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Just started playing. It seems that when you take damge on one level you start of damaged in the next? Also there seems to be no-way of buying repears. The only way of fixing damge is with the heath drops which only seem to arrive once per level and don't give much health.

This all seems kinda harsh even for an old school game as your expected to complet the game basically by tking no damage at all.
This question / problem has been solved by DarrkPhoeniximage
You can buy energy at the shop between missions (shield energy is the equivalent of health in Raptor). Also, once you get enough money, you can buy Phase Shields which act as additional health (Phase Shield strength is displayed on the left side of the screen, and you can buy up to 5 Phase Shields).
If you're tight on money at the end of a level -- let's say you picked up JUST enough cash to get that upgrade you wanted -- you can stop firing and avoid the boss' fire for a while to slowly regenerate your health. It takes a while, though.