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Hospital stocks tumble as the Supreme Court questions drug price mark-up

ICICIdirect Research 01 Oct 2026 DISCLAIMER

In a recent court hearing regarding the alleged price disparity, Hon. Supreme court has raised concerns over hospitals charging steep mark-ups on essential medicines to the patients. As a result, majority of the hospital stocks tumbled 4-6% on Wednesday as investors feared across the board pricing scrutiny at every stage.   
The specific issue highlighted that drug manufacturers supplied the oncology injection for ₹2700, yet the hospital pharmacy set the MRP at ₹27000.
Other points made by the court indicated that patients should not be forced to buy drugs exclusively from in-house pharmacies and a blanket 16% retail margins should be imposed on the pharma drugs regardless of their essential medicine’s status.
Our interaction with hospital management suggests that this mark-up in this particular cancer drug could be possible due to the nature of this nuclear cancer drug that is used for cancer diagnosis.
Some industry experts suggest that patients buying drugs from in-house pharmacies help keep the quality of drugs in-check because the prevalence of spurious drugs in the market may lead to adverse events.
They also argued that at the EBITDA level, an average large and matured hospital fetches 20-25% EBITDA margins. Applying caps at every stage may lead to EBITDA drag and may hamper further investments in new and existing hospitals.
We believe the fear is slightly blown out of proportion as it will be difficult to target each and every charge point stage in hospital bills. Even in the worst case, we believe the negative impact could be confined to just ~2-5% of EBITDA. In the past, these noise events have created good entry points for hospital stocks, and we expect similar opportunity at the current level.
Our top picks in the sector – Artemis Medicare – TP ₹410; Aster DM - TP ₹895; Narayana Hrudayalaya - ₹ 2310

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