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Diagnostics services constitute one of the most critical components of medical care. Around 70 percent of treatment decisions in India are based on test results. Diagnostics may not be perfect for curing the disease, but they can be helpful to a large extent.
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Creating a Value Chain in Diagnostics With more and more Indians becoming part of the middle class there is rise in health consciousness in the society, and this in turn is leading to an exponential growth in the segment of diagnostic laboratories By Dhirendra Pratap Singh, dhirendra@elets.in
T
he laboratory plays a central role in healthcare. By one estimate, 70 percent of all medical decisions are based on laboratory results. And now all the laboratories strive to use latest technology. However, technology cannot be an end in itself; it is only the means to an end. Optimising performance means that workflow and technology are integrated to yield an operation that will meet all the clinical needs and financial goals of the organisation. The International Diabetes Federation estimates that the number of diabetic patients in India has more than doubled from 19 million in 1995 to over 41 million. Cardiovascular diseases (CVD), cancer and stroke account for 53 percent of all deaths and 44 percent of disability-adjusted life years. Thus, the Indian population is graduating from cheaper to treat “infectious diseases” to the more complex and expensive “Lifestyle diseases” which require greater diagnostic and therapy interventions. Lifestyle diseases are set to assume a greater share of the healthcare market. Step back in time and pose a contrast: life expectancy has shot up in India, from 23 at the turn of the 20th century to 65 years, while death rates have come down—from 25 per thousand to eight. The truth is that we used to die of dreaded infections in circa 1900. Around 70 percent of treatment decisions in the country are based on test results. Diagnostics may not be perfect for curing the disease, but they can be helpful to a large extent. Diagnostics services constitute one of the most critical components of medical care. The Indian diagnostic market is worth US$ 2 billion, and constitutes four percent of the overall healthcare delivery market. It is expected to grow at a CAGR of 21.2 percent, which is supported by a historical five year CAGR of 20 percent. The industry is highly competitive and price-driven with kickbacks and business referral payments in the absence of a regulatory body. Medical Lab (Pathology)
makes up 60 percent of the diagnostics market, whereas radiology and imaging constitute 40 percent of the market. Diagnostics is widely classified into In-vitro business and Invivo business; they are equal in size in terms of turnovers and both are growing at a 20 percent year on year. Consolidation is sensed in in-vitro segment, where 90 percent business is still with unorganised laboratories. Out of the 60,000 laboratories, where testing is done, only 200 are accredited. Only 1000 of them are worth calling laboratories. By the year 2020, at least 60 percent of in-vitro business is expected to become organised. As on date only 10 percent is organised and though it has taken 40 years to move to 10 percent, this is likely to grow to 50 percent in just next 10 years. Growing awareness on quality and brand puts unorganised laboratory at check and thus allowing the organised sector to move faster. Though the industry is growing 20 percent per year, the organized players are moving at 30 percent and Thyrocare is moving at 40 percent which obviously says market share of brands are growing faster.
Major Players An estimated 90 percent of such centres belong to unorganised sector. The organised sector is largely dominated by Dr Lal Path Labs, Metropolis, SRL Religare and Thyrocare. Major branded players in the Indian diagnostics market include names like Super Religare Laboratories, Dr Lal Pathlabs, Quest Diagnostics, Thyrocare and Metropolis. Super Religare Laboratories is servicing nearly 1550 hospitals/path labs along with its subsidiary Piramal Diagnostic Services Private Limited. They offer a comprehensive range of over 3,300 diagnostic tests, from the routine to the highly specialised tests. Dr Lal Pathlabs has 65 laboratories at present in India and it is looking to add another 35 this year. The company has decidFEBRUARY / 2012 www.ehealthonline.org
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ed to invest Rs 150 crore this year on acquisitions in India and abroad. The company is also looking to acquire assets in Middle East, Bangladesh, Sri Lanka and other South Asian nations. Quest Diagnostics has operations in the US, India, UK, Brazil, Puerto Rico, Mexico and Ireland, it is a Fortune 500 company. In India, it has set up facility in Gurgaon, Haryana. It has recently launched a wide array of testing for diagnosing and monitoring blood cancer in India. Thyrocare is among the top laboratory brands in India. It is growing at 40 percent annually. Another major player Metropolis has created an Indian Association of Pathology Labs, under the umbrella structure of CII (Confederation of Indian Industry), in view of representing the industry in front of the government. The company has been into the process of promoting three more tests viz. He4 (Ovarian Marker – Gynaecological), Hair DX (Genetic hair loss – Dermatological), DNA paternity test, for the Indian citizens.
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Accreditation and Regulations There are a lot of hidden costs in getting accredited as you have to pick up the tab of lots of global first class travels of auditors. Moreover, getting accredited is not particularly helpful as the common man, or even the fraternity of doctors, is not tuned towards the importance of accreditation. Any laboratory gets even government business and that makes accreditation “unattractive for many”. It is just 200 versus 60,000 and it would take another 10 years to see 10,000 versus 60,000. The Indian diagnostic industry needs regulation. There are no set criteria in terms of infrastructure, technology and qualification for setting up a diagnostic laboratory. The diagnostic sector under the Indian regulatory framework has low entry barrier with the only requirement being registration under the Shop and Establishment Act. The National Accreditation Board for Testing and Calibration Laboratories (NABL) is the sole accreditation body with the criteria assuring accuracy, reliability and conformity of the tests results.
The nature of competition in the diagnostic industry would undergo significant change. This is because the National Clinical Establishment Act, 2010 would make registration and quality compliance mandatory for laboratories and diagnostic centres. While at present accreditation of laboratories is not necessary in India, it can still become a mandatory law in times to come. This can potentially check the growth of small local level players, while the large players such as Dr Lal Path Labs, Super Religare Laboratories, Metropolis and Quest Diagnostics will be able to expand faster. This is in contrast to the present situation where unorganised sector contributes to major share of the industry. Absence of strict regulatory environment had led to mushrooming of large number of small sized diagnostic centres providing limited services. ISO, NABL, CAP (College of American Pathologists) accreditation can help develop structured framework for quality control and assures compliance to stringent national and international quality re-
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“Information Technology has Taken a Giant Leap in the IVD Industry” The diagnostic market in India is undergoing sea change. Powered by technology, which is dominated by Corporates and driven by new-age consumers, the diagnostic laboratory market in India has taken a giant leap forward. Large giants from all over the world are finding the Indian market to be very attractive, and they have set up their operations in India e.g. Quest Diagnostics. ICT bridges the gaps by automating entire process of testing from on-line patient booking to the registration of the sample and then finally getting the report digitally signed-in after the analysis of the sample. Going forth, ICT will play an important role in data mining of information in pathology and diagnostic industry. Lab automation has also taken on a new level of importance in the ability to actually get instruments interfaced to various laboratory information systems (LIS). Information technology has taken a giant leap in the IVD industry, thereby reducing the dependence on a technically qualified individual to be present at all times during the analytical procedure without compromising on established levels of care. Due to increasing consolidation in the in-vitro diagnostics market, Indian market dynamics are expected to change the way it changed in USA, where 20 years back, there were at least 30,000 labs, and now, 4-5 major chains of organised players control 30 percent of the total market. Clinical Labs will undergo consolidation in future, thereby moving from unorganised to organised (20 percent organised market by 2020). Also, Insurance companies prefer tie ups with labs that have quality control, uniform systems of billing and services. This will further fuel the growth of organised sector within the clinical lab segment. Ageing population and lifestyle related disorders would be the future growth drivers for this market along with medical insurance. The sector’s growth will be driven by the country’s growing middle-class, which can afford quality healthcare Diagnostic industry is largely driven by Innovations. Innovations which are critical in this segment are seen at following two levels: Product innovations: Under this category, new tests are being offered. Molecular diagnostics is the most valuable one. The testing will play a greater role in predictive diagnosis and will be an enabler for personalised medicine. Also, several new instruments, which are convenient to use and are compatible with other electronic devices like mobile phones, have been the latest offerings in this area. Service-level innovations: This includes value-added services like online services, collection of samples and home delivery of reports.
Murali Rao Associate Vice President- Healthcare, Technopak FEBRUARY / 2012 www.ehealthonline.org
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Labwatch
The diagnostics industry is highly fragmented with the largest players accounting for less than 15 percent of the total diagnostics market. Out of the 60,000 laboratories in India, only 200 are accredited and only 1000 of them are worth calling as laboratories. Unorganised laboratories are growing at the rate of 10 – 15 percent, while the organised corporate chains having less than 10 percent share of the total market are growing in a much faster rate at 25 – 30 percent, annually. By the year 2020, at least 60 percent of in-vitro business will become organised since, though slow, things are moving in right direction. Life expectancy has shot up in India, from 23 at the turn of the 20th century to 65 years, while death rates have come down—from 25 per thousand to eight. As of now only 10 percent is organised. Even though it has taken 40 years to move to 10 percent, this is likely to grow to 50 percent in just next 10 years. The Indian healthcare market is growing on an unprecedented high rate of 16 percent year on year. From Rs 1, 02,600 crore in 2005, it now clocks Rs 2, 00,000 crore and is projected to reach Rs 3, 00,000 crore by 2012. Source: Indian Diagnostic Industry and Market Report 2011
quirements all of which are imperative in a vital service sector like healthcare. The fast growing diagnostic sector opens several avenues for partnership between the Indian and International Diagnostic companies. There is huge potential in the Clinical Research and Trials market by combining the unique strengths of Indian and US companies, US companies are the leader in Pharmaceuticals and Biologics Research and Development. Indian companies can leverage their extensive expertise in Life sciences, the large number of CAP accredited labs in India and the huge patient base, to collaborate with US companies in organising large scale and complex clinical trials at low costs. There is good potential to develop training and accreditation programmes for the Indian market. There is a need to design cheap, high quality equipment for Indian markets and device creative financing options and low cost, effective IT solutions for the Indian market.
Fragmented Industry Diagnostic laboratory industry, which is estimated to be about Rs 10,000 crore
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in India, is largely fragmented and unorganised. According to estimates, there are about 100,000 pathology laboratories in India of which only 200 should be accredited. But ten years from now we see this industry consolidating and the health insurance industry will drive the growth. About 75 percent of our revenue comes from the Indian market, while the remaining 25 percent revenue comes from the international market. ICT bridges the gaps by automating entire process of testing, starting from the on-line patient booking to the registration of the sample and then finally getting the report digitally signed after analysis of the sample. Had the entire process been done manually, the possibilities of human error would have been higher. In future, ICT will play an important role in data mining in pathology and diagnostic industries, which are growing leaps and bounds. Diagnostics is an important part of healthcare and thus proper regulations needs to be in place, be it terms of regulations for opening a laboratory or mandatory accreditations. Some private companies, especially those that are en-
gaged in the health business are striving to increase the health awareness among the common man, not only in metro cities but in the Tier-II, Tier-III and smaller towns. In recent years, the workload on laboratory personnel has increased two to two-and-a-half times. An increase in the capacity and directions of laboratory investigations should be reflected in the quality of the work, or in the accuracy and reliability of the acquired data. But this is possible only when laboratories are equipped with modern technology, permitting a sharp rise in production and in the reliability of investigation results. Delivering the right data in a timely and cost effective manner while improving the sensitivity and specificity of the test is the need of the hour and the industry needs to gear up for single workstations that can carry multiple workloads. Experience has confirmed that full automation is a very gradual step towards efficiency in laboratory work and lab automation still continues to evolve. The drive or thrust for smaller, faster, and more-accessible devices is increasing. Emerging markets have different needs with respect to the test menus, technologies used and operating procedures. Thus, made-to-order solutions need to be developed for these markets. To survive and succeed in these challenging conditions, it is imperative for laboratories to look for ways to adapt and implement new strategies that can help them in saving costs. In today’s competitive environment, revenues per test are seeing a continuous downtrend. So the testing centres have to increase their productivity in order to survive. The paradigm shift towards improved quality, error-free services, and the need to ensure patients’ satisfaction has prompted laboratories to adopt novel technologies such as automation and point-of-care systems. Advances in nanotechnology and genomics have enhanced the role of diagnostics in the healthcare market, thereby facilitating the shift towards personalised medicine.