Which Is the Better Buy: iShares’ Pharma ETF IHE or First Trust’s Biotech Fund FBT?

The iShares U.S. Pharmaceuticals ETF (NYSEMKT:IHE) offers a more cost-effective and less volatile way to play the healthcare sector, while the First Trust NYSE Arca Biotechnology Index Fund (NYSEMKT:FBT) provides concentrated exposure to the high-growth biotech space.

These two healthcare funds offer specialized exposure to medical innovation but focus on different sub-industries. While the First Trust fund tracks an index of biotechnology firms using an equal-weighted approach, the iShares fund follows the broader domestic pharmaceutical market. Investors typically choose between them based on their preference for the aggressive growth potential of biotech or the relatively stable cash flows of established big pharma.

Snapshot (cost & size)

Metric	FBT	IHE
Issuer	First Trust	iShares
Share price	$273.89 (as of 2026-11-02)	$106.92 (as of 2026-11-02)
Expense ratio	0.55%	0.37%
1-yr return (as of 2026-11-02)	41.9%	43.0%
Dividend yield	None	1.3%
Beta	0.68	0.47
AUM	$3.1B	$1.6B

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.

The iShares fund is the more cost-efficient choice for long-term holders, featuring an expense ratio of 0.37%. This compares favorably to the 0.55% fee charged by the First Trust fund. Over time, these lower operating costs can help preserve capital and contribute to total returns.

Performance & risk comparison

Metric	FBT	IHE
Max drawdown (5 yr)	(27.4%)	(16.0%)
Growth of $1,000 over 5 years (total return)	$1,624	$1,818

What's inside

iShares U.S. Pharmaceuticals ETF provides broad exposure to domestic drugmakers through its 53 holdings. Its sector allocation is 100% pharmaceuticals, with a small allocation to cash or derivatives. Its largest positions include Eli Lilly (NYSE:LLY) at 26.88%, Johnson & Johnson (NYSE:JNJ) at 21.80%, and Royalty Pharma (NASDAQ:RPRX) at 4.73%. This heavy concentration in its top two holdings means its performance is significantly tied to the success of those industry giants. The fund was launched in 2006.

First Trust NYSE Arca Biotechnology Index Fund maintains a tighter industry focus, holding exactly 30 securities within the healthcare sector. Its largest positions include Genmab (NASDAQ:GMAB) at 4.89%, Regeneron Pharmaceuticals (NASDAQ:REGN) at 3.95%, and Halozyme Therapeutics (NASDAQ:HALO) at 3.77%. Because the fund tracks an index that employs an equal-weighted methodology, it tends to have less concentration in any single name compared to its pharmaceutical counterpart. The fund was launched in 2006.

For more guidance on ETF investing, check out the full guide at this link.

Which looks like the better buy?

The iShares U.S. Pharmaceuticals ETF (IHE) looks like the better buy for long-term investors heading into 2027. Its fee is lower than the First Trust biotech fund's, and it has been the calmer of the two, which helps when you plan to hold for years. Eli Lilly, the maker of popular weight-loss and diabetes drugs, is its biggest holding.

FBT is a different ride altogether. Because it owns just 30 biotech companies, one trial result can swing the whole fund. It also pays no dividend. IHE pays one while you wait, which is a nice cushion if biotech gets bumpy.

FBT does deserve credit for beating IHE over the past decade, and biotech has been hot as bigger drugmakers buy smaller rivals. Even so, IHE's lower cost, dividend, and steadier ride make it easier to hold through 2027 and beyond. FBT works best as a smaller add-on for investors who want more biotech risk.

Sara Appino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Eli Lilly, Genmab A/s, and Regeneron Pharmaceuticals. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.