U.S. Healthcare in July 2025: Policy Shifts and Market Implications

In July 2025, the U.S. healthcare sector underwent substantial policy changes under the Trump administration, leading to significant market shifts. The "One Big Beautiful Bill Act" (OBBBA), signed into law on July 4, introduced deep cuts to Medicaid and SNAP, including stricter eligibility checks and work requirements for Medicaid recipients. These reforms are projected to increase the national deficit by $3.4 trillion over the next decade and could result in 11.8 million people losing Medicaid coverage. Additionally, the administration’s drug pricing initiative, which includes escalating tariffs on pharmaceutical imports, aims to reduce drug prices and incentivize U.S.-based production.

These policy shifts have led to mixed reactions in the financial markets. The S&P 500 healthcare sector declined by 5% in 2025, underperforming the broader market, due to regulatory uncertainty, increased tariffs, and reduced funding for healthcare programs. Despite these challenges, some investors view healthcare stocks as undervalued, with the sector trading at 27% below the S&P 500 average. Analysts are optimistic about growth prospects, particularly in the obesity drug and medical device markets, forecasting an 11% annual earnings growth over the next two years. Strategic investment decisions will be critical, focusing on policy monitoring, diversification, and companies with strong growth potential despite ongoing volatility.