Nomura has maintained its 'Neutral' ratings on Apollo Hospitals and Fortis, estimating that the government's decision to cap trade margins on non-scheduled anti-cancer drugs at 30% could have a mid-to-high single-digit impact on the EBITDA of its covered hospitals.
"Since a substantial portion of oncology drugs are dispensed through hospital channels, we anticipate the direct impact will be most significant for hospitals, followed by wholesalers to a lesser extent, with retailers experiencing minimal effects," Nomura said in a note dated October 9.
The brokerage expects the impact to moderate over time as hospitals implement higher service pricing. "Large hospital chains may leverage their purchasing power to negotiate lower prices from pharmaceutical companies, thereby mitigating some impact, in our view."
On October 8, the government approved a 30% cap on trade margins for non-scheduled anti-cancer drugs, measured as a percentage of the maximum retail price (MRP). The government estimates that the measure will reduce medicine prices by up to 70% and generate approximately Rs 25 billion in annual patient savings.
The cap applies to branded and generic formulations, domestic and imported products, and patented and non-patented medicines, covering approximately 110 anti-cancer drugs, including 35 patented medicines.