Health care stocks in 2025 saw a rebound in the sector, largely due to improved earnings expectations and increased enthusiasm around artificial intelligence. However, Schwab's analysis suggests that further pressures are building, with federal spending cuts and upcoming drug patent expirations potentially disrupting the recovery. The report suggests that all five health care industries within the S&P 500 were expected to post positive year-over-year earnings growth, but projected earnings growth in dollar terms had fallen by the second-steepest amount of any sector, landing at a 0.2% gain. Pfizer, Merck, and Gilead Sciences were among the companies expected to absorb the deepest cuts. The One Big Beautiful Bill Act, signed into law in 2025, cuts roughly $1 trillion in federal health care spending over the next decade, with the vast majority coming from Medicaid reimbursements. The Congressional Budget Office estimates that the law will increase the number of uninsured Americans by 10 million by 2034, with 7.8 million of those losses from Medicaid changes and 2.1 million from changes to the ACA marketplaces. Meanwhile, pharmaceutical companies are facing a threat of patent exclusivity, with nearly 200 brands set to lose patent protection between 2025 and 2030.