Oncology drug price caps may pressure hospitals in the near term, says Bernstein

The government’s decision to cap trade margins on oncology drugs at 30% could put pressure on hospitals over the next few quarters, particularly those that sell cancer medicines through their in-house pharmacies.

Nandan Kulkarni, Director and India Healthcare Senior Research Analyst at Bernstein said, “Hospitals sector will certainly continue to bear the brunt of this capping for at least couple of quarters. Especially the companies who do oncology sales through their private pharmacies, given that’s where the hit is going to be maximum, but we expect that to be normalised over the next three to four quarters.”

However, he believes the move could improve patient access to newer treatments and support long-term growth for pharmaceutical companies, according to

Companies such as Zydus Lifesciences and Lupin, which have a presence in specialty oncology drugs, could benefit from higher volumes as more patients gain access to treatment.

Kulkarni said the impact on drug manufacturers is expected to be limited, with some temporary pressure possible as companies adjust their inventory. Over the medium to long term, better access to cancer treatments could help drive demand for specialty medicines in India.

Kulkarni believes India still has a long way to go before it can compete with global leaders in discovering new drugs. He said the country needs to strengthen its academic research, scientific publications and research institutions before original drug discovery can become a sizeable business opportunity.

Indian pharmaceutical companies also need to increase their investment in research and development (R&D) to build capabilities in this area. Kulkarni estimates that companies currently spend around 7–8% of their revenue on R&D and 4–5% on capital expenditure, which he believes is not enough to support a major shift towards original drug discovery.

He also highlighted the limited development of artificial intelligence (AI) capabilities in India as a challenge, given the growing role of AI in identifying and developing new medicines.

According to Kulkarni, India may need at least five to six years to build a stronger ecosystem for original drug discovery. Until then, the country is likely to remain behind markets such as China, the US and Switzerland in this field.

The GLP-1 drug market is another area that investors are closely tracking, particularly as patent expiries create opportunities for generic drugmakers. However, Kulkarni believes the market’s growth will not depend only on semaglutide, a molecule used in diabetes and weight-loss treatments.

He expects semaglutide brands and generics together to account for around 35–45% of India’s total GLP-1 market at best. The remaining opportunity is likely to come from new molecules, scientific advances and product launches.

This could favour companies that have a strong pipeline and the ability to develop differentiated treatments, rather than those focused mainly on manufacturing generic semaglutide.

“We like Sun Pharma from that play. We like Zydus, Lupin from that play, rather than purely focusing on how many vials of semaglutide can be made by a generic company for India,” Kulkarni said.

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Oncology drug price caps may pressure hospitals in the near term, says Bernstein