Path lab chains forecast consolidation in the Indian diagnostics market

EHM News Bureau - Mumbai

With the advent of large pathology laboratories chain, the Indian diagnostics landscape has undergone some major changes in the last four to five years. One of the significant impacts has been the rising competition among the large players, which may not have cut down the prices to the consumers, but has surely raised the entry barriers for small path labs, which mushroomed in the nineties to uncontrollable proportions. Now, large path labs say that consolidation is imminent and they quote the US example which evolved in a similar way, but is today dominated by only four major chains of path labs.

Says Ameera Shah, marketing head of the Mumbai-based Metropolis Laboratories, ‘‘Ten years ago, the US had a very fragmented market similar to India, but today, four major chains control over 90 per cent of the market. Consolidation is bound to happen in the Indian market as well and these will be driven largely through collaborations’’.

Though large path labs have been showing impressive growth rates (for instance Metropolis claims that its business grew 50 per cent over last year, while the overall market growth was estimated at 25 per cent), a large portion of the market is still dominated by the unorganised sector, say experts.

But, it is evident that the unorganised sector is feeling the heat. If large labs claim to have outperformed the industry growth, experts say that it is obvious that they are eating into the share of small labs. And with strong focus on quality and accuracy of test results in their communication strategy, the organised players are rapidly gaining the acceptance and confidence of the medical community, they add. For instance, a test for diabetes is done by arbitrary calculation in 80-90 per cent of the cases. Large labs claim that this method is unreliable, while direct estimation offer accurate results.

Doctor and patient education form a core business strategy for organised players, a strategy that largely remains localised or unachievable by those in the unorganised sector. ‘‘Screening is an issue that is only catching up in the Indian health care sector. There is a constant need to educate doctors and patients alike. We have managed to increase our business from Rs 2 crore to Rs 5 crore largely due to creation of awareness,’’ says Dr Sushant Agarwal, head, clinical services, Thyrocare. Says Dr M D Thakker, senior manager, marketing, Thyrocare, ‘‘The Indian medical scenario suffers from lack of education material. Marketing strategies can be considered in terms of demand and supply. Only when there is a rise in demand will there be a rise in supply. So it becomes imperative to educate both the patients and doctors alike and to ensure supply chain management so that volumes can grow.’’

And to top it, organised players are aggressively exploring options to expand collection network nationally to increase penetration. This is because the market has shown impressive growth rates in the recent past, encouraging large players to invest in new business models. Increased awareness on life-style related diseases and communicable diseases such as HIV/Aids, tuberculosis and malaria is driving volume growth, say experts. However, it is not just the lifestyle diseases that have made their presence felt. Speciality tests have also been big business for the larger labs. According to Shah, the diseases that are in the limelight now are HIV, TB, Hepatitis C, malaria, dengue and leptospirosis. ‘‘Over a couple of years, the volumes for detection of malaria and leptospirosis has registered 50 per cent growth.’’ Dr Agrawal of Thyrocare says that after lipid profile and diabetes, it is the infectious diseases like TB that have helped the business grow. Adds Dr Swarupa Bhagwat, pathologist, Dr Lal’s Path Lab, Mumbai, ‘‘Overall there is approximately 25 per cent increase in the laboratory business due to the screening and follow up for lipid profile, blood glucose levels, glycosylated haemoglobin, besides speciality tests for thyroid hormone levels and some basic cancer markers.’’ Also, advent of new and reliable technology has forced the medical community to increase their reliance on diagnoses.

And different players are adopting different strategies to increase awareness and reach. Metropolis, which claims it has not done any ’marketing’ for the past 22 years, says it relies more on the word of mouth campaign. They have now come up with a directory of services that is circulated to various doctors and allies. Thyrocare, on the other hand, has tied up with 14 to 15 pharma companies, wherein, the medical representatives conduct verbal marketing, issuing of discount pamphlets to the clients, patients, etc.

Recognition for these labs comes with offering the most advanced tests. Says Dr Agarwal, ‘‘We now offer four-colour testing for HIV which is the most updated technology and have priced it at one-third of the cost of doing a three-colour test. Also, PCR test for HIV detection is offered in liaison with Reliance Life Science. This has very high utility, which detects not only the presence but also the extent of the viral load. This has been patented for the Indian patients.’’ Sugar testing, which is the most common and recommended test, do not give a consolidated figure and also the variation in sugar levels in the intermediate periods. On the other hand, the HBA1C technology estimates the variation at required intervals with accurate values.

Though large labs say that they do not intend to impinge on the business of small labs, experts say that it would be extremely difficult for small players to survive with business dynamics changing rapidly. Experts suggest that one way is collaborate with small labs, which will in turn cut down the cost of investment in setting up new centres for large labs and also assure more volumes. For small labs, this would mean assured margins on referrals to large labs.