The Indian healthcare market is mainly categorized into 1. Healthcare delivery market (hospitals) 2. Pharmaceuticals industry 3. Diagnostic sector and 4. Healthcare insurance industry. Diagnostic services are a major sub-vertical of the Indian healthcare market. Diagnostics operate at only 4-5% of the total healthcare expenditure but it influences the remaining 95 % of the cost in a big way. Globally around 80% of the medical decisions regarding disease diagnosis, patient prognosis and selection of treatment are based on laboratory diagnostic reports. These lab reports also helps in monitoring the condition during the recovery phase of patient.
The diagnostic industry is one of the fastest expanding service verticals in India. The domestic diagnostic industry is estimated at $9.5 billion, and it is anticipated to increase at ~11% CAGR over the next five years. The industry is highly fragmented and under penetrated despite the presence of over 1 Lacs labs. There are multiple delivery formats like hospital labs, standalone labs, national chains and regional chains. Most of the market is dominated by the fragmented standalone centres with the largest organised player having a market share of less than 5%. The industry can be divided into 3 categories with Hospitals holding 37% of the share, standalone centres comprising 47% and organised diagnostic chains holding 16% of the market.
Also more than 65% of the business comes from urban areas. So there is a huge opportunity for national players to grow organically and inorganically in highly penetrated areas like cities as well as rural areas where penetration is low.
Furthermore the industry is broadly classified into pathology testing and imaging diagnostic services. As per estimates, the pathology industry contributes 58% of the total market revenue.
The perception of the diagnostic industry has been drastically altered during the pandemic. While always having remained on the side-lines, the industry came upon to be front and centre of the COVID-19 emergency response. Heighted awareness of the industry along with other key growth drivers will propel the industry forward.
- Rising healthcare spending and life expectancy
- Increasing income levels
- Growing awareness for preventive testing
- Advanced diagnostic tests offerings
- Increasing incidence of lifestyle-related diseases
- Government’s healthcare measures like Ayushman Bharat
- Increasing Insurance Cover
Lately the organized players are focusing on individuals with sedentary lifestyles, individuals who are more susceptible to significant lifestyle diseases such as diabetes and cardiovascular ailments. In the past, the diagnostic players had given focus towards illness diagnostics which is slowly moving towards focus on preventive care. India’s diagnostics industry is highly fragmented and with the spread of Pan-India diagnostic chains, the sector has witnessed and will continue to see more consolidation through mergers and acquisitions. It will increase the market share of organized diagnostic chains.
Major diagnostic companies are also focusing on brand building through online marketing campaigns to differentiate their service offerings, quality, and test accuracy. These campaigning includes healthcare camps, advertising campaigns apart from preventive and wellness test packages.
Online sellers offer a robust platform for customers to choose diagnostic packages according to their requirements. The adoption of digital methods by patients to compare services from different diagnostic players, online booking of tests and digital reporting of those tests have also increased significantly after the Covid-19 waves. Such new avenues are bridging the gap between diagnostic testing services and customers, empowering the latter to select from several available options in no time.
The diagnostics industry plays an underappreciated yet critical role in the care continuum. The growing significance of evidence-based care has provided an impetus to the industry. In addition to offering diagnoses, the industry also offers other additional benefits, including employment generation, making available specialised tests and improving access to masses through technological advancements.
Consumer expectations have changed when it comes to diagnostics. Due to the pandemic, a bulk of the urban population and those residing in smaller cities and towns are now aware of accreditations and the need for reliable diagnostic reports. Consumers now also demand the convenience of testing from their homes.
By applying lessons from COVID-19 and understanding the changing customer requirements, we believe that the future of diagnostics and healthcare will be built on the following pillars: home-centred care and testing, data, automation, advanced testing technologies and efficiencies in supply chain. A sound understanding of these pillars will enables us to discover future business opportunities.
Healthcare delivery is expected to shift from ‘’illness to wellness’’, from ‘’doctor first to diagnosis first’’ and from ‘’healthcare facilities to homes of patients’’. Personalized, affordable, always-on, always-connected, predictive and convenience based diagnostics is the diagnostics of future. We saw a glimpse of this during the pandemic and there may not be a time very far when this will become the mainstay.
Agilus Diagnostics, a subsidiary of Fortis Healthcare Limited
