the early 2000s. But its current trajectory suggests its valuation could soon reach $200 a share. And, it could even surpass with continued performance through Q3 of fiscal year 2024.
Thus, investors should keep a close eye on THC stock. It’s likely to grow as it acquires more and more facilities to keep up with demand from the aging U.S. population.
On the date of publication, Viktor Zarev did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
