Hospital stocks fall, drug makers recover after initial losses; check out latest news in healthcare space

Pharmaceutical and other healthcare-related companies remained in focus in a volatile session on Dalal Street on Thursday. Drug pricing regulator NPPA fixed the retail prices of 100 medicines, including medicines used in the treatment of cholesterol, diabetes, pain, fever, infection and excessive bleeding, and certain calcium and vitamin D3 supplements. Stocks of a bunch of hospital operators remained under pressure after the Supreme Court said that the government's failure to standardise the charges for such services will lead to the enforcement of Central Government Health Scheme (CGHS) rates. 

While stocks such as Sun Pharma, Lupin, Cipla, Alkem Labs, Torrent Pharma and Cadila Healthcare closed 0.2-2.8 per cent higher, Divi's and Sanofi India declined 0.8 per cent and 2.6 per cent respectively while Dr Reddy's and Aurobindo Pharma remained largely unchanged. Among hospital stocks, Max Healthcare, Fortis Healthcare, NH, Global Health (Medanta), Apollo Hospital, Jupiter Life Line Hospitals, Kovai Medical Center & Hospital, and Yatharth Hospital & Trauma Care Services fell between 1.6 per cent and 6.8 per cent. 

The NPPA list included certain medicines manufactured by pharmaceutical companies such as Sun Pharma, Alkem Labs, Torrent Pharma, Cipla, Lupin and Mankind. The regulator's move was set to lower the prices of the 100 medicines, including 69 new formulations, according to the order dated February 28. 

"The manufacturer may add Goods and Services Tax only if they have paid actually or it is payable to the Government on the retail price," the NPPA said.  

The revised prices would be printed on the new batches of packing of the impacted drugs. Additionally, drug makers will be required to report the new prices to their respective dealer networks.

ALSO READ: Regulator NPPA fixes rates of 100 drugs; diabetes, cholesterol, fever, infection drugs on the list

The National Pharmaceutical Pricing Authority reviews and fixes the retail prices of essential drugs and formulations from time to time to ensure the optimum availability of medicines in the country at reasonable prices. 

Zydus Life, Alkem, Torrent Pharma, Sun Pharma, Alembic Pharma, Lupin, JB Chemicals and Mankind have good exposure to cardiac and anti-diabetic segments, Deepak Jasani, Head of Retail Research at HDFC Securities, told Zeebiz.com. 

"While these companies will get impacted to some extent due to the price reduction, we do not see a very large impact on their stock prices for long," he said. 

On Tuesday, the Supreme Court ordered the central government to standardise hospital treatment charges. Coming down heavily on discrepancies in the prices of healthcare services between government and private medical facilities, the top court criticised the government for failure to enforce the 14-year-old Clinical Establishment (Central Government) Rules.

The apex court said the Centre cannot deprive the people of the country of the basic right to healthcare services, warning that failure to standardise the charges would lead to the enforcement of Central Government Health Scheme (CGHS) rates. 

Stocks such as Medanta, Apollo Hospitals and Jupiter Life have had a strong run-up in the past fortnight, according to Jasani.
 
"The players with extremely high average revenue per occupied bed (ARPOB) may get impacted, such as Apollo, Medanta, Fortis and Max Healthcare. The hospitals with median ARPOBs like Kovai Medi, Yathartha and NH will have less impact... It may be difficult to implement this measure practically as the standard of service in a CGHS hospital may not be the same as that in a large private hospital," Jasani added. 

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