Health Care sector explained

How companies in this sector earn

How do Health Care companies make money?

• Drug makers sell medicines through wholesalers, and insurers and government programs often receive rebates off the list price.
• Patents stop direct copies for a set time; after that, cheaper generic versions can take much of a drug's sales.
• Vaccine makers sell to governments and to distributors that supply pharmacies and clinics; demand can shift with seasons and outbreaks.
• Hospitals are paid for the care they provide, and health insurers collect premiums and pay members' medical bills.
• Research and development is often among drug makers' largest costs, and most drug candidates fail before approval.

Who regulates it

Food and Drug Administration (FDA), for drugs, vaccines and medical devices · Centers for Medicare & Medicaid Services (CMS), for Medicare and Medicaid coverage, payment and drug price negotiation · Centers for Disease Control and Prevention (CDC), for vaccine recommendations · Federal Trade Commission (FTC), for competition, including drug company mergers · US Patent and Trademark Office (USPTO), for drug patents

What moves results across the sector

• FDA approvals and safety decisions on new drugs and vaccines.
• Government rules on drug prices, including Medicare price negotiation, and what insurers agree to cover.
• Patent expiry dates, after which generic copies can reach the market.
• Vaccine recommendations from health agencies, which can shift demand for shots.

Words you'll meet

Key terms

Clinical trial

A test of a new drug or vaccine in people, run in stages before a maker seeks approval.

Patent

A legal right that stops others from making and selling the same invention for a set time.

Generic drug

A copy of a brand-name medicine, sold after the original's legal protection ends.

mRNA vaccine

A vaccine that uses messenger RNA to make cells build a harmless virus piece, training the immune system.

Pharmacy benefit manager

A company that negotiates drug rebates and manages drug coverage for insurers and employers.

Medicare and Medicaid

Government health programs: Medicare mainly covers older people, and Medicaid covers many people with low incomes.