Healthcare sector outlook stable: ICRA

June 10, 2019 0 By FM

India’s healthcare sector outlook remains stable despite regulatory headwinds, says ICRA, an Indian credit rating agency.

The hospital sector’s performance has been falling in the last two years due to several regulatory restrictions, including demonetisation, the cap on prices of stents and knee implants by the National Pharmaceutical Pricing Authority (NPPA), stiff regulatory action by certain states and the implementation of the Goods and Services Tax (GST).

In the latest order, issued on March 8, 2019, the NPPA put a cap of 30 per cent on the trade margin earned on 390 drugs that are primarily used for treatment of cancer. The price cap led to a reduction of up to 87 per cent in the prices of the anti-cancer drugs. The current order by NPPA adds on to the list of products already placed under price restrictions. Most of the cancer-related drugs are high-value medicines and are sold directly through the hospital chains, oncology being one of the highest-value-added specialty for hospitals due to the increasing incidence of cancer-related ailments. Nonetheless, several oncology drugs are still out of the purview of the price cap.

“The regulatory environment continues to be the overarching challenge for the hospital sector and the recent NPPA order reinforces this view. The wide-ranging regulatory restrictions from multiple authorities have suppressed the margins of the players,’’ said Shubham Jain, group head and vice president – corporate sector ratings, ICRA, in a statement.

However, hospitals’ decision on repricing of service/product component of packages and usage of different drugs is expected to correct the lopsided pharma component margins and partly negate the impact of the current NPPA order, he noted.