Home >Companies >News >Private labs struggling in covid journey: Arindam Haldar, CEO, SRL Diagnostics
Arindam Haldar, CEO, SRL Diagnostics
Arindam Haldar, CEO, SRL Diagnostics

Private labs struggling in covid journey: Arindam Haldar, CEO, SRL Diagnostics

  • Arindam Haldar, CEO, SRL Diagnostics spoke about challenges that diagnostic sector faced during the pandemic, cost of testing and revival of the sector

Like all other sectors, covid-19 pandemic massively impacted functioning and revenues of diagnostic industry. As the country ramped up testing, interestingly, the sector played an important role in India’s fight against covid-19. Arindam Haldar, CEO, SRL Diagnostics spoke about challenges that diagnostic sector faced during the pandemic, cost of testing and revival of the sector. Edited excerpts from an interview:

How has the Covid-19 pandemic impacted the diagnostics sector?

The diagnostics industry has been on a sharp decline since mid-March. During the lockdown, walk-ins (B2C business) have been significantly affected. Also, logistical challenges to move samples around, with the lockdown of interstate and intrastate movement, stopping of OPD services and elective surgeries at hospitals and clinics, corporates working from home, etc., the B2B business was also equally affected. As expected, the diagnostics chain labs have shown a strong recovery from the deep impact seen in last week of March and in April, but the non-Covid revenues are yet to come to the last year’s or pre-Covid levels. Amongst all our labs in the network offering Covid diagnostic tests, we have done more than 2.2 lakhs of RT-PCR tests till date. That partially makes up for the revenue gap, but not completely. However, the margins made on Covid test is significantly lower, and the recent price cut has also affected profitability in a big way. At the same time Covid associated costs like data entry, supervision, and logistics, have all gone higher than the initial estimates. Today, private labs are struggling to find their feet amongst the various challenges they encounter in their covid-19 journey including complex, and ever-changing regulations, cost pressures, lengthy data entry requirements, banning of labs for frivolous reasons to name a few, putting incredible pressure on already overworked medical professionals. Thus, while the overall revenues are progressively becoming better, the higher costs on Covid, and the regular non-COVID business still far lower than earlier period, this is putting incredible financial strain to sustain fixed costs and operation. Apart from this, our frontline healthcare workers are at an increased risk of falling victim to this infection, and there’s a rising challenge to keep them safe. We have no other option but to plan for higher bench strength on a temporary basis to sustain operation. Getting trained workers for COVID testing as back-up is a difficult task too.

However, we are hopeful the recovery in diagnostics would be at a faster pace and in an extremely efficient manner, and this is more of a short-term impact that the sector is currently experiencing.

As an industry expert, how do you foresee India’s diagnostics space?

70% of decisions that medical experts take on patient treatment depends on diagnostics tests, but at the same time the diagnostics industry in India accounts for only 5% of the total health system costs. And I believe this segment is coming out of the shadows and is becoming more and more prominent amongst the overall healthcare industry. The market has been growing over the past five years. There have been various trends at the testing level, market level, and at the consumer level. Routine blood tests are still the mainstay of the overall industry, though there is a definitive trend towards higher molecular and genetic testing. The recent pandemic has probably opened up both awareness of tests using RT-PCR technology and also expanded the availability and capacity across the country. On a more medium term, there will be an attitudinal shift amongst consumers towards doing more frequent health check-ups to understand one’s immunity and general health level. At an overall level, health awareness and consciousness amongst customers is on the rise, and large private chain labs are also improving market accessibility, making sure the highest level of tests are available at all market through their hub & spoke model. If we divide the market into pathology and radiology, the growth rate for pathology, due to its geographical spread along with its ability to transport samples, will surely be higher. Radiology would also grow but is often limited by the need for sizeable capex and locational limitation, unlike pathology. High-end radiology will be mostly centered around hospitals having the relevant medical program. Also, in the future, there is a possibility of an increase of organized (national and regional chains) diagnostic chains’ revenue salience to at least 20% vis-à-vis the current 16-17% of the share. This would be at the cost of the standalone labs. Some of the reasons for the same would include mergers and acquisitions wherein the bigger players take over the smaller players. Along with this, the current situation of COVID may make it difficult for players to sustain in the market unless you have the economies of scale and wide market access.

What more can India do to boost its diagnostics landscape?

The covid-19 pandemic has underpinned the significance of a robust healthcare system in such crisis situations. Despite the testing cost in India valued at 1/5th of the cost of the USA, a significant number of the middle and lower income families still cannot afford them in India. As of now, more than 60% of the expenditure is out of pocket expenditure, insurance coverage is in single digit, and the remaining would be a corporate spent, and government initiatives in some of the states.

However, one must note that despite the testing cost in India being lower as compared to other countries, the reagents and equipment being used in India are at par with global standards. Our doctors are also equally qualified as their western counterparts. Adding to the insights, the equipment used for conducting tests in India are imported and also come with the impact of import duty. The only way a commercial enterprise can survive in the market would be by consolidating volumes and getting higher efficiencies from their lab machinery and manpower. This is especially true for high-end tests.

With schemes such as Ayushman Bharat in the pipeline, it presents a great opportunity for the diagnostics sectors and for the poorer patients across the country. The scheme and the industry together could do wonders, as individuals would be able to access diagnostic services simply with an Ayushman ID. And I would appeal for the authorities to work out a win-win operating model jointly with the private sector.

Thus, diagnostics tests and OPD coverage under medical insurance for paying patients, and government schemes like PM-JAY for weaker sections of the society would surely help both the consumers along with the players in this industry. However, to make this implementable, we need states and central authorities to think and work in sync keeping the national interest in mind.

What are the precautions that SRL is taking in order to devise a robust testing protocol?

SRL is at the forefront of this battle, we were amongst the first few private labs chosen by ICMR to conduct COVID -19 testing. We started testing from the last week of March at two of our clinical reference labs at Mumbai and Gurgaon, and currently five labs within our network are conducting these tests and so far more than 2,00,000 tests have been conducted. Our testing labs in Gurgaon and Mumbai are NABL and CAP-accredited and run by highly professional, qualified and experienced doctors and we are only using ICMR approved kits and testing technique to conduct testing.

There are established protocols for transporting samples which are religiously followed, making sure that the samples are sent across in cold chain in the viral transport medium (VTM). The sample collected is packed immediately in triple layer packing and is then sent to the SRL Reference Laboratory for testing under temperature-controlled conditions, ensuring no chance of spreading infection. At our drive-thru facilities we sanitize the booth and the surrounding area at regular intervals in addition to all patient vehicles to ensure safety and hygiene. The whole area from outside is sanitized with a hypo solution immediately after a patient sample is done and then only the next patient is asked to park his car. The facility allows a patient to remain inside the car, and the nasal/throat swab sample is taken through the car window by the phlebotomists wearing PPE in the booth, so there is no aerosol generation in the procedure.

In order to maintain and follow social distancing protocols, the sample collection is done through a prior appointment and all documentation is collected and verified over electronic medium before fixing up the appointment time for the sample collection and payments are done digitally.

Additionally, to ensure safety and precautions for covid- 19 patients and caregivers, our specially trained phlebotomists collect samples, while observing all biosafety precautions and are using personal protective equipment. We are undertaking training and re-training of our staff relating to the use of protective gear, disposal, sample collection and ensure accurate testing, the safety of patients and employees. We undertake frequent check-ups for our staff, and in any such unfortunate case, they are advice home and self-quarantine immediately.

What are your expectations from the government in terms of pricing of covid- 19 test?

While we understand government’s prerogative to make test cost affordable for all so that there are no excess or unreasonable profit made by anyone in the whole value chain. In fact, with that in mind, ICMR did fix INR 4500 as the price for RT PCR test across the country initially, and this was done after government labs including NIV had a few weeks of experience of conducting these tests themselves. Availability of kits have improved from the situation existing beginning of April, and PPE and mask costs have come down, and thus can be a reasonable agreement to relook at the initial price cap, and bring that down in line with actual costs. We should also keep in mind, that there are associated costs like data entry, supervision, and logistics, which have all gone higher than the initial estimates. So, in summary, a new and lower price should be fixed by the government which has to be reasonable.

First, given that the input costs across the country are similar, there should be a central body deciding on what should be the new pricing across the country, and it should not be left at the behest of each state. Secondly, while the government has reduced the test price they haven’t capped the price of the inputs. As one of the largest lab chains in the country with the sufficient testing capacity, we are more than willing to reduce the cost, provided the input costs are also capped. Corollary to that, some of the inputs have tax components that are very high (as high as 18%) and the government should look at making this tax free. And while test cost is one, the other aspect is the collection. The government should assign a reasonable amount for collection from hospitals or home, when applicable. Therefore, to be able to navigate away from this rapidly evolving situation, testing becomes absolutely critical and would play a pivotal role in combating covid- 19. Private labs today are best equipped and capable of supporting PM’s initiative to get India back to economic progress. If we can take the above points into consideration, we believe that there could be a win-win solution for all, and public can get quality healthcare at reasonable cost.

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