On Tuesday, a bench of justice Vikram Nath and justice Sandeep Mehta noted that corporate hospitals compel admitted patients to purchase medicines exclusively from their in-house pharmacies at inflated retail prices, while patients who bring medicines from outside are left high and dry with hospitals refusing to assure treatment.
The hearing comes as a continuation of proceedings from last week, where the top court had flagged a ten-fold price difference in a cancer drug, where the price to retailer (PTR) was ₹2,700, but the maximum retail price (MRP) was ₹27,000. At the time, the Court had termed the uncapped markup an ‘absolute rampage and carnage’ and ‘broad daylight dacoity’.
Hospital stocks fall in morning trade
The selling was broad-based among the listed hospital companies in the market data provided for Wednesday, at around 10:20am.
Max Healthcare fell 5.59% to ₹927.20, while Apollo Hospitals declined 5.55% to ₹8,178.50. Fortis Healthcare dropped 4.81% to ₹782.50 and Manipal Health declined 4.44% to ₹714.55.
Aster DM Healthcare was down 3.82% at ₹705.95, while Krishna Institute of Medical Sciences (KIMS) fell 3% to ₹746.80. Global Health, which operates the Medanta hospital network, declined 2.77% to ₹1,375.90, and Narayana Hrudayalaya fell 2.69% to ₹1,741.70.
The eight companies together had a market capitalisation of about ₹5.26 lakh crore.
Corporate Hospital Pharmacies Under Scrutiny
Another major issue before the apex court was the practice of hospitals requiring patients to purchase medicines through their own chemists or specified pharmacies.
The bench questioned why patients should be restricted to a particular pharmacy when the same medicine might be available outside the hospital at a substantially lower price.
Justice Mehta gave the example of a pharmacist offering the cancer drug to a needy patient for ₹2,700. He noted that the patient could then question whether the cheaper medicine was genuine.
The issue, therefore, involved not only the price of medicines but also the choices available to patients and the relationship between hospitals, pharmacies and medicine suppliers.
The court also highlighted the consequences for patients whose treatment is paid for under government schemes. Where the government reimburses medical expenses, the bench noted, the taxpayer ultimately bears the cost.
Court Questions Pricing of Commonly Used Medicines
The bench also raised questions about pricing differences in commonly used medicines. Justice Mehta referred to a simple statin costing around ₹40 and a version combined with aspirin costing around ₹70, questioning how such differences arise.
The Court connected the issue to the wider question of the role and practices of corporate hospitals.
“Corporate hospitals are industries. It is not a service at all. Why should the common man suffer all this?” the bench asked.
The judges also indicated that the matter extended beyond medicine pricing to the ethical practices of medical practitioners.
“We will examine this issue thoroughly. This affects a large section of the society,” the bench said.
Govt Seeks 2 Weeks to Reply
Solicitor General Mehta told the apex court that the Union government would need to discuss the matter with officials. “Let me have a meeting with the officials. Give me two weeks,” he said.
The solicitor general also submitted that a balance would have to be found. He said he is not suggesting that the petitioners were wrong, but that an approach balancing different interests would have to be developed.
He further submitted that pharmaceutical companies were not necessarily the parties benefiting from the markups. The court was told that private hospitals appeared to be gaining from the higher prices.
The bench subsequently posted the matter for further hearing on 12 October 2026 and asked the Centre to respond to the issues raised.
Petitions Examine Drug-price Regulation
The hearing involved two petitions concerning regulation of medicine prices, generic prescriptions and controls on medical devices under the Drugs (Prices Control) Order, 2013.
One petition, filed by Kishan Chand Jain, highlights the distinction between scheduled and non-scheduled medicines.
Scheduled medicines are subject to ceiling prices. According to the petition's estimate, non-scheduled formulations account for around 80% or more of the market by number and value. These medicines have greater freedom in setting MRPs, although annual price increases of up to 10% are subject to the applicable framework described in the petition.
The petition seeks measures to make drug formulations more cost-effective, stricter enforcement of price controls under the DPCO, action against violations in the drug supply chain and measures against what it describes as disproportionate profits by retailers through alleged unfair trade practices.
The other petition seeks disciplinary action against medical practitioners who do not prescribe generic medicines.
What Happens Next
The Supreme Court has asked the Union government to examine concerns surrounding medicine markups, hospital pharmacy practices and the possible application of more uniform pricing criteria.
For listed hospital companies, the case could create a new source of regulatory uncertainty. If the government eventually introduces tighter controls on medicine margins, restricts mandatory purchases through hospital pharmacies or imposes greater transparency on drug pricing, hospitals could face pressure on one of their existing revenue and margin streams.
That, in turn, could place an upper limit on the valuation and earnings expectations for hospital-sector stocks, particularly if investors begin to assume that medicine-related margins will remain structurally lower than in the past. The impact would depend on the final regulatory framework, the proportion of revenue and profit linked to pharmacy operations, and the extent to which hospitals are able to offset any pressure through higher occupancy, room revenue, procedures or other healthcare services.
The immediate concern for investors is therefore not necessarily a sudden change in hospital earnings, but the possibility of margin compression over time. A lower-margin environment could make investors more cautious about the sector's future cash flows and returns on capital.
The regulatory uncertainty could also influence investment decisions. Private-equity firms and other institutional investors may become more selective when evaluating hospital assets if future pharmacy margins and pricing practices face greater regulatory scrutiny. If expected returns decline, this could potentially reduce the amount of fresh capital flowing into hospital expansion projects.
A prolonged margin squeeze could also affect capital expenditure (capex). Hospital chains planning new facilities, bed additions or expansion into new markets could reassess the pace and scale of investment if projected returns on new capacity fall. However, the extent of any capex impact would depend on the eventual rules and how hospitals adapt their business models.
For the stock market, the key variables to watch will therefore be the government's response, the direction of any proposed pricing regulations, the Supreme Court's observations at the 12th October hearing, and subsequent disclosures from hospital companies regarding pharmacy margins, profitability and expansion plans.
The current share-price decline should not, by itself, be interpreted as evidence that these longer-term effects will materialise. The potential for margin pressure, lower investment appetite and slower capex remains scenario-based until the regulatory framework becomes clearer.
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And further more, why the government has failed to provide a basic healthcare facilities to its citizens. Why would some one go to a private hospital if the same level of services are available in a government hospital. After all, a private enterprise has to be allowed to make a reasonable margin on their investment and to sustain future investment requirement also. I think, a simple answer lies in the thesis that let there be a sufficiently large number of such private hospitals which will increase bed capacity and competition and therefore, automatically force these private hospitals to charge only a reasonable charge.
However, at the same time, the wrong practice of retaining patients for longer periods than required and other such practices has to be thoroughly and strongly curbed.