From The Economic Times · Veer Sharma · · 1m 30s
Hospital Stocks Rally After Cancer Drug Price Caps
Hospital stocks jump up to 5% as India caps cancer drug margins at 30%.
In brief
Hospital stocks jump up to 5% as India caps cancer drug margins at 30%. India's hospital stocks rose 4-5% after government capped cancer drug trade margins at 30%, potentially saving patients Rs 2,500 crore annually. Originally reported by The Economic Times.
Hospital Stocks Rally
Hospital stocks including Fortis Healthcare, Dr Agarwal’s, Manipal, Apollo Hospitals and Medanta gained up to 5% on Friday after the government decided to cap trade margins on non-scheduled anti-cancer drugs at 30%.
Price Cap Impact
The move could reduce cancer medicine prices by up to 70% and save patients an estimated Rs 2,500 crore annually.
Jefferies Stance
Jefferies says near-term margins could be impacted but recommends Buy as regulatory uncertainty eases for now.
Consumables Impact
Jefferies estimates consumables account for 12-15% of a patient's hospital bill but margins in this segment are relatively low.
Historical Context
Hospitals offset margin impacts through staggered procedure charges and cost rationalisation over 12-15 months.
Past Recovery
Apollo Hospitals restored EBITDA margins to previous levels within a few quarters after price caps on stents and implants in 2017.
Current Valuation
Hospital stocks trade at 21x-25x FY28E EV/EBITDA compared with 25x-35x a year ago.
Jefferies Picks
Jefferies recommends Fortis, Manipal, Apollo Hospitals, Max Healthcare and Medanta as preferred picks for sustainable EBITDA growth.
Patient Coverage
Margin caps likely affect cash-paying patients while insurance and public health schemes use pre-negotiated package rates.
At a glance
India's hospital stocks rose 4-5% after government capped cancer drug trade margins at 30%, potentially saving patients Rs 2,500 crore annually.
