Money is flooding into exchange-traded funds focused on health care at the fastest rate in at least six years, driven by booming biotechnology and pharmaceutical sectors bringing new products to market.

In 2014, 51 percent of money flowing into U.S. sector-focused ETFs, or $4.06 billion through Feb. 28, was for health-care funds, according to data compiled by Bloomberg. That’s more than two-thirds of the total deposits the funds attracted in all of 2013, and a greater share of total ETF contributions than any time since at least 2008.

“People thought drug development was dead and all there was a patent cliff,” Doug Foreman, chief investment officer at Kayne Anderson Rudnick Investment Management in Los Angeles whose firm oversees about $9 billion, said referring to the loss of exclusivity for top-selling brand-name medicines. “There isn’t a day that goes by that some company doesn’t report positive results from a trial and the stock is up 100 percent.”

Exchange-traded funds are securities that track an index or basket of stocks or bonds in a given market or industry sector. They can be easily traded and come with low costs. Inflows to U.S. ETFs more than tripled to $183 billion last year from 2004, according to data compiled by Bloomberg.

This year also is the health-care sector’s highest share of ETF inflows since President Barack Obama took office and debate began in 2009 over the Patient Protection and Affordable Care Act, Obama’s signature health-care overhaul. After the law was signed in 2010, health-care ETFs saw $944.9 million leave, and health was the worst performing of 12 ETF sectors.

Obamacare Effect

Concern that the law known as Obamacare would damage the sector—which helped drive down health stocks in 2010—is largely over, said Les Funtleyder, a longtime heath-sector investor and analyst who is a consulting partner at Bluecloud Healthcare. The firm doesn’t have any health-care ETF investments.

“The ACA has kind of come and gone,” Funtleyder said. “It’s been implemented and nothing bad has happened to the companies by and large.”

The biggest health-care ETFs are dominated by pharmaceutical and biotechnology drug stocks, which are enjoying a boom. Of the three funds with the biggest inflows this year, nine of the top 10 holdings in each fund are drug and biotech companies, according to data compiled by Bloomberg.

Shares Gain

The Standard & Poor’s 500 Biotechnology Index gained 74 percent last year compared with a 30 percent increase in the entire S&P 500 Index. Pharmaceuticals and biotechnology companies jumped 9.3 percent this year as a group, beating all other 23 industries in the S&P. Institutional investors who don’t specialize are using ETFs to get in on that rise, according to Ravi Mehrotra, a New York-based analyst at Credit Suisse Group AG.

“The central key reason for the biotech sector’s stellar performance since 2011 has been generalist inflows,” Mehrotra said in a Feb. 27 note to clients.

The funds offer an easy way into drug and biotechnology stocks. “If you’re an institutional investor, and you’re not a health-care specialist, and the sector is outperforming, the fastest way to get to an equal-weight or over-weight exposure is through ETFs,” Funtleyder said.

Biotechnology companies are bringing new medicines to market, while pharmaceutical companies have managed to move past the loss of top drugs from patent expirations.

Gilead’s Rise

Gilead Sciences Inc., a Foster City, Calif.-based biotechnology company that is the world’s biggest maker of AIDS medicines, last year gained U.S. approval of a liver disease drug that may become one of the biggest sellers in history. The company more than doubled in value in 2013.

The Nasdaq Biotechnology Index has gained 18 percent this year as InterMune Inc. more than doubled to lead the advance. The shares of the Brisbane, Calif.-based company soared 171 percent on Feb. 25 after its drug pirfenidone for a fatal lung disease met goals of a study expected to support U.S. approval.

“In an environment where economic growth is relatively scarce, people are willing to pay a higher price for that growth,” James Abate, who oversees about $1 billion as chief investment officer at Centre Asset Management in New York, which owns shares of Gilead but doesn’t have investments in any health-care ETFs. “And health-care companies, by nature of their lack of sensitivity to economic ups and downs, can continue to deliver.”

Pfizer Inc., the world’s biggest drugmaker, has maintained earnings excluding certain items at $2.23 a share in 2010 to $2.22 last year, even as sales fell 23 percent over that period. It has done so by buying back shares and introducing two new potential blockbuster drugs.

“The Pfizers, Mercks and Lillys of the world, those have been doubted for years,” said Tony Scherrer, director of research at Smead Capital Management Inc., referring Merck & Co. and Eli Lilly & Co. “The patent cliff issues are real, but the big pharmas are managing through that really well and they have pipelines that look better than people were thinking,” he said. The fund manages $861 million though it doesn’t have health-care ETF investments.