The Supreme Court’s recent ruling has intensified selling pressure on hospital stocks, with Apollo Hospitals, Fortis Healthcare and Max Healthcare trading lower on Thursday, October 1. The court highlighted steep mark‑ups on medicines sold by private hospitals, especially cancer drugs, citing a case where a drug costing retailers around ₹2,700 was sold at an MRP of nearly ₹27,000. It urged the government to examine the issue and consider a uniform 16% margin on medicines to curb excessive pricing and reduce patient and taxpayer burden. The matter is set for a further hearing on October 12.

The court also raised concerns that corporate hospitals often require patients to purchase medicines from in‑house pharmacies, potentially limiting access to cheaper alternatives outside the hospital. It questioned whether pharmaceutical companies or hospitals benefit most from high mark‑ups. The petitions seek stricter price controls under the Drugs (Prices Control) Order (DPCO) and action against alleged overpricing and non‑prescription of generic medicines. These developments have raised worries about pharmacy‑related revenues and profitability for hospital chains.

Analysts remain broadly constructive on Indian hospital stocks despite the correction triggered by regulatory concerns. BofA views the correction as potentially short‑lived, noting drugs and consumables account for 25‑30% of tertiary care bills and that regulated margins of 16‑20% apply to many pharmacy drugs. BofA reiterated a Buy rating on Apollo Hospitals and Fortis Healthcare while maintaining a Neutral rating on Max Healthcare. HSBC sees pricing control as a headline risk but remains uncertain about on‑ground changes.

HSBC highlighted that current discussions pertain to drug pricing in government channels only and will monitor further developments. It noted that Max Healthcare, Fortis Healthcare, Global Health (Medanta) and Narayana Health have 17‑21% revenue exposure to government schemes, while Aster and Apollo Hospitals have 9‑11% exposure. HSBC prefers Aster and Apollo Hospitals. Macquarie estimated that medicines, consumables and implants account for about 21% of private hospital revenues in FY26, with two‑thirds attributable to pharmaceuticals.

Macquarie’s sensitivity analysis suggests that changes to medicine pricing and margin structures could meaningfully impact sector profitability, with potential EBITDA implications ranging from high‑single digits to double digits. It assumes hospitals can offset 60% of the revenue impact through repricing of treatment packages and other service components. Jefferies estimates that consumables and oncology drug pricing account for 15‑20% of hospital revenue and calculates an EBITDA impact of 2‑5% under various price‑cap scenarios, assuming hospitals cannot pass on the impact.

Axis Capital noted pharmacy remains a high‑margin area for hospitals and is likely to remain exposed to regulatory scrutiny. It estimates hospitals generate around 15‑17% of inpatient revenue, or 12‑15% of total revenue, from medicines, with KIMS at 20‑22% pharmacy revenue contribution. The NIFTY Healthcare index fell 2.57% on September 30, trading 0.03% lower at 16,132.75 at 10:19 AM. Apollo Hospitals Enterprise was down 1.44% to ₹8,048, Fortis Healthcare 1.87% lower at ₹755.60, and Max Healthcare Institute about 1% at ₹920.80 on the NSE.