With markets dominated by news of the Covid-19 pandemic, investors are seeking to identify those sectors that will be damaged (travel) and those that will be enhanced by the crisis. Healthcare is often cited alongside online services as a long-term winner. Indeed, the Artemis Global Select fund that I manage with two colleagues currently has healthcare as its largest exposure, but we advise investing in this sector with caution. 
A key issue can be illustrated by the quotation from Cicero that Boris Johnson used at his first cabinet meeting when back from hospital: ‘salus populi suprema lex esto’. He did not offer a translation to his ministers and the press have taken this to mean that the ‘health’ of the people should be the supreme law, but as classicist Mary Beard has pointed out, a reasonable translation may also be the ‘welfare’ of the people.
This is a much broader definition. It includes economic wellbeing as well as physical health. And here is the rub. Will the virus make governments feel that they have to take more responsibility for health or prioritise economic issues like inflation and employment?
And if healthcare has become a greater priority, how will they deliver on any promises? Will they nationalise a further area of healthcare or will they think it better to leave market forces to be allowed to operate even in areas of pandemic?
Different countries have very different health systems and different governments will undoubtedly respond differently to the pandemic. The UK and, in a way, China have very broad state provision – indeed Chinese health ministers are believed to have studied and admired the NHS. The US has a very complex mixture of systems dominated by private health insurance, but also with broad state insurance for the retired (Medicare) and for the less well off (Medicaid), supplemented by Obamacare.
Let us suppose that the major waves of the virus will soon pass. We are likely to be left facing either further waves of this virus in future, or close mutations of it, or other viral pandemics. We live in a world where diseases both of humans and agriculture can and do move about more rapidly – think swine flu as well as coronavirus. Societies may well be willing to pay more tax for the state, or agencies chosen by the state, to have greater capacity to look after their health in these circumstances. This could be a role in which the state is best placed to insure all and give rules to all on how to behave.
However, different countries have very different traditions and views on whether this is a role for the state. The US in particular seems to prefer that individuals look after their own health and that Washington concentrates on keeping the economy going. Seeing Bernie Saunders and his Mediaid-4-All policy collapse during the steep rise of the virus dramatically illustrates how even a crisis like this does not lead America to wanting its own NHS. I recall one Republican describing state provision as “Washington telling you whether or not you could be well”.
In Europe, however, I would expect many countries to spend taxpayers’ money on hospital resources. Economies are in recession and shovel-ready building plans will be popular and necessary to create employment. Indeed, I could see such plans take precedence over some previously proposed ‘Green Deals’. Building hospitals, especially local hospitals with more diagnostic capabilities, training more nurses and doctors all seem valuable, prudent and probably vote-winning. The equipping of such hospitals will be completed at market rates.
However, it may be awkward for any successful innovator of vaccines or drug treatments to expect to be paid in the normal way. We have already seen Gilead abandon ‘orphan status’ for the much-hyped Remdesivir. Orphan status is a way of keeping prices high for treatments of rare diseases, where little of the drug may ever be sold. Similarly, other companies are saying they will sell treatments at cost or less. Such signalling is understandable given the scale of this crisis, but one wonders whether the state can ever replace the capitalist forces which would have been put behind finding treatments if the profit motive had not been demonised. It is also a reminder that investors should not assume that just because a company is operating in an important area of healthcare at this time that it will make large profits.
In our portfolio we have always tried to find companies that can provide world-class healthcare at a reasonable cost, recognising that rising demand is met with constrained budgets. This has led us to have holdings in companies that lead in diagnostics and testing, such as Thermo Fisher and PerkinElmer, as well as Roche, which is the leader in coronavirus tests. Alongside these we hold companies such as Becton Dickinson, which leads in medical worker safety and Sanofi, the world leader in influenza vaccines. These companies have been investing profitably for years to provide affordable care in such circumstances as these and will continue to invest for future medical demands as yet unknown.
Simon Edelsten is co-manager of the Mid Wynd International investment trust and the Artemis Global Select fund. The views expressed above are his own and should not be taken as investment advice.