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Rapid Growth Expected to Continue in Indian Diagnostics Market

May 01, 2013

Diagnostic Testing & Technology Report -- May 1, 2013 -- The diagnostics and laboratory service industries are experiencing significant growth in India. With a number of strong drivers in place, this growth is expected to continue, presenting American laboratories and diagnostics manufacturers an opportunity to penetrate this nascent, fragmented market. Ironically regulation, the factor attributed with slowing commercialization efforts in the United States, poses the only threat to growth in India, although in India it is the lack of regulation and the resulting questionable quality of some tests that could derail confidence in the testing market.

Driving the growth in diagnostic testing is India’s overall economic success in the past decade with double-digit growth in the gross domestic product.

Increasing consumer wealth combined with an increasingly connected global marketplace is raising expectations of Indian consumers.

“Twenty-five years ago a doctor would look at your ears, your eyes, your throat and give you a yellow liquid or a blue liquid,” recalls Ravi Kiron, Ph.D., managing partner at Biopharma Strategy Advisors (San Jose, Calif.). “There was no system to collect or transport specimens to outside labs. Whatever the doctor could do in the office was what was done. Today the common man in India wants quality diagnostics.”

Additionally, there has been a shift in disease profiles. Previously, communicable diseases were the biggest health threat. Now, with adoption of some of the negative influences of Western lifestyles, chronic diseases including diabetes, heart disease, and cancer are growing in prevalence—all of which require diagnostic testing.

India’s reimbursement structure will also drive growth. Experts say that vast majority of patients pay for diagnostic testing out of pocket. The limited insurance that exists in India only covers inpatient hospital and surgical services. All outpatient testing is paid for by the individual.

“There are over a 100 million educated Indians who can afford anything. . .There are also 200 million other Indians who can afford ‘almost’ anything,” says Zoya Brar, co-founder of Core Diagnostics (Gurgaon, India). “With growing awareness . . . Indians are demanding the best that health care has to offer. This is what is at the heart of the growing utilization.”

Brar tells DTTR that the Indian diagnostic and pathology labs test services market in India was valued at approximately $2.2 billion and is expected to more than double to $5.5 billion by 2020. The diagnostics market in India is described as having two informal segments—the organized market and the unorganized market. The unorganized market includes a staggering 30,000 to 40,000 laboratories, which are not necessarily owned by a pathologist or doctoral laboratory scientist. By contrast, the organized segment has much better oversight, but not necessarily by a government or regulatory agency. The organized segment is significantly smaller with centers numbered in the hundreds. Only a few of the laboratories in this sector are performing complex molecular diagnostics, including sequencing.

“There is also a severe lack of availability of high-end diagnostics,” says Brar. “Most immunohistochemistry is just starting up and there is almost no FISH/molecular-based testing. There is also a lack of subspecialist pathologists, leading to deficiency in diagnosis. Some tests are sent to the United States or Europe, but in these cases, there are long turnaround times (two to three weeks). Essentially, there is a demand-supply imbalance.”

Core Diagnostics, which has received venture capital funding from Artiman (Palo Alto, Calif., and Bangalore, India) is focused on offering advanced, high-value clinical diagnostics including in oncology and reproductive health in India.

In contrast to the over-regulation cited in the U.S. market, it is a lack of regulation in India that poses one of the few challenges to growth. With no single agency approving tests or determining their clinical applicability, nothing formally holds doctors back from ordering tests. Commercial laboratories just need to persuade a doctor, making it relatively easy to launch a test. The challenge, experts say, is that with a lack of regulation there is no guarantee patients are receiving quality, medically necessary services. Several people familiar with the Indian laboratory market say labs commonly cut corners by buying cheaper products from China and Taiwan that have no regulatory approval and that unscrupulous practices, including kickbacks to prescribing doctors, could affect patient care.