In Healthcare ETFs, Is iShares Pharma a Better Buy Than VanEck Biotech?
Key Points
iShares U.S. Pharmaceuticals ETF has significantly outperformed VanEck Biotech ETF over the last year and on a five-year growth basis.
VanEck Biotech ETF offers a slightly lower expense ratio, though both funds carry costs below 0.40%.
iShares U.S. Pharmaceuticals ETF provides a higher dividend yield and maintains a larger assets under management (AUM) base than its biotech counterpart.
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The iShares U.S. Pharmaceuticals ETF (NYSEMKT:IHE) and VanEck Biotech ETF (NASDAQ:BBH) offer targeted exposure to healthcare, with one focusing on established pharmaceutical giants and the other on high-growth genetic research firms.
Both funds provide concentrated access to specific healthcare sub-sectors, providing tools for investors looking to outpace broader market benchmarks through specialized thematic exposure. While the VanEck fund targets the biotechnology industry via a concentrated 24-stock index, the iShares fund casts a wider net across the established U.S. pharmaceutical landscape. Investors may choose between these two vehicles to dial into different risk-reward profiles within the drug-development and medical innovation fields, depending on their outlook for high-growth genetics versus the relative stability of pharmaceutical giants that often have more diversified cash flows.
Snapshot (cost & size)
| Metric | BBH | IHE |
|---|---|---|
| Issuer | VanEck | iShares |
| Share price | $219.64 (as of 2026-08-13) | $102.99 (as of 2026-08-13) |
| Expense ratio | 0.35% | 0.37% |
| 1-yr return (as of 2026-08-13) | 34.0% | 53.2% |
| Dividend yield | 0.4% | 1.4% |
| Beta | 0.69 | 0.48 |
| AUM | $427.3 million | $1.6 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield as of the close of trading on Aug. 13, 2026.
The VanEck fund is slightly more affordable with a 0.35% expense ratio compared to 0.37% for the iShares fund. However, the iShares fund offers a significantly higher payout, providing a yield advantage of about a full percentage point over its biotech-focused peer.
Performance & risk comparison
| Metric | BBH | IHE |
|---|---|---|
| Max drawdown (5 yr) | (39.7%) | (16.0%) |
| Growth of $1,000 over 5 years (total return) | $1,061 | $1,725 |
What's inside
iShares U.S. Pharmaceuticals ETF focuses entirely on the healthcare sector, maintaining 56 positions to track the performance of U.S.-based drugmakers. Its largest positions include Johnson & Johnson (NYSE:JNJ) at 22.1%, Eli Lilly (NYSE:LLY) at 20.8%, and Bristol Myers Squibb (NYSE:BMY) at 4.8%. This heavy concentration in large-cap pharmaceutical leaders helps explain its lower volatility profile. It was launched in 2006. iShares U.S. Pharmaceuticals ETF has paid $1.47 per share over the trailing 12 months, which on its recent ~$102.99 share price works out to a 1.4% yield.
VanEck Biotech ETF also maintains 100% exposure to healthcare but with a narrower focus on 25 holdings, specifically those involved in genomic research and diagnostic technologies. Its largest positions include Amgen (NASDAQ:AMGN) at 16%, Gilead Sciences (NASDAQ:GILD) at 13%, and Vertex Pharmaceuticals (NASDAQ:VRTX) at 8.6%. This tighter focus on biotechnology companies can lead to higher volatility but offers distinct exposure to cutting-edge medical innovation that may not be found in a broader pharmaceutical fund. It was launched in 2011. VanEck Biotech ETF has paid $0.96 per share over the trailing 12 months, which on its recent ~$219.64 share price works out to a 0.4% yield.
For more guidance on ETF investing, check out the full guide at this link.
Which looks like the better buy?
Few sectors are moving as fast as healthcare right now.
Both ETFs provide good exposure to the sector and have some similarities beyond their healthcare focus. For one, both funds are heavily concentrated in their top 10 holdings, with the iShares fund, IHE, allocating about 76% of its assets to its top 10 holdings, while the VanEck fund, BBH, allocates over tnearly 73% of its assets to its top 10 holdings.
Interestingly, the more concentrated VanEck fund offers more style diversification than iShares' offering. BBH holds 36% of its assets in large-cap stocks, 54% in mid-cap stocks, and 8% in small-cap equities.
IHE, meanwhile, holds 59% in large caps, 16% in mid caps, and 26% in small caps. The weightings toward large and small caps in a notable structure compared to BBH.
It is performance where these two healthcare funds really show differences.
Despite its concentration, BBH has not been as able to deliver outsized returns to its investors compared to IHE. BBH has returned 9%, 0.3%, and 6.4% over the 3-year, 5-year, and 10-year time frames. It's up 8.67% year to date.
IHE beats BBH in all those periods. Over the past 3-, 5-, and 10-year periods, IHE has generated annualized returns of 20.7%, 11.6%, and 8.6%, respectively. IHE is up nearly 21% in 2026.
Outperformance is the ultimate deciding factor when looking for the best ETF to invest in. In this case, IHE is the winner between these two healthcare-focused ETFs.
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Brendan Coffey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amgen, Bristol Myers Squibb, Eli Lilly, Gilead Sciences, and Vertex Pharmaceuticals. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.
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