Deal-making activity in the rapidly growing health-care sector is expected to rebound in 2019, a law firm said in a report Monday, but heavier regulation and political uncertainty cloud the future of mergers and acquisitions.

Health care is an increasingly important part of the global economy as populations in a number of advanced economies such as Japan grow older, and rising incomes in some emerging ones, including China, mean people can afford better treatment.

Chicago-based international law firm Baker McKenzie, in a report issued with Oxford Economics, predicted that deals in the sector will increase to $331 billion in 2019 — or up 7 percent on-year. That marks a solid recovery from last year's drop of 5 percent. Their forecast does not include the latest deals involving Eli Lilly and Bristol-Myers Squibb.

On Monday, Indianapolis-based pharmaceutical giant Eli Lilly announced it was buying cancer drug developer Loxo Oncology for about $8 billion in cash. Just last week, Bristol-Myers Squibb said it would acquire cancer drug company Celgene in a cash deal valued at $74 billion.

Last year also saw a number of huge deals including Takeda Pharmaceutical of Japan's takeover of London-listed Irish drug company Shire in a deal valued at $59 billion.

Stocks in the sector enjoyed a banner year in 2018, bucking the broader turmoil that shook equity markets. The S&P 500 health-care sector rose 4 percent last year, compared to the broader S&P 500 index which lost more than 6 percent during the same period.

Driving the increased M&A activity is intense competition for new drugs, according to Jane Hobson, health-care M&A partner at Baker McKenzie.

"As companies compete to add drugs to their portfolios, we're seeing more early stage acquisitions and licensing, sometimes before proof of concept," Hobson was quoted as saying in the report.

The report predicted that deal-making activity is likely to be the most intense in the United States and Asia, saying consumer spending power in those economies will push companies to seek new technologies.