Axios analysis of company financial documents; Chart: Andrew Witherspoon/Axios
The health care industry recorded an immensely profitable first quarter, according to an analysis of financial documents for 108 companies. Year-over-year earnings among the 10 biggest health care corporations by net profit soared by 8.4%.
Yes, but: Wall Street wants more. The S&P 500 health care index so far this year is trailing the broader S&P 500 as well as other industries, including energy and technology.
The bottom line: The 108 companies cumulatively boosted Q1 global revenues by 6.3% to $558 billion — an amount from just one quarter that is about the size of Sweden's economy. Their collective profits actually decreased 0.8% to $44.7 billion, but if a few one-off elements from 2017 were eliminated, profits would have increased.
More than half of the industry's earnings came from 10 companies.
All 10 of those companies that reaped the largest earnings are either pharmaceutical firms or are involved with the drug supply chain.
No health care company collected more Q1 earnings than Johnson & Johnson, the maker of drugs, medical devices and Band-Aids.
Drug maker Amgen's 41.6% profit margin was the highest among all companies in Q1.
Of the 10 companies with the highest profit margins, eight were pharmaceutical firms. The other two were a real estate investment trust (Welltower) and a medical device company (Intuitive Surgical).
The Republican tax overhaul contributed to increased earnings, as savings from a lower corporate tax rate immediately fall to the bottom line — especially for companies like health insurers that have almost all of their business in the U.S.
The analysis did not include not-for-profit hospital systems, but most of those organizations have been doing well, too.
The big picture: Higher profits and revenues naturally mean U.S. health care spending is increasing. That inevitably affects other portions of the economy — like how people may not be getting significant salary raises since their employers are covering the rising costs of health care.
