Decoding the Innovations and Disruptions in India's Highly-competitive Diagnostics Landscape

For generations, the diagnostics industry in India was mainly driven by testing during illness. However, the scenario changed after the pandemic, when people realised the importance of safeguarding their overall well-being. As a result, preventive tests have increased since the pandemic sparked long-lasting changes in people’s attitude towards personal well-being. 

Industry Overview and Drivers

The Diagnostics industry in India is currently valued at $4 bn. The share of the organized sector is almost 25% in this segment (15% in labs and 10% in radiology).1 The main growth drivers are considered to be an increase in healthcare awareness, a rise in preventive check-ups, the growing prevalence of communicable and non-communicable diseases and expanding health insurance penetration. 

As the burden of cancer and other chronic, life-threatening ailments keeps increasing, early diagnosis and timely treatment are being recognised as the best way to save lives and ensure better healthcare outcomes. Given this backdrop, several new companies are entering the diagnostics segment. These include pharma firms, hospital chains, digital start-ups and corporate entities, all keen on picking up a share of the expanding diagnostics market. 

In this highly fragmented diagnostics landscape, Dr Lal PathLabs has been the industry frontrunner for decades. Beginning as a blood bank and pathology service provider in 1949, the company was incorporated in 1995. Both milestones mark Dr Lal PathLabs as the undisputed diagnostics leader, despite various challengers snapping at its heels. 

Considering the intensifying competition, Dr Lal PathLabs is aware that though its brand value sets the company apart, it must always stay one step ahead of competitors. It has been doing this through constant innovation, re-strategizing of pricing and improvements in its logistics model to curb operational costs. It is also expanding its geographical presence and portfolio of tests. Currently, the company has 277 labs across India offering a comprehensive portfolio of 5,000 pathology and radiology tests. 

Conversely, the new entrants are primarily present in the metro cities such as Delhi, Mumbai, Pune, Bengaluru, Chennai and Hyderabad. As a result, rural diagnostics has only 22% of the market share, highlighting the huge potential of untapped hinterland regions. Dr Lal PathLabs’ FY2022 Annual Report reveals that organised diagnostic chains hold barely 17% of the market share. 

Dr Lal PathLabs has introduced cost-effective offerings such as the Swasthfit plan. A bundled product in diverse packages, the plan contributed to 21% of its revenues in 2022. Also, we are confident that the diagnostics industry will grow as the industry transitions from the unorganised sector to the organised segment.

Why Collection Centres are Crucial

In the diagnostics domain, a cross-country collection network provides a key advantage since samples collected from patients can be sent to the lab in time, ensuring speedy turnarounds. In turn, this can limit sample processing costs. Herein, Dr Lal PathLabs’ wide geographical reach includes 4,731 collection centres supported by 10,599 pick-up points, pan-India.

As if this wasn’t good enough, the company is presently advancing its ‘Hub labs’. Though not as big as the centre labs, the hub labs are bigger than its satellite labs. Hubs can undertake a broad range of tests, helping the company venture deeper into tier 2 and tier 3 towns. Its innovative operating model is proving beneficial for Dr Lal PathLabs in reducing overall processing costs. With 35 hub labs already open to date, the company enjoys a healthy start over its peers. 

Given the low penetration of other diagnostics players in tier 2 cities and beyond, rivals have much work to do before they stand any chance of catching up with an acknowledged industry leader.