Hospital Stocks Drop 6% as Supreme Court Questions Medicine Mark-Ups

Shares of leading hospital chains experienced a notable decline on Wednesday, with Apollo Hospitals Enterprise, Fortis Healthcare, and Krishna Institute of Medical Sciences (KIMS) falling as much as 6 percent. The drop came in response to concerns raised by the Supreme Court regarding substantial mark-ups on medicines sold through corporate healthcare providers.

Apollo Hospitals saw its stock price decline by 5.95 percent, closing at Rs 8,184.50. Fortis Healthcare shares dropped 5.03 percent to Rs 777.80, while KIMS shares fell 5.70 percent to Rs 726.20. Another major player, Aster DM Healthcare, also witnessed a 4.26 percent fall to Rs 703.95. The broader healthcare sector indices reflected this pressure as well, with the Nifty Pharma index down 1.77 percent and the BSE Healthcare index falling 2.19 percent.

The Supreme Court’s scrutiny focused on the wide disparity between the prices hospitals pay for medicines and the maximum retail prices charged to patients. The court highlighted a specific example involving a cancer drug supplied to retailers at Rs 2,700 but sold with a maximum retail price (MRP) of Rs 27,000, marking a tenfold increase.

During the hearing, Justices Vikram Nath and Sandeep Mehta criticized the steep price difference, describing it as "carnage." They questioned the justification for such high pricing, calling attention to the burden this places on patients and government healthcare schemes.

The court suggested the possibility of implementing a uniform margin cap of 16 percent on medicine prices. Justice Mehta questioned why essential and non-essential medicines should be treated differently and recommended considering the same margin across all medicines to prevent excessive mark-ups.

Another issue raised was the requirement by some hospitals that patients purchase medicine exclusively from their in-house pharmacies, a practice the court questioned given the potential impact on affordability and access.

The bench remarked on the role of corporate hospitals, stating that they operate as industries rather than service providers. This perspective has drawn attention to the profit-driven nature of medicine pricing within such institutions and its consequences for common patients.

These discussions are part of ongoing petitions related to drug pricing, generic prescribing, and regulation of medical devices under the Drugs (Prices Control) Order, 2013. Solicitor General Tushar Mehta acknowledged the complexity of the issue and requested two weeks to provide a detailed response to the court.

Additionally, the Supreme Court raised concerns about price differences between generic medicines and combination drugs, further highlighting disparities in pharmaceutical pricing strategies within hospitals.

The healthcare sector in India, comprising public and private providers, plays a critical role in delivering medical services and pharmaceuticals. Corporate hospital chains have grown rapidly in recent years, expanding their reach and service offerings. However, the pricing of medicines in these institutions has occasionally come under scrutiny, particularly when patients face high out-of-pocket expenses.

The Supreme Court’s intervention signals increased regulatory attention towards ensuring fair pricing and protecting patient interests. If uniform margin regulations are adopted, corporate hospitals may need to adjust their medicine pricing policies to maintain transparency and affordability.

Investors closely monitor such legal developments as they can influence the profitability and market valuation of hospital companies. The recent stock declines reflect immediate market reactions amid uncertainty surrounding potential regulatory changes.

As the court continues to examine this matter, stakeholders from the healthcare industry, patient advocacy groups, and policymakers will likely engage in discussions about balancing corporate sustainability with affordable healthcare access.

Disclaimer: This article was written by Sakshi Kumari, who is not a SEBI-registered Research Analyst or Investment Adviser. Neither the author nor her relatives hold financial interests in the companies mentioned. Opinions expressed here do not reflect those of The Economic Times Digital. Readers should consider original research and conduct their own assessments before making investment decisions.