When tech sells off and the economy wobbles, investors can typically rely on the healthcare sector—people still need medication when recessions hit. Despite having a correction in March, the US healthcare sector is down roughly 3.6% year-to-date, making it the second-worst performer (just above financials). And it's concentrated in the kinds of stocks investors might have expected more resilience.

To understand what's going on, we looked at every healthcare name in the Russell 1000, focusing on the worst performers (found below). And discovered interconnected themes driving the pain that may tell a story about where healthcare goes from here.

Theme 1: The MedTech valuation hangover

The biggest cluster in the bottom 10 is medical device companies including Boston Scientific (BSX), Insulet (PODD), Abbott (ABT), and Intuitive Surgical (ISRG), and they share 2 problems.

The first is tariffs. These are companies that manufacture devices globally in Ireland, China, Costa Rica and ship them into the US. Boston Scientific alone absorbed roughly $200 million in tariff headwinds last year, and the stock dropped. A decline that continues into 2026.

The second is high market expectations. As we often say, expectations are everything, and when they’re high, it can be more difficult for a company’s performance to drive further stock price growth. Boston Scientific was up 54% last year. Intuitive Surgical was a market darling. When you combine high valuations with cost headwinds, it’s tougher to look good. There's less margin of safety to absorb the bad news.

Theme 2: When Pharma sneezes, vendors catch a cold

3 of the bottom 10 performers: Veeva Systems (VEEV), IQVIA (IQV), and Doximity (DOCS), don't make drugs or devices. They sell software, data analytics, and advertising platforms to the companies that do. 

When pharmaceutical companies come under pressure from drug price negotiations, Most-Favored-Nation pricing threats, tariff uncertainty, they’ll look to cut discretionary spending. Meaning fewer clinical trials outsourced to CROs like IQVIA. It also means pharma marketing budgets get trimmed, hitting Doximity hard (over 90% of its revenue comes from pharma advertising on its physician network). It means IT and software projects get delayed or cancelled, applying more pressure to Veeva.

Doximity is the most dramatic example. In February, the company guided Q4 revenue growth much lower than expected. The culprit: 16 of the top 20 pharma companies had signed Most-Favored-Nation agreements with the White House in late December 2025, and were delaying upfront budget commitments as a result. The stock dropped 30% in a single day. Year-to-date, it's down 45% making it the the worst performer in the entire Russell 1000 healthcare universe.

Theme 3: The policy overhang on biopharma

Rounding out the bottom 10 are Alnylam Pharmaceuticals (ALNY) and Insmed (INSM)—both innovative, high-growth rare disease biotechs that had been enormous outperformers. 

The biopharma story in 2026 is fundamentally a policy story. The aforementioned Most-Favored-Nation pricing concept threatens to benchmark US drug prices against cheaper international rates. If that policy fully materializes, analysts estimate large-cap pharma earnings could fall 9–10% over the next few years. Even companies whose drugs haven't been directly targeted are seeing their multiples compress, because the market is pricing in a structural shift in US drug pricing power that doesn't go away.

For high-flying names like Alnylam and Insmed, which trade on the promise of future blockbuster revenues,  that multiple compression bites especially hard.

So what does this mean for investors?

What's happened is a re-rating, a compression of the multiples investors are willing to pay, driven by policy uncertainty and tariff fears. The forward P/E for the entire healthcare sector has fallen around 17 times, near but not at, its lowest level relative to the broader market in 30 years. The sector trades roughly 10% cheaper than its historical average versus the S&P 500.

History suggests that when valuations get compressed, it tends to be a better-than-average time to own the sector. But the path back requires some clarity on the things that caused the de-rating in the first place: tariff policy, drug pricing negotiations, and the speed at which pharma companies restore their R&D and marketing budgets. Until then, the sector may remain the market's sick ward  even if the underlying patients are healthier than the stock prices suggest.