Healthcare: Durable Demand, Constrained Capacity

By Vigilant Wealth Management on August 27, 2026

Aging populations and expanding access are driving decades of healthcare demand, while labor and financial constraints are making it harder for the system to deliver more care.

Executive Summary

• Healthcare demand is durable. People are living longer, spending more years managing chronic disease, and gaining access to care across developing markets.
• The system’s ability to deliver that care is constrained. Labor shortages, tighter reimbursement, and rising costs are forcing healthcare to become more efficient.
• We see investment opportunities in companies that help the system absorb rising demand by treating disease earlier, improving productivity, expanding capacity, or reducing long-term cost.

Healthcare at a Capacity Inflection

Healthcare demand is rising faster than the system’s capacity to deliver care. People are living longer and spending more of those years managing chronic conditions, while providers face labor shortages, higher costs, and tighter reimbursement. Federal projections point to a shortage of more than 140,000 physicians by 2038, with 30 of 35 specialties in deficit, and roughly 267,000 registered nurses by 2028.

Historically, rising demand was met by adding staff, facilities, and spending. That is becoming harder as the healthcare workforce ages and payers push back on cost growth. Healthcare has no shortage of demand. The challenge is delivering more care within increasingly constrained labor and financial resources. We believe this environment favors companies that expand capacity, improve outcomes, increase access, or lower the cost of care.

Durable Demand: Aging Populations and Expanding Access

Two long-term trends are driving healthcare demand. The first is demographics. The United Nations projects the global population aged 65 and older will more than double, from roughly 761 million in 2021 to about 1.6 billion by 2050. The issue is not age alone but the health needs that come with living longer. Most older adults live with at least one chronic condition, such as heart disease, diabetes, cancer, or cognitive decline, and these conditions require years of ongoing care rather than a single episode of treatment. According to the CDC, people with chronic and mental health conditions account for 90% of total U.S. annual healthcare expenditures, making chronic disease a central driver of both healthcare demand and spending.

The second trend is access. Incomes are rising across the developing world, and expanding insurance coverage and better diagnosis are bringing more people into the healthcare system. Low- and middle-income countries account for roughly 80% of the world’s population but a small fraction of its healthcare spending. That gap gives proven therapies, devices, and diagnostics a long runway, though growth will be uneven and will favor companies with scale and established local distribution.

Together, an older developed world and a developing world with broader access to care add up to decades of rising demand. Meeting that demand will not be easy, and that friction is where we see investment opportunity. In developed markets, the opportunity is in companies that make care more precise, shorten recovery, reduce complications, or lower the total cost of treating a patient. In developing markets, we favor companies with global supply chains, local distribution, and the ability to adapt proven products to local needs, preferences, and price points.

Treating Disease Earlier

Healthcare is shifting from treating disease toward preventing it, with more emphasis on identifying, monitoring, and treating conditions before they become advanced and expensive to manage.

GLP-1 therapies are a current example. Originally developed for type 2 diabetes, this class of medicines has expanded into obesity and related cardiometabolic risk, with research underway in several other conditions. Metabolic disease represents a large economic burden, with diabetes and obesity contributing hundreds of billions of dollars in annual U.S. healthcare costs. Adoption is still early, but company commentary in our research coverage has already pointed to double-digit declines in U.S. bariatric surgery volumes as GLP-1 use has increased. That is an early sign of how effective drug therapy can reshape demand in other parts of the healthcare system. The open questions are how much earlier treatment reduces downstream complications, how access and adherence evolve, and who ultimately captures the economic benefit.

Prevention depends on finding problems sooner, and technology is steadily improving our ability to do that. Medicine has historically been episodic, with patients often seen after symptoms emerge or disease has already advanced. New diagnostic tools, including liquid biopsy, genetic screening, and other molecular tests, are pushing care earlier by identifying risk or disease signals before they are visible through traditional methods. Continuous glucose monitors, wearables, and home diagnostics extend that same logic into everyday monitoring, giving patients and clinicians a better view of health between visits, when intervention may be cheaper and more effective.

Earlier detection is only part of the opportunity. Personalized medicine is improving what happens after a disease is identified. Genetic testing and targeted therapies increasingly allow treatment to be matched to the biology of a patient’s disease, improving outcomes and sparing patients from therapies unlikely to work. Adoption will take time because patient selection, manufacturing, cost, and reimbursement remain challenging. The investment opportunity is strongest where earlier detection and more precise treatment produce measurable clinical value, whether through better outcomes, improved adherence, or lower avoidable care.

The Innovation Reset

Drug development has become more expensive, more complex, and more exposed to pricing pressure. Recent estimates place the average cost of developing a new drug above $2.5 billion, and fewer than one in ten drugs entering human trials reaches approval. Large pharmaceutical companies also face a wave of patent expirations that will open their best-selling medicines to lower-priced competition. A bigger pipeline alone is not the answer. The industry needs better science, better trials, and stricter capital allocation.

The response is taking shape in three ways. First, acquisitions and licensing are becoming more central as companies look outside their own labs to fill pipeline gaps. The challenge is discipline. Paying up for assets only works if the science is strong enough to support lasting clinical and commercial value.

Second, China has become an important source of new drug candidates. Chinese biotech companies have moved from lower-cost followers to credible originators, and global drugmakers are increasingly licensing their assets for science, speed, and cost. For now, that supplements Western research. Over time, it could become disruptive if Chinese companies build the capabilities to go global on their own.

Third, artificial intelligence is starting to improve the drug development process. The clearest near-term benefit is not a single breakthrough, but fewer wasted steps along the way. Better use of data can help companies design stronger trials, avoid costly delays, and identify weaker programs earlier. These improvements will not eliminate the risk of drug development, but they can improve productivity and reduce the cost of failure.

The economics of innovation are also becoming more demanding. Medicare drug-price negotiation took effect in January 2026, with the first negotiated prices representing an average discount of 63% from list prices, and most-favored-nation proposals aim to bring U.S. prices closer to those in other developed nations. The policies differ in design but push in the same direction, requiring companies to demonstrate clearer clinical and economic value. Drugs that treat serious unmet needs, meaningfully improve on existing care, or reduce future system costs should still be rewarded. Products with modest differentiation or a reliance on post-launch price increases are more vulnerable.

Research quality now matters more than research spending. The attractive companies will have proprietary data, strong scientific judgment, and the ability to source innovation globally while keeping control of the science that sets them apart.

Bottom Line: What This Means for Portfolios

Healthcare demand is durable, but it will not lift every company equally. Medical cost trends are pressuring insurers, policy uncertainty remains unresolved, better drug therapy may disrupt some procedure categories, and pricing reform will continue to weigh on parts of the pharmaceutical market.

Those risks make stock selection more important. We favor businesses where rising volumes are supported by real medical need and whose products help the system deliver better care at lower cost. We are more cautious toward companies that rely on price increases, aging product franchises, reimbursement-sensitive volumes, or wellness offerings without clinical proof.

The opportunity in healthcare is not simply that spending will rise. It is owning the companies that can prove clinical and economic value in a system under growing capacity and affordability pressure. That is where our research is focused.

Selected Source Notes

• United Nations Department of Economic and Social Affairs, World Social Report 2023, published January 2023: global population aged 65 and older projected to more than double from roughly 761 million in 2021 to 1.6 billion by 2050. As of January 2023.
• U.S. Health Resources and Services Administration, National Center for Health Workforce Analysis, Physician Workforce: Projections, 2023–2038 and Nurse Workforce Projections, 2023–2038: projected shortage of approximately 141,000 full-time-equivalent physicians by 2038, with 30 of 35 modeled specialties in shortage; current HRSA projections also indicate an 8% national shortage of registered nurses in 2028. As of December 2025.
• Centers for Disease Control and Prevention, Fast Facts: Health and Economic Costs of Chronic Conditions: people with chronic and mental health conditions account for 90% of the nation’s $5.3 trillion in annual healthcare expenditures. As of May 26, 2026.
• American Diabetes Association, Economic Costs of Diabetes in the U.S. in 2022: estimated total economic cost of diagnosed diabetes of $412.9 billion in 2022, including $306.6 billion of direct medical costs. Published November 1, 2023; data as of 2022.
• World Bank, World Development Indicators; World Health Organization, Global Health Expenditure Database: population and healthcare expenditure by income group used to assess developing-market population scale and healthcare-spending gaps. WHO’s current GHED release includes health-spending data through 2023. Database updated March 2026; underlying health-spending data through 2023.
• Intuitive Surgical earnings calls and conference commentary: discussion of GLP-1 adoption and pressure on U.S. bariatric surgery volumes, including company commentary indicating double-digit declines in the overall U.S. bariatric surgical market. Reviewed through July 2026.
• Deloitte, Measuring the Return from Pharmaceutical Innovation, 16th edition: average cost to develop a pharmaceutical asset from discovery to launch increased to approximately $2.67 billion in 2025, including the cost of failure. Published May 4, 2026; data as of 2025.
• Biotechnology Innovation Organization, Informa Pharma Intelligence, and QLS Advisors, Clinical Development Success Rates and Contributing Factors 2011–2020: overall likelihood of approval from Phase I across developmental candidates was 7.9%. Published February 2021; data covering 2011–2020.
• Goldman Sachs Global Investment Research and other healthcare research reviewed by Vigilant Wealth Management: China biotech innovation, licensing activity, and the growing role of external innovation in global pharmaceutical pipelines. Reviewed through July 2026.
• IQVIA, Thermo Fisher Scientific, and Lonza earnings calls, investor days, and conference presentations: discussion of AI, data, clinical-trial efficiency, development workflows, manufacturing scale, and biopharma R&D productivity. Reviewed through July 2026.
• Centers for Medicare & Medicaid Services, Medicare Drug Price Negotiation Program: Negotiated Prices for Initial Price Applicability Year 2026: negotiated prices for the first 10 selected Part D drugs announced in August 2024 and effective January 1, 2026. As of August 2024; prices effective January 1, 2026.