Hospital stocks Apollo, Max, Fortis, and KIMS fell up to 6% on Wednesday, September 30. The Supreme Court questioned high drug markups in hospitals during a Public Interest Litigation hearing. Investors got worried after the court flagged how drugs costing ₹2,700 are billed at ₹27,000 to patients in many hospitals.
Explained - Why Hospital stocks Apollo, Max, Fortis, KIMS are down up to 6% on Wednesday
A Public Interest Litigation was being heard by the Supreme Court on price fixation of drugs, mandates for generics. The government was also questioned by the Apex Court as to why there is no 16% mark up across all drugs and devices.
Shares of Hospital Stocks Apollo Hospitals Ltd., Fortis Healthcare Ltd., Max Healthcare Ltd., Krishna Institute of Medical Sciences Ltd., Narayana Health Ltd., Global Health Ltd. among others are all trading with losses between 5% to 6% on Wednesday, September 30.
Four out of the top five losers on the Nifty 500 index are hospital stocks. Both Apollo, KIMS and Fortis are trading with losses of 5.5% each, while Max Health shares fell as much as 6% before seeing a small recovery to now trade 4.5% lower.
Why are Hospital Stocks Falling?
On Tuesday, the Supreme Court flagged how drugs costing ₹2,700 to a retailer are being billed at ₹27,000 to patients in hospitals, going on to question where the 10x markup on prices goes.
The Supreme Court also questioned the pricing differential between essential and non-essential drugs, and expressed concern that the drugs and devices under "essential" are out of the scope of price control orders.
A Public Interest Litigation was being heard by the Supreme Court on price fixation of drugs, mandates for generics. The government was also questioned by the Apex Court as to why there is no 16% mark up across all drugs and devices.
In their petitions, the petitioners have claimed that the price control orders are not applicable on patented drugs and have gone on to claim that 82% drugs are outside the pricing orders, with prices of only 1,000 drugs being controlled by the NPPA.
The court also expressed concerns on hospitals forcing patients to buy drugs only from in-house pharmacies.
It must be noted that no order has been passed by the court, with the next hearing date scheduled for October 12.
Shares of Krishna Institute of Medical Sciences are now at the lows of the day, trading 5.7% lower at ₹726.25. The stock has now trimmed its year-to-date gains to 18%.
Shares of Apollo Hospitals are trading 5.5% lower at ₹8,185. The stock has trimmed its year-to-date advance to 15%.
Max Healthcare shares are trading 5.2% lower and are among the top Nifty 50 losers, along with Apollo Hospitals. The stock is down 11% so far this year.
Fortis Healthcare shares are also trading 5.4% lower at ₹778. The stock is down 14% so far this year.