India’s mostly fragmented medical diagnostics service industry is getting consolidated and preparing itself for the next level of growth. The leading corporate diagnostic chains in the domestic market have been on an acquisition and market expansion spree and the market has seen at least a dozen high valued deals in the last couple of years. In addition, new corporate players are entering the space leveraging their existing network in the medical prescription market.
The country’s top diagnostics service providers, including the newly emerged large entities, in this Rs 700-billion market are also planning large investments in the next few years for expanding their product and service portfolio as well as geographical reach. This in turn will lead to the launch of new and innovative tests, better technologies and increased access to more sophisticated preventive and predictive tests and disease screening.
The consolidation trend, according to market analysts, would also lead to further investments by the large players in the country’s medical tests and the imaging market in the next few years, targeted at their market network and product and service expansion. While this industry transformation would also see an unprecedented competition among the top players, it may also leave many standalone and regional small laboratories with the option of succumbing to the competition pressure by the big corporate chains.
Key merger and acquisition deals in the country’s diagnostics services sector during the last two years included the Rs 350 crore acquisition of the South-based DDRC that made the IHH Healthcare owned SRL Diagnostics the largest medical lab chain in the country,; Dr Lal PathLabs’ Rs 925 crore acquisition of Suburban Diagnostics; the merger of Chennai-based Healyst Wellness Laboratory with Neuberg Ehrlich Laboratory, and Rs 636 crore purchase of Dr Ganesan's Hitech Diagnostic Centre (Hitech) along with its subsidiary Centralab Healthcare Services (Centralab) by the country’s second-largest diagnostics chain Metropolis Healthcare.
Besides, India’s leading drug maker — Lupin — made a big bang entry into the sector by launching Lupin Diagnostics almost seven months ago. Lupin’s foray into this healthcare service industry is part of its strategy to provide integrated healthcare in India, using its strong grip on the medical prescription market.
An earlier report by Edelweiss’ senior research analyst Praveen Sahay had analysed this industry consolidation as a move for quality transformation in the market. “As top diagnostic chains taking the lead with superior and quality services, highly accurate and wider test menu — resulting in market share gains — we expect the consolidation trend to continue in the sector going forward,” he wrote.
However, a major concern remains in the market is the cost escalation for the consumer. This is because the domestic industry is currently mostly dependent on imported input materials such as test kits, reagents and other chemicals. Most of the technologies and tools for the new generation tests are also currently sourced from foreign manufacturers.
SRL Diagnostics CEO K Anand says that the research-led labs like the one which he heads, actually offers the hope for reduced cost with lab developed innovation in tests and population specific diagnostics.