The health care industry’s winners and losers in the midst of the pandemic

It isn’t exactly a secret that the American health care system is a messy hodgepodge of industries with often inscrutable—and adversarial—relationships with one another.

Hospitals, physicians, drugmakers, private insurers, public insurers, middlemen such as drug distributors and pharmacy benefits managers, and others must, by nature, work together to deliver care and make this labyrinthian system workable for consumers and patients.

But the reality is that the end goals and profit incentives can diverge significantly among different segments. That’s just the status quo in the U.S. Add a global pandemic, and you’ve got a perfect storm of industry competition that favors certain segments while devastating others. It makes winners and losers out of intricately linked sectors.

Those disparities have shifted significantly during the coronavirus pandemic.

Loser: Hospitals and doctors

In April, the health care industry lost 1.4 million jobs. That may not sound like a shocking figure given that the U.S. unemployment rate soared to 14.7{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00} in that same month with more than 20 million Americans losing their jobs. Economists expect even more pain in the months to come with mass uncertainty and public health–motivated lockdowns which have shuttered businesses across multiple sectors.

But the job losses within health care are striking—especially given that, prior to the COVID-19 pandemic, health care had been a consistent source of new employment. The federal Bureau of Labor Statistics had projected that health care occupation growth would climb “14{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00} from 2018 to 2028, much faster than the average for all occupations, adding about 1.9 million new jobs.”

You might think that in the midst of a pandemic, hospitals and doctors would see a windfall. But that hasn’t been the case. And that largely has to do with a steep drop in demand—and capacity or ability to provide—the elective medical procedures which make up so much of the sector’s revenues. Many dental offices are closed; outpatient procedures have been placed on the back burner as the medical system has grappled with an influx of COVID-19 patients and closed off premises to prevent coronavirus transmission.

“Across all health care services, which do not include pharmaceutical drugs, expenditures were down 12{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00} in March 2020 relative to last year, with particularly sharp drops in expenditures on dental services (–27{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00}) and medical laboratories (–28{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00}),” writes the nonpartisan Kaiser Family Foundation in a report published Tuesday. Physicians have, consequently, been facing similar pressures, according to industry surveys.

Elective procedures can bring in over $700 more per patient admission than an emergency room stay, according to another study conducted by George Washington University, and the effect has been harsh on large health systems such as Tenet Healthcare and HCA Healthcare. Some have resorted to furloughs or layoffs in the midst of the crunch.

But here’s one exception: the telehealth industry. As patients forgo brick-and-mortal hospitals in favor of virtual doctor visits, telemedicine giants such as American Well are seizing the moment by ramping up support for doctors in their networks who are losing business. The federal government has also given such companies, and their participating physicians, a boost—including by hiking up the number of telehealth services eligible for enhanced government payments.

Winner: Health insurers

The decline in demand for so-called elective procedures at hospitals—which, by the way, aren’t necessarily superfluous as they may encompass everything from hip replacements to cancer biopsies—has helped fuel an unexpected windfall for health insurers.

This is yet another strange financial shift wrought by the pandemic. Two weeks ago, insurance giants UnitedHealthcare, Cigna, and Humana announced that they’d be offering discounts to certain members for health care services and prescription drug costs, including waiving cost-sharing for elderly people in private Medicare Advantage plans and setting caps on out-of-pocket costs for those who have lost their jobs.

This is largely driven by a glut in the demand for ordinary health care services as people don’t want to trek to the hospital if they fear contracting the coronavirus. But the windfall may prove temporary as certain procedures resume.

Furthermore, a massive spike in unemployment—which is driving millions away from their employer-sponsored health coverage and into programs like COBRA and the Affordable Care Act—is lifting membership numbers for these insurers.

A mixed bag: Drugmakers

The biopharmaceutical industry is, by nature, one of the most unpredictable entities in the health system. A promising early-stage clinical trial can end in tears; hundreds of millions may go into developing a suite of technology that simply doesn’t pan out.

In this moment, drugmakers, a traditionally loathed element of the medical industry, have a chance to shine.

There are currently more than 115 treatments and more than 55 vaccine candidates in development for the coronavirus and the disease it causes, COVID-19, according to AgencyIQ.

The trouble is that there will be immense pressure from the public and governments to price any treatment or vaccine fairly for consumers. That means that developing such drugs may not be a massive revenue boost for the firms in the midst of the battle.

But the nuances abound. For instance, Gilead’s remdesivir, the first emergency authorized COVID-19 treatment, hasn’t done wonders for the company’s stock, with shares down about 12{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00} since remdesivir’s Food and Drug Administration authorization.

Some investors seem to be spooked by the high manufacturing costs and financial pressures the treatment will face, although that could change should the experimental treatment prove to cut COVID-19 death rates rather than just time spent in the hospital. Others may be encouraged by the underlying science that gave way to remdesivir, reenforcing their faith in the company.

On the flip side, you have Moderna, the upstart biotech which announced encouraging preliminary results for its COVID-19 vaccine candidate, mRNA-1273. Moderna’s stock soared on that announcement, though results from later-stage clinical trials could rock the boat. One hope from a business standpoint? Even if a vaccine were to be cheap for consumers, insurers (public or private) may have to cover the costs, depending on how things play out.

Ultimately, a first-to-market advantage for a coronavirus therapeutic or vaccine could prove critical given the number of companies rushing into the space.

More coronavirus coverage from Fortune:

—The Rebuild Program: A project to help small businesses reopen amid a pandemic
—What France’s “patient zero” doctor wants you to know about COVID-19
—McConnell focuses Senate on conservative judge appointments rather than the coronavirus
—Photo essay: What life looks like in Europe as the continent starts to reopen
—Trump’s demand that China pay coronavirus reparations evokes an ugly history
—To reopen safely, the private and public sectors need to ramp up collaboration
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—PODCAST: How Marc Benioff is helping out during the coronavirus pandemic
—WATCH: Fortune’s top 10 heroes of the coronavirus pandemic

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