India's Supreme Court scrutinizes hospital markups on medicines and devices
India's Supreme Court is taking a closer look at hospitals for charging big markups on medicines and medical devices.
The justices are questioning why strict price controls only cover certain cancer drugs, hinting that more rules might be coming.
If regulations expand, both hospitals and pharmaceutical companies could feel the pinch.
Markup reduction may lower hospital revenue
Pharmacy sales make up about one-quarter of hospital revenue, so lowering allowed markups from 50% to 30% could translate into a revenue impact of around 4% to 5%, with a corresponding effect on EBITDA, according to Kunal Dhamesha, Pharma and Healthcare Analyst at Macquarie Capital.
To balance things out, hospitals might raise prices for people paying out of pocket, though changes could be more difficult for patients covered by insurance, where negotiated rates limit flexibility.
India's next Supreme Court hearing on October 27 should give more clarity on what is next for drug pricing in India.