Indian healthcare stocks eroded 248 billion rupees ($2.6 billion) in market value on concerns that high-margin pharmacy revenue may come under threat after the top court questioned steep markups on lifesaving cancer drugs.
All but one of 17 members of the BSE Hospitals Index closed lower on Wednesday, with the gauge falling 5%. Top hospital chain Apollo Hospitals Enterprise Ltd. slumped 5.7%, while Fortis Healthcare Ltd. dropped 6.3% and Max Healthcare Institute Ltd. fell 5.3% in Mumbai.
India’s Supreme Court asked the federal government to probe allegations that hospitals make patients purchase medicines from their own or designated pharmacies, especially when the drugs carry a steep margin, the Press Trust of India reported. A markup of as much as 10 times on cancer drugs is “carnage,” PTI quoted the court as saying, asking whether there should be a uniform 16% margin on all medicines.
The scrutiny could affect large private hospitals, where medicines and ancillary services form a key component of revenues. Any move to cap margins for drugs or roll out policies preventing compulsory in-house pharmacy purchases could hit these firms.
This looks like more of a sentiment impact as these are court proceedings, and nothing has been finalized, Deepika Murarka, analyst at Choice Equity Broking Pvt., told Bloomberg News. Any price limit could impact high-margin pharmacy revenues of a few large players, including Apollo and Max, she said.
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