In the stock market, a constant refrain over the years has been that health care is a "defensive" sector because it resists recession. Whatever ails the economy, people still get sick and need medical care.

With the U.S. economy experiencing its biggest pullback in nearly 60 years, that notion is being put to the test. The result? More than a year into a nasty recession, health-care profits have barely budged. In the current scheme of things, that's a pretty good performance.

According to Thomson Reuters (TRI), analysts expect health-care earnings to fall 2% in the second quarter, far less than any other sector in the broad Standard & Poor's 500-stock index. By contrast, profits for the entire S&P 500 are predicted to drop 34%.

But will the sector's defensive position hold? On June 19, another 850-page plan was floated to reform the health-care sector -- this time by a U.S. House of Representatives working group.

And on June 22, President Barack Obama announced a deal by which pharmaceutical companies agreed to spend $80 billion on lowering health-care costs over the next 10 years.

Walgreen Disappointed Investors The deals, proposals, and counterproposals -- it seems another is unveiled each week -- could create major and unpredictable shifts in the way health care is paid for in the U.S. Adding to the uncertainty is the bad economy. Despite health care's reputation as a defensive sector, many companies are unquestionably feeling the effects of the economic slowdown.

All this was demonstrated on June 22, when the quarterly results from pharmacy giant Walgreen (WAG) showed the dizzying complexity of the current environment. Walgreen disappointed investors with lower-than-expected earnings. Earnings per share were 53% last quarter, 3% below Wall Street estimates and 8.6% lower than a year ago. Higher costs ate into profit margins at Walgreen.

Like some other health-care companies, certain parts of the chain's business seemed untouched by the recession. Walgreen's pharmacies filled 8.3% more prescriptions than a year ago. But sales results were weighed down by slow consumer spending in the rest of the store. "We continue to see consumers save more, use less credit, and spend closer to payday," Walgreen Chief Executive Gregory Wasson told analysts on June 22.

Excluding prescriptions, same-store sales were up just 0.9%, compared to a 4.6% increase a year ago. Same-store prescription sales growth actually accelerated, from 2.7% a year ago to 3.8% last quarter.

Walgreen execs say they want to widen profit margins by launching a range of initiatives.