Better Pharma ETF: iShares IHE vs. State Street XPH
Key Points
The iShares U.S. Pharmaceuticals ETF is significantly more concentrated than the State Street SPDR S&P Pharmaceuticals ETF, with Eli Lilly accounting for 23.63% of the portfolio.
The iShares U.S. Pharmaceuticals ETF provides a higher dividend yield of 1.4% compared to 0.4% for the State Street SPDR S&P Pharmaceuticals ETF.
The State Street SPDR S&P Pharmaceuticals ETF has a lower expense ratio of 0.35% but has experienced a deeper maximum drawdown of -30.9% over the last five years.
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The iShares U.S. Pharmaceuticals ETF (NYSEMKT:IHE) offers a concentrated, market cap-weighted approach to drugmakers, while the State Street SPDR S&P Pharmaceuticals ETF (NYSEMKT:XPH) provides broader, more equal-weighted exposure to the domestic pharmaceutical industry.
Both funds provide targeted exposure to the U.S. pharmaceutical industry, yet this comparison shows that their internal mechanics lead to very different risk profiles. While the iShares U.S. Pharmaceuticals ETF leans heavily into the largest players in the sector, the State Street SPDR S&P Pharmaceuticals ETF spreads its assets across a wider range of companies.
Snapshot (cost & size)
| Metric | XPH | IHE |
|---|---|---|
| Issuer | State Street | iShares |
| Share price | $63.66 (as of 2026-10-05) | $98.22 (as of 2026-10-05) |
| Expense ratio | 0.35% | 0.37% |
| 1-yr return (as of Oct. 5, 2026) | 36.2% | 40.8% |
| Dividend yield | 0.4% | 1.4% |
| Beta | 0.56 | 0.45 |
| AUM | ~$0.5 billion | ~$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-year return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
The State Street SPDR S&P Pharmaceuticals ETF is the more affordable choice for long-term investors with its 0.35% expense ratio. However, the iShares U.S. Pharmaceuticals ETF provides a notably higher payout, offering a 1.4% yield for income-focused portfolios.
Performance & risk comparison
| Metric | XPH | IHE |
|---|---|---|
| Max drawdown (5 yr) | (34.9%) | (16.0%) |
| Growth of $1,000 over 5 years (total return) | $1,453 | $1,759 |
What's inside
The iShares U.S. Pharmaceuticals ETF holds 53 stocks and is entirely focused on the healthcare sector. Because it is market-cap weighted, its largest positions include Eli Lilly (NYSE:LLY) at 23.63%, Johnson & Johnson (NYSE:JNJ) at 22.28%, and Pfizer (NYSE:PFE) at 4.65%. The fund was launched in 2006, and has paid $1.43 per share over the trailing 12 months, which on its recent ~$98.22 share price works out to a 1.4% yield.
The State Street SPDR S&P Pharmaceuticals ETF tracks a modified equal-weighted index of 62 holdings, which is also concentrated 100% in the healthcare sector. Its largest positions include Xeris Biopharma Holdings (NASDAQ:XERS) at 2.39%, Amneal Pharmaceuticals (NASDAQ:AMRX) at 2.39%, and Veradermics (NYSE:MANE) at 2.38%. This fund was launched in 2006, and has paid $0.27 per share over the trailing 12 months, which on its recent ~$63.66 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
The pharmaceutical industry was valued at $1.7 trillion in 2025 and is projected to grow to $2.8 trillion by 2033. This trend makes investing in the sector a compelling opportunity. The iShares U.S. Pharmaceuticals ETF (IHE) and State Street SPDR S&P Pharmaceuticals ETF (XPH) offer two different approaches to doing so. Which to choose depends on the factors that make the most sense for your portfolio and investment goals.
IHE, in particular, may not be for investors who already own Eli Lilly and Johnson & Johnson shares, since the ETF is market-cap weighted and these two companies represent nearly half the fund. If you don't own these stocks, IHE may make sense, although its performance is heavily dependent on these two pharma giants. That bet has paid off in recent years, as IHE's one-year and five-year returns are stronger than XPH.
That said, XPH has compelling qualities. Its equal-weighting approach means no one stock dominates, and allows large, mid, and small-cap stocks to all contribute to the ETF's performance. It's also a good way to balance and diversify a portfolio for investors who already own large pharma stocks and want to target the rest of the sector.
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Robert Izquierdo has positions in Johnson & Johnson and Pfizer. The Motley Fool has positions in and recommends Eli Lilly and Pfizer. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.
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