Mumbai: The diagnostic laboratories industry in India is poised for strong growth because of rising demand for healthcare but lack of regulation remains a major concern, considering the risks it poses to patients.
Parliament enacted the Clinical Establishments Act, 2010, which prescribes minimum standards for facilities and services for clinical establishments, but this has to be to adopted by states as health is a state subject.
So far only 10 states—Uttar Pradesh, Uttarakhand, Rajasthan, Bihar, Jharkhand, Sikkim, Mizoram, Arunachal Pradesh, Himachal Pradesh, and Assam—have implemented it, leaving a large number of laboratories unregulated.
The Union health ministry has repeatedly requested states to adopt the Act or enact laws of their own on similar lines, said a senior health ministry official, requesting anonymity. “But slow implementation of the Act is a challenge.”
In the states and Union territories that have adopted the Act, more than 10,000 clinical establishments have been registered online and more than 1,500 have been registered offline so far, the official said.
The diagnostic laboratories sector in India is highly fragmented with standalone centres accounting for 45-50% of the market and organized ones having a 25-30% shares. Hospital-based diagnostic centres account for the rest.
India has around 100,000 diagnostic laboratories, which include pathology laboratories and radiology centres, Ameera Shah, managing director of Metropolis Healthcare, said citing data from a research report of Seattle-based non-governmental organization PATH.
National Accreditation Board for Testing and Calibration Laboratories (NABL) is the nodal agency for accreditation of laboratories but accreditation is not mandatory. According to details on the NABL website, 783 medical laboratories have been accredited as of 31 January. This shows less than 1% of the total laboratories are accredited.
High competition because of low entry barriers amid lack of regulations continues to be a challenge for large diagnostic chains such as Dr Lal Pathlabs Ltd, Thyrocare Technologies Ltd, Metropolis Healthcare Ltd and Suburban Diagnostics India Pvt. Ltd, who have voluntarily got their laboratories accredited by NABL.
“There is no stratification of labs and there is lack of awareness. People don’t know the difference between an accredited lab and any other lab. That is because there is no legislation around it. We are competing with the mom and pop shops, hospital-based labs, as well as larger players and the only comparison people have is on cost,” said Sanjay Arora, founder and managing director of Suburban Diagnostics. He added that the company spends more than Rs1 crore per year to maintain the accreditation.
Given the costs involved in getting the accreditation, various small and medium size companies cannot afford it and therefore, government needs to come out with basic quality standards, which all laboratories must adhere to, according to industry officials.
“NABL standards are very high and it is expensive for many labs to build and sustain the infrastructure that is required for accreditation. I think NABL should have a basic level of standards and government should mandate all laboratories to meet these basic requirements and get accredited,” Shah of Metropolis said.
“Accreditation is a voluntary process. It is not proposed to be enforced on clinical establishments including laboratories. Under the Clinical Establishments Act, the effort of the government is to enforce standard treatment protocols, ensure adherence to minimum standards and range of rates of medical/diagnostic procedures, which is essential to make proper healthcare available by ensuring affordability and accessibility to the citizens of the country,” the health ministry official said.
Overall, the diagnostic industry is poised for growth and the strong performance of Dr Lal Pathlabs and Thyrocare on the stock exchanges in the past one-and-a-half year has pushed up valuations of companies operating in this sector.
According to CRISIL Research, the size of the diagnostics industry was around Rs37,700 crore in FY15 and is expected to reach Rs60,000 crore in FY18.
Increase in evidence-based treatments, demand-supply gap, changing disease profiles, increase in health insurance coverage, rising income levels, demand for lifestyle diseases-related healthcare services and increase in preventive health check-ups are the factors that will drive growth of the diagnostic laboratories industry, Dr Lal Pathlabs said in its 2015-16 annual report.