Diagnostics in India: Full-throttle growth expected in the near future

However, lack of entry barriers and absence of strong regulation in the diagnostics market has also led to an increase in number of unorganised, standalone players, which form a substantial part of this fragmented market. Such players have proven useful in catering to the diagnostic needs of tier II and tier III cities, where almost every area has local and generic diagnostic laboratory, particularly dealing in pathology services. Larger, organised chains are continuously scouting for acquisition of such regional chains to enhance their business and bring in quality services to smaller regions. 

A number of government initiatives have also propelled the overall growth of the healthcare sector in India. Under the National Health Assurance Mission, Prime Minister Narendra Modi's government would provide all citizens with free drugs and diagnostic treatment, as well as insurance cover to treat serious ailments. India has also become one of the leading destinations for medical tourism and high-end diagnostic services, with tremendous capital investment for advanced diagnostic facilities, thus catering to a greater proportion of population. This universal health plan that the government aims to offer, is expected to cost an estimated Rs 1.6 trillion ($ 23.72 billion) over the next four years. This has encouraged private players to increase their efforts and invest in a number of healthcare awareness initiatives too.

Rising penetration of private medical insurance plans has also been observed as one of the major driver for the diagnostic laboratories market. Financial constraint is considered to be the primary hurdle while seeking medical treatment, claimed 55 percent of the rural population and 60 percent of the urban population in India. As health insurance companies step in and increasingly cater to this need by providing medical cover to a person at nominal premium amounts, consumers have the freedom to seek the best healthcare services available. Unlike the past, today about 20 percent of the Indian population has been covered with health insurance benefits.

Healthcare IT and evolving technology has also benefited the pathology industry. Health tracking mobile applications and online services such as booking appointments online for preventive healthcare checkups, booking a path/lab test, obtaining reports online are further shaping this segment. India is also expected to show high growth rates in the next six years in molecular diagnostics market. The current diagnostic market is split between imaging and pathology with 30 percent and 70 percent respectively. Pathology testing being first line of diagnosis for majority of diseases is the major factor that resulted in it attaining a dominant position in the market. High differential costs in India allows for outsourcing of pathology and laboratory tests by foreign hospital chains.

Tier I cities have contributed a majority part of revenue share to the total revenue earned by the India’s private diagnostic laboratories market in FY’2016. Rise in pollution levels in tier I cities increased the chances of more severe diseases being spread across the masses, thereby resulting in more demand for diagnostic services and preventive care. Moreover, high awareness among the educated people living in these cities resulting in more number of preventive healthcare testing has added to the revenue of overall diagnostic laboratories market making the segment dominate the market. 

For any ambitious organisation aiming to become a success in this rapidly growing diagnostic laboratories market, the best move at the moment is to plan to invest in tier II and tier III cities of India. The companies should expand their network by collaborating with more health institutes and increase their collection centers in India resulting in widespread reach and more access for the masses. 

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Dr Sushil Shah is the founder & chairman of Metropolis Healthcare Ltd