A recent white paper from Healthbridge on the diagnostics lab market estimates that the lab market in India is worth at least Rs 30000 crores. What were the parameters considered to arrive at this figure (common estimate is about Rs 15000 crore)? There is also a significant presence of clinical laboratories in rural India. How do you divide this market estimate among labs from big and small cities as well as rural India?
| Dr Adheet Gogate |
We sized the market using two distinct methodologies. Through one approach, we sized the market using a ‘bottoms-up’ approach by aggregating city level build-up of players using individual lab data, hospital data and qualitative data such as interviews. We also did a separate top-down population, using disease and utilisation based model to determine the market size.
We were surprised to see how different this number was in comparison to the traditional estimates. We were also unable to trace any model, study or survey that was the basis of this Rs 15,000 crore number. Virtually all reports we read referenced it circularly as a given! We decided to not accept it and invested significant effort to validate it and are confident that the market is far bigger than generally imagined. It may be possible that conventional estimates ignored or underestimated segments such as intra-mural lab studies (done by physicians in their own clinics) that are actually quite significant.
In our estimates, we believe that the top 60 metros drive 65 per cent of the volume, with about 35 per cent from the rest of India. With reference to market division, we believe about 35 per cent of market revenue comes from metros and other top 60 big cities constituting 20 per cent of population – 12 per cent coming from top three metros alone. Remaining 65 per cent is from rest of India, which constitutes almost 80 per cent of the population.
There are places like Kerala in India where doctor density is one per thousand population. Do you think that such disparity also affects the count of clinical laboratories in that particular region?
Lab investigation is integral to diagnosis and the usage of labs is closely linked to usage of healthcare overall. In India, healthcare usage and availability are highly variable and driven by a large number of factors. Patient-side factors include health-seeking behaviour, disease profile, awareness, affordability and others. Similarly, provider side factors such as doctor density, quality of doctors, mix, presence of incentives etc. So, the correlation is quite multivariate. Though we did note that in Kerala logistic and paramedic support (e.g. supply chains) are not that strong, this is not unique to Kerala and is true of other semi-rural states too. What is stark is the difference between rural and urban levels of consumption though.
What is the average ratio of diagnostic labs per thousand population in India? How does this compare with global ratios, in developed and developing nations?
In India, the rate of usage of laboratory services is far lower than in developed markets. This is due to a variety of factors that include lower affordability, no insurance coverage for diagnostics, lower reliance on diagnostics (Indian doctors are generally more comfortable with their clinical judgment), lower retest rates and the nature of disease itself. For example, lifestyle diseases like diabetes have very high per capita lab consumptions.
We estimate that the average number of labs per thousand population in India would be about 0.1. However, to compare with global ratios, we believe number of tests per capita per annum is a better indicator. In India, average number of tests performed per capital per annum is about two, which is much lower as compared to 30 in developed countries like the US.
Molecular and genetic testing is slated to play a significant role in the growth of the lab market over the next decade. However, will these tests be available across all laboratories or restricted predominantly to the larger labs?
These tests will definitely be more broadly available as they become cheaper, easier to perform and more robust. At present, many sophisticated tests are physically conducted at a smaller subset of labs as their reagents are expensive and the tests have to be run in batches with their own unique economics. But as technologies are evolving, these tests are moving closer to the frontline. Arterial Blood Gas (ABG), for instance, used to require larger labs but new kit-based tests have brought these technologies to the frontline. Spot ELISA is another example. However, it is important to note that even when these fields are growing fast, their market share will remain small as the overall market itself is likely to continue growing rapidly.
Do you have the approximate figure of qualified pathologists in India? How does this compare with global ratios, in developed and developing nations?
We believe there are about 35000-45000 qualified pathologists in India. In US this number would stand at about 10000-15000. However, the problem is that ratio of number of pathologists as compared to total number of labs is very low in India. It stands at about 0.35-0.45 in India as compared to almost two in US.
Many new diagnostic tests/lab technologies are built for point-of-care and are virtually touch-less. Are we going to see technology evolve to a stage where a patient will have his own diagnostic kit/test at home and he would need the pathologist only for interpretation of results? If doctors decide to make such testing services available in house within their clinics, how is it going to shape up the lab market?
Absolutely. We have identified this in our paper. More and more tests will not require labs or pathologists at all. Many will be done by individuals at home or in doctor’s OPDs, reducing the need for large labs with complex collection systems. In this space, technology is a powerful democratising force.
As per the Healthbridge white paper, the lab market is going to remain fragmented and unorganised. Will this development impact the entry of new organised players in the market?
We believe the market is very large, with strong demographic trends favouring prolonged continued growth. The market can absorb all sorts of players, though they will have to be realistic about their growth aspirations.
India has predominantly remained an importer of diagnostic devices. Do you think that self sustainability in this regard will make labs more affordable and in turn more accessible for patients?
At present, most equipment and consumables are imported. If India chooses, at a policy level, she can become a net manufacturer and exporter. If she chooses, at a policy level. That is a big ‘if’. In automotive, for instance, she has chosen to do so and is a significant player with strong domestic players too. In other sectors, she has chosen to remain a net importer.
Any lab market stands on three pillars-patient, pathologist and doctor. What kind of symbiotic relationship you would expect among these three key factors in future? Is the government expected to play any role for the same?
We have articulated this in the paper. The appropriate role of a healthcare system (and thereby a lab too) is to deliver to the population the highest level of healthcare possible at the lowest total cost of ownership possible. This is a very lofty requirement and requires the creation of a system where both doctors and laboratories are encouraged (through incentives and regulations) to enable rapid, accurate diagnosis and prompt treatment to maximise health at minimal total cost (to the system and patient). The creation of such a system takes decades. Various countries across the world have made significant strides towards this direction. In India, we have a long way to go. The role of government is crucial. It has to play a far more active regulating role than it is currently.
In our view, the government’s biggest job is to safeguard patients. Creating mandatory national quality and safety standards, testing standards are key steps. Linking payment to these is another. However the real role of the government is to shape incentives. Doctors and labs are currently subject to powerful conflicts of interest that may stand in the way of ensuring that all providers act in the best interest of all their patients at all times. Incentives need to change from being provider-centric to patient-centric. Regulators have to plan this and shape the industry over time. This is not easy and requires a clear articulation of long-term goals along with the patience and commitment to move (and keep moving) in the direction of this goal.