Pharma is the powerful subsector, and medical devices/technology its smaller sibling within the huge healthcare industry. They are different enough that the two subsectors often move in opposing directions, enabling investors to stay diversified within the booming healthcare by shifting in and out of the two subsectors at appropriate times.

In a number of treatment areas, one sector can take away market share from the other. Take the huge heart disease market. While surgical interventions have become increasingly minimally invasive, pharmacological interventions, including thrombolytics, fibrinolytics, beta blockers, statins and anti-platelet treatments are covering a wider spectrum of acute coronary syndromes, sometimes eliminating the need for surgery.

In evaluating the potential of the two sectors, it must be said that there is nothing quite like getting in early on a blockbuster drug and riding it to new highs. In the meantime, smart pharma investors stay on the lookout for news about clinical trials that result in new indications for a drug, or that show a reduction in mortality, side effects, etc. Modifications in a drug that expand target populations are also good. Often these kinds of developments show up on TV commercials. Currently, through a spate of commercials you can witness the battle unfold over new indications for insomnia treatments, as drug companies address the huge and growing problem of sleeplessness in America.

But on the whole, right now Pharma is in a bit of a funk, hoping for new blockbusters, while medical devices/technology is more exciting, especially minimally invasive technologies. Substantial acceleration in FDA approval timelines since the passage of the 1997 Modernization Act, has helped the medical device industry.

As the competition among broad-based medical technical companies, like Medtech, Boston Scientific J&J and others has grown more intense, they are increasingly looking to acquire small companies with promising technologies. This has spurred a great deal of entrepreneurial growth. Is there such a thing as a blockbuster medical device? Except for drug-eluting stents, probably not, when you compare devices to top pharmaceutical winners. But medical technology is addressing some huge markets, with big profit potential.

Take back pain. It's the scourge of millions with a market of over $60 billion annually. Artificial disc technology is rapidly coming up with advances to treat chronic back cases. Carotid stenting, which was approved last year, is less invasive than surgery and sales of carotid stents are anticipated to grow to $1 billion within the decade-from less than $100 million today. And the annual growth rate of computer aided surgery rate is expected to increase from 10% in 2005 to more than 20% in 2009.

Aging baby boomers will aid the medical device boom. Age-related ailments combined with medicare eligibility will expand the use of pacemakers, defibrillators, stents, orthopedic implants and cochlear implants.

Medical devices/technology and pharmaceuticals provide a good way to diversify within healthcare, though you must stay current on developments in both fields. Of course, if you're really looking for growth you might turn to an even smaller healthcare/biotech sibling- diagnostics. With approval power over payments, healthcare providers, in essence, control the money, and thus wield enormous influence over which treatments grow share. Increasingly, healthcare providers are looking at preventative measures to stave off the huge expense of treating full-blown diseases. And how do you prevent diseases? Early diagnosis. But more on that in another article.

Leon Altman is the founder of http://www.InvestingIN.com, a website that explores opportunities in sectors and themes, such as healthcare. The website offers free newsletters. To sign up for free newsletters to http://www.investingin.com/SectorLetterFind.htm

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