Healthcare ETF Strategies: How to Position Your Portfolio Amid Trump's 2026 Policy Shift

The White House’s unveiling of “The Great Healthcare Plan” on January 15, 2026, marks a pivotal moment for healthcare investors. This sweeping policy initiative fundamentally reshapes how profits flow through the medical sector, creating a clear divide between winners and losers. For those holding healthcare ETFs, understanding this shift is no longer optional—it’s essential to survival in your investment portfolio.

The plan attacks three core inefficiencies: exorbitant prescription drug prices through “Most-Favored-Nation” (MFN) pricing mechanisms, inflated insurance premiums by rerouting subsidies directly to consumers, and opaque pricing practices across the entire healthcare ecosystem. These aren’t incremental tweaks. They represent a systemic redistribution of revenue streams, particularly targeting the middlemen who have historically captured outsized margins. This creates both opportunities and dangers for healthcare ETF investors.

Which Healthcare Sectors Are Positioned to Benefit?

Retail and Consumer-Facing Healthcare Winning

The plan’s push toward over-the-counter (OTC) drug availability directly supercharges retail-focused healthcare strategies. Retailers like Walmart are primed to expand their prescription drug business into the consumer staples aisle, driving foot traffic and increasing average transaction values. HealthEquity, positioned as a leading custodian of Health Savings Accounts (HSAs), stands to gain significantly as direct-to-consumer subsidy programs channel funds straight into individual accounts rather than institutional intermediaries.

Large pharmaceutical firms that voluntarily adopted MFN agreements—including Merck, Johnson & Johnson, Eli Lilly, AstraZeneca, and Novartis—position themselves as policy partners rather than targets. These companies gain regulatory certainty and favorable optics by participating in frameworks like TrumpRx, even if near-term profit margins face compression.

For healthcare ETF portfolios seeking exposure to these beneficiaries, certain investment vehicles offer more direct access than others.

The Sector Facing Existential Threats

Pharmacy Benefit Managers and Insurance Intermediaries Under Fire

The plan explicitly dismantles the PBM model by eliminating kickback arrangements between drug pricing intermediaries and insurance brokers. Companies like UnitedHealth Group, Cigna, and CVS Health—which derive substantial revenue from PBM operations—face material business model disruption. The centerpiece threat: rerouting billions in insurance subsidies away from insurers and directly to individuals fractures the stable risk pools these companies have relied upon for decades.

This regulatory assault targets companies including Centene and Molina Healthcare, which operate in managed care. For investors holding healthcare ETFs concentrated in these sectors, the risks extend beyond valuation compression to potential market share erosion.

Strategic Healthcare ETF Positioning: Building Resilience

Given the policy environment, successful healthcare ETF investors need to adopt a two-tier approach: overweight beneficiary categories while underweighting regulatory targets.

Healthcare ETFs to Strengthen Your Holdings

iShares U.S. Pharmaceuticals ETF (IHE) provides diversified exposure to 55 U.S. pharmaceutical and vaccine manufacturers navigating the MFN landscape. With $968 million in assets under management and a fee structure of 38 basis points, its top holdings—Johnson & Johnson (22.98%), Eli Lilly (22.69%), and Merck (4.84%)—concentrate on firms benefiting from policy certainty. For healthcare ETF allocations seeking pharmaceutical upside, this fund balances direct MFN winners with diversification.

State Street Consumer Staples Select Sector SPDR ETF (XLP) captures 36 consumer staples companies, including retail medicine providers. With $16.26 billion in assets and a competitive 8 basis point fee, it offers exposure to Walmart (11.54%), Costco (9.36%), and Procter & Gamble (7.46%)—companies positioned to capitalize on OTC medication sales and direct consumer engagement. This healthcare ETF category provides defensive income alongside growth from retail healthcare expansion.

iShares U.S. Medical Devices ETF (IHI) operates as a tactical hedge within broader healthcare allocations. With $4.04 billion in assets and an 8 basis point fee, its 47 holdings in medical device manufacturing—led by Abbott Laboratories (17.13%), Intuitive Surgical (15.35%), and Boston Scientific (10.57%)—remain largely insulated from pricing and subsidy battles. This healthcare ETF acts as diversification within a contested sector.

Healthcare ETFs to Reduce or Avoid

iShares U.S. Healthcare Providers ETF (IHF) concentrates exposure to 62 healthcare service providers, with $750.5 million in assets. Its top holdings—UnitedHealth Group (22.2%), CVS Health (12.29%), and Elevance Health (10.26%)—face direct policy headwinds. At 38 basis points in fees, this healthcare ETF’s composition exposes investors to companies defending challenged business models. Reducing allocation here aligns with tactical positioning.

State Street SPDR S&P Health Care Services ETF (XHS) presents concentrated risk in managed care and insurance services. With $101.4 million in assets and 35 basis point fees, positions in Centene (2.35%), Molina Healthcare (2.32%), and Alignment Healthcare (2.29%) create exposure to regulatory uncertainty. This healthcare ETF category warrants caution until policy implementation clarity improves.

The Bottom Line: Healthcare ETF Recalibration Isn’t Discretionary

Trump’s Great Healthcare Plan transforms the investment landscape for anyone holding healthcare ETFs. The redistribution of profit pools across pharmaceuticals, retail, medical devices, and insurance services creates clear bifurcation: companies aligned with policy objectives gain optionality, while intermediaries face structural headwinds.

For investors managing healthcare ETF allocations, now is the moment to audit holdings for concentration in regulatory targets. Building positions in beneficiary-oriented healthcare ETFs—whether through pharmaceutical diversity, retail healthcare expansion, or medical device isolation—provides both tactical advantage and philosophical alignment with the policy direction.

The winners are being identified. The question is whether your healthcare ETF portfolio is positioned to benefit.