A spoonful of medicine to grow your wealth

In general, companies tend to specialise in specific areas. Smith & Nephew, for example, is an expert in orthopaedic and wound care, while GlaxoSmithKline and Merck are renowned for their vaccines. Both GSK and Merck have been instrumental in developing vaccines for Ebola.

Abbott's return on equity is underpinned by its leadership in life-changing diagnostics, cardiovascular and neuromodulation products. For example, its FreeStyle Libre continuous glucose monitoring system, which is used by 1.5 million people in 46 countries, represents just a fraction of the 425 million people who are living with diabetes. Its ease-of-use could spur rapid revenue growth by changing the way that people can manage the condition painlessly.

That goes some way to explain why healthcare companies demand higher margins on their patent-protected products. They need to reinvest the profits generated now to develop new products that can replace the ones that are no longer protected by patents. But developing new medicines is both costly and unpredictable. More developmental drugs end up in the bin than on the shelves at pharmacies. It is important to bear that in mind the next time we moan about the price of medicines.

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