Healthcare
By SuperdayReps · Wharton MBA · ex-Greenhill · investment banking interview coaching
17 min read · updated October 10, 2026
A healthcare interview is mostly the standard first round. The three statements, a DCF, terminal value, WACC, enterprise value against equity value, and the valuation methods all still come up, and they are covered in the range of technicals and the lessons under it.
What is different about healthcare is not one idea, as it is in FIG, but range. A healthcare group covers drug developers with no revenue, hospital chains, health insurers, device makers and software companies, and they make money in completely different ways. Most of them value the normal way. One part does not, and that part is where most of the sector questions come from.
So the sector layer has two halves. First, know the map well enough to say which verticals are standard and why. Second, know the exceptions properly: branded drugs, biotech, and the volume metrics that run a hospital or an insurer.
The map
Interviewers often open with the verticals, because the answer shows whether you understand the group you are applying to. A useful split is six buckets.
| Vertical | Examples | How it makes money | How it is valued |
|---|---|---|---|
| Branded pharma and biotech | Large pharma, clinical-stage biotech, specialty pharma | Patent-protected drugs sold at high margins until exclusivity ends | Probability-adjusted DCF, sum of the parts; normal multiples only once there are sales |
| Generics | Generic drug makers | High-volume copies of off-patent drugs, won on price and supply contracts | Normal DCF and EV / EBITDA |
| Providers | Hospitals, surgery centres, nursing homes, physician groups | Reimbursement per patient treated, from insurers and the government | EV / EBITDA, DCF built from beds and volumes |
| Payers | Health insurers, also called managed care organisations | Premiums, less the medical costs they pay out | P / E and EV / EBITDA, read through the medical loss ratio |
| Services and distribution | Drug wholesalers, pharmacy benefit managers, contract research organisations, healthcare IT | Fees and spreads on volume moving through the system | Normal multiples; healthcare IT often like software |
| Medtech and tools | Device makers, diagnostics, lab equipment | Equipment plus the recurring consumables that go with it | Normal DCF and EV / EBITDA |
The one-sentence answer: most of healthcare values like any other company, with a DCF, EV / EBITDA and P / E, because their statements read like anyone else's. The exception is branded drugs, because their revenue has to be adjusted for the chance it ever arrives and it expires when the patent does. Say that, and you have answered the question behind the question.
You may also be asked to compare a healthcare company with one from another sector on the same EBITDA. Start from what EBITDA leaves out. It is struck before capex and working capital, so the question is how much of it survives as free cash flow. A device maker or a healthcare software vendor reinvests little, so most of it does, and that supports a higher multiple. Then qualify it, because the sector is not one thing: a hospital chain spends heavily on buildings and equipment, and a biotech may have no EBITDA to compare.
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Frequently asked
- What questions do healthcare investment banking interviews ask?
- The standard first round plus a sector layer. The sector layer is the verticals inside healthcare and which ones value normally, why a branded drug company's revenue falls off a cliff when its patents expire, how you value a clinical-stage biotech with no revenue, how generics are priced, how a hospital's revenue is built from beds, occupancy and admissions, what the medical loss ratio tells you about a health insurer, and how a drug moves from the manufacturer to the patient.
- How do you value a pre-revenue biotech company?
- Drug by drug, with a probability-adjusted DCF, often called risk-adjusted NPV. You forecast the remaining trial costs and, after a possible launch, revenue from patients times share times price. Each year's cash flow is multiplied by the chance the drug has reached that point, and revenue falls sharply when exclusivity ends. You normally skip a terminal value, discount at the cost of capital, add the company's cash, and sum the drugs.
- Why does a branded drug's revenue fall so much after its patent expires?
- Because generic copies can then be sold, and they are priced far below the brand. With one generic on the market the price falls by about two fifths, and with six or more makers it can fall by over 95 percent. Insurers and pharmacy benefit managers push patients to the cheaper version, so a branded drug can lose most of its revenue within a year or two of losing exclusivity.
- What is the medical loss ratio?
- The share of a health insurer's premium revenue that is spent on medical care, so medical costs divided by premiums. It is the insurer's version of a cost of goods ratio. A higher ratio means less of each premium dollar is left for administration and profit, which is why a rise of even one or two points moves a managed care company's stock. Under the Affordable Care Act it must be at least 80 percent for individual and small group plans and 85 percent for large group plans.
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