Hospital stocks fell up to 6% on September 30 after the Supreme Court criticized high markups on cancer drugs. The bench said, "Corporate hospitals don't spare anyone." Justices Vikram Nath and Sandeep Mehta questioned hospitals forcing patients to buy medicines from in-house pharmacies, as many investors got worried about future profits.
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Hospital stocks fell up to 5% on September 30 after Supreme Court voiced its concern over a steep markup of ten times on cancer drugs by hospitals and batted for a uniform 16% margin on all medicines.
A bench of Justices Vikram Nath and Sandeep Mehta asked the Centre to look into the issue of hospitals mandating the purchase of medicines from their chemists and said it is the common man who suffers from this system.
"This is carnage. Plain and simple. The cancer drug is priced at an MRP of Rs 27,000 despite being supplied to retailers for Rs 2,700.
At 10:40 am on September 30, Apollo Hospitals, Yatharth Hospital, Max Healthcare shares were trading 4%-6% lower.
Fortis Healthcare, Krishna Institute Of Medical Sciences, Aster DM Quality Care were trading 5.2%, 3.8% and 4.2% lower, respectively.
Nifty Pharma index was trading 1% lower while BSE Healthcare index was trading 2% lower on September 30
"Corporate hospitals don't spare anyone. They won't allow even the dead body to be taken out. The pharma sector is not bothered," the bench told Solicitor General Tushar Mehta appearing for the Centre.
The bench was hearing petitions concerning regulation of medicine prices, generic prescriptions and controls on medical devices under the Drugs (Prices Control) Order (DPCO), 2013.
At the outset, Mehta said they need to find a way out and some balance has to be created.
Justice Mehta said, "Why this distinction? Essential or non-essential does not matter? Why not keep a 16% margin on MRP of everything?
"Think about what happens. Ultimately, the result is that the taxpayers suffer. In corporate hospitals, the MRP of an essential cancer drug was Rs 27,000 when the price to retailer (PTR) was Rs 2,700. Just see the difference."
The solicitor general said that he needed to discuss with the officials and agreed that the issue requires attention.
Fundamental view
"The Supreme Court observation proposing a uniform 16% retail markup cap above the Price to Retailer on medicines and its questioning of the practice of corporate hospitals requiring patients to buy from their in-house pharmacies threaten a high-margin revenue pool, compressing pharmacy contribution to ARPP and ARPOB across listed hospitals. Drugs, pharmacy and consumables typically run 20% to 35% of hospital revenue, though the retail-markup profit actually at risk is narrower. I estimate a consolidated EBITDA margin drag of roughly 50 to 150 bps for pharmacy-heavy integrated names, namely Apollo, Max, Aster DM, Medanta and Fortis, which carry pharmacy plus diagnostic arms where drug and lab revenue is meaningful.
"Apollo is most exposed given its large standalone retail pharmacy footprint. Impact stays under 50 bps for clinical-heavy chains like KIMS, Narayana, Rainbow, Jupiter and Shalby, though oncology-led HCG retains direct cancer-drug exposure. Aggregate sector value impact stays modest for now, this being advice pending the next hearing scheduled for October 12, 2026 rather than a binding order," said Nitant Darekar, Research Analyst at Bonanza.