Rise of a diagnostics superpower
Diagnostic market has
been growing at 15-20 percent and by all indications shall continue to
grow for another 10 years at this rate.
Increasing personal wealth and awareness about health is
pushing Indians into seeking better medical options. Today hospitals
and diagnostic centers across the country are armed with the best in
class medical and diagnostic devices. Companies that offer these
devices are increasing their investments and product portfolio in the
country—an unlikely scenario at the start of this decade but
a familiar situation across India.
Various diagnostics devices manufacturers who skipped India to find
better markets elsewhere today find India a red hot market in which to
do business and are finalizing both business and manufacturing deals
anticipating huge uptake for their devices. They should. India is home
to one-sixth of humanity, 30 percent of population is below the age of
25, increasing government expenditure on healthcare and even expanding
medical insurance coverage is helping people to care more about their
health. The number of tests conducted in the last decade has doubled
from 180 million to more than 425 million. There are over 12,000
hospitals and 15,000 diagnostic laboratories in the country that
utilize large volumes of diagnostics.
Although India hasn’t become a full-fledged manufacturing hub
for medical devices, things are changing. There are many local
companies that produce diagnostic kits, reagents and kits for blood
grouping, serology, clinical chemistry, pregnancy detection, HIV
detection and other rapid tests that are accepted globally and imports
of such products in finished form is almost negligible. According to
Netscribes, the medical diagnostics market is just 10 percent of the
healthcare sector’s revenues and was estimated to be
about Rs 37,900 crore in 2008. In India, 60-70 percent of
medical treatments are based on laboratory diagnostics tests.
Markets for medical
In a recent report for the Department of Pharmaceuticals,
Ahmedabad-based National Institute of Pharmaceutical Education and
Research (NIPER) said the medical devices supplies market in India will
be approximately $1.70 billion by 2010— growing at 23 percent
annually. Currently, the market for medical devices supply is Rs 5,750
crore or $1.19 billion.
In its report NIPER said diagnostic kits are a fast growing segment of
the entire devices market growing at 30 percent, annually. With over 50
companies vying for business, the business will only grow.
However, experts say it is difficult to determine the exact size of the
market in India, as the diagnostic market is highly fragmented as it
involves different segments such as home segment, urine chemistry,
diagnostic kits, and reagents. The entire market for diagnostic kits
and urine chemistry will be about Rs 275 crore, discounting the cheap
unbranded Chinese kits that are available in plenty in the grey market.
Another area of growth is the in-vitro diagnostic (IVD) market that
includes diagnostic test services and diagnostic products. This market
has grown substantially in the last five years making India one of the
important business areas for IVD. The market however is dominated by
the MNCs, who between themselves have cornered 65 percent of the market.
Another business that has seen growth is market for clinical chemistry
which is approximately Rs 490 crore. Instruments market is estimated at
Rs 185 crore while the reagents market is at Rs 305 crore. The reagent
market is further divided into “closed systems” at
Rs 85 crore and the actual served open market at Rs 220 crore.
The leading players in this segment include Transasia Bio-medicals
which was ranked as the top IVD company in India by McEvoy &
Farmer, a US-based experts on IVD markets. The other major players in
this group are Roche Diagnostics, J Mitra, Johnson & Johnson,
Beckman Coulter, Trivitron, Accurex, Tulip/Crest, Bayer-Siemens,
Agappe, Randox, Span, Wipro Biomed, Merck, Ranbaxy, NPIL-DiaSyS. Apart
from these, there are 30 other smaller players operating in this market
According to international reports, the Indian healthcare sector is
currently valued at $34 billion and by 2012, it will be valued at
approximately $40 billion and out of this market, the diagnostic and
pathology market is around 2 percent. The diagnostic market has been
growing at 15-20 percent and by all indications shall continue to grow
for another 10 years at this rate.
Diagnostic market includes diagnostic test services market and
diagnostic products and instruments market. Diagnostics and pathology
lab test services market in India holds 44 percent of the medical
devices and diagnostics market, valued at Rs 12,587 crore in 2007.
According to Cygnus Business Consulting and Research, Indian diagnostic
and pathological labs test services market is valued at Rs 5,590 crore
(2007) and is estimated to reach Rs 13,900 crore by 2012.
Increasing health consciousness and preventive care have changed the
landscape of healthcare services market. Whether it is wellness
checkups, preventive care checkups or insurance-related checkups,
diagnostics and pathology laboratories are growing significantly,
fueled by the growth in outsourcing diagnostics tests and clinical
research. The Indian diagnostic and pathological labs test services
market was valued at Rs 6,687 crore in 2008, says the Cygnus report.
There are about 40,000-50,000 pathology labs spread across the country
with less than 100 having accreditation. Out of these only a few labs
are operating as referral centers and about 1,000 labs are automated.
The major players in diagnostics and pathological test labs market are
Metropolis, Religare SRL Diagnostics, Dr Lal’s Pathology,
Piramal Diagnostics (formerly Wellspring), Thyrocare and Anand Labs.
Lifestyle diseases make a
India has the largest number of people suffering from diabetes while
hypertension, respiratory diseases and obesity are increasing as
lifestyle changes. This has led to the growth of consumer home-use
medical device markets. As per industry forecasts, personal use
device segment will reach over $5 billion by 2011.
India is also fast emerging as the diagnostic capital of the world,
currently there are about 40.9 million Indians suffering from diabetes.
But the concept of Self Monitoring Blood Sugar (SMBG) is still not
well-known in India as compared to the West. In India a meager 0.3
percent of diabetics use SMBG as opposed to almost 22 per cent in
developed countries. Lack of awareness regarding complication of
diabetes and benefits of regular monitoring are key factors for this.
Imports constitute over 50 percent of this market. Most imported
products have high gross margins. Currently, the high value imported
products include cancer diagnostic, polymerase chain reaction
technologies among others. However, the market is becoming increasingly
competitive due to low entry barriers, relaxed laws, increasing
competition and users.
The duty exemption for diagnostic kits used to detect life threatening
diseases is another area of contention. NIPER noted that the duty
waiver continues to only apply to basic techniques that are
increasingly replaced by newer and more precise methods like the
polymerase chain reaction (PCR) test. At present only tests like the
ELISA and CLIA enjoy the duty waiver while the PCR kits attracts 37
percent. Customs duty in spite of applications in the diagnosis of
diseases like TB, hepatitis or bird flu, increase the cost of tests
done using the advanced technique. These budgetary tax measures coupled
with an already anomalous customs tariff structure are expected to
escalate the cost of treatments and burden the patients and ultimately
constraint the delivery of modern healthcare, the report noted.
As a measure to tackle the increasing duty structure and dependency on
imports, Indian companies are looking forward to having alliances with
foreign companies either to import and distribute their products in the
Indian territory or become licensed manufacturers and distributors of
the foreign companies.
For example; Japan-based Arkray, has entered into a 49:51 joint venture
with Piramal Healthcare and formed Arkray Piramal Medical to market
diagnostic products, mainly SMBG (Self Monitoring Blood Glucose System)
in the Indian market. Arkray Piramal is currently looking at
strengthening its position in the SMBG space.
India as a major bioindustry and IVD manufacturer needs to invest in
dedicated research and development to boost the delivery of
increasingly sophisticated equipments and quality kits. Steps need to
be taken to cross the current chasm to fulfill responsibilities to
doctors and patients in meeting and exceeding their needs for reliable,
affordable and innovative medical diagnostic systems.
Looking at the opportunity and growth of the market, local companies
are now investing on R&D and developing a range of kits for the
local market. However, there are a few hi-tech products like Elisa,
PCR, a few cancer markers and many other products for which there are
very few manufacturers in the country. This area is also developing
Xcyton, had recently launched a PCR-based diagnostic kit for eye
infections. The project was supported by the Ministry of Science and
Technology, and was a collaborative effort involving research
institutions like Shankara Netralaya, LVP Eye Institute, the Centre for
Cellular and Molecular Biology, and the All Indian Institute of Medical
The level of R&D spending in the medical device and diagnostics
industry, as a percentage of its sales, has been consistently
increasing from 5.4 percent in 1990, to 8.4 percent in 1995, to 12.9
percent post 2000, says NIPER.
NIPER has asked the government for creation of more academic centers to
meet the technological and regulatory demands; interdisciplinary and
combinatory research projects; testing facility for devices and
pre-clinical and clinical studies for medical devices as some of the
measures to assist the sector.
The emerging industry structure is headed towards providing healthcare
services as an integrated comprehensive package rather than the
traditional concept of providing healthcare infrastructure and reactive
medical care. Growing health consciousness among middle and high-income
families in India is heralding a new business
opportunity—preventive healthcare. This has shifted focus
from in-patient treatment to a regular preventive health check.
Corporate companies offer annual health check for their employees;
insurance companies conduct pre-insurance policy check; and self paid
health checks also give out a potential business opportunity.
Private equity (PE) and venture capital (VC) investors are looking to
step up the pace of investments in the healthcare sector in India. In
the recent past though, specialty PE firms have emerged to invest
exclusively in this segment. Evolvence India LS, India Ventures and
Sabre Capital’s Spring Healthcare fund are some PE funds in
According to Venture Intelligence, ‘There are very few
corporate hospitals and PE and VC funds see this as an opportunity to
bring smaller hospitals together to scale-up.’
In July 2008, Mauritius-based private equity fund New York Life
Investment Management and Jacob Ballas India Fund invested $22 million
in Mumbai-based Themis Labs. In February this year, India Venture
invested $18 million in Tamil Nadu-based Kavery Medical while IFC
invested $30 million in Max India. Sabre Capital has a $100 million
fund focused on investing in mid-size existing hospitals or in
start-ups. ChrysCapital, which focuses on the pharmaceutical sector, is
looking at opportunities in the healthcare space especially in
hospitals, medical diagnostics and devices. It may invest anywhere
between $30-300 million with a long-term view of 5-10 years.
Venture Intelligence noted that over 42 percent of PE and VC investors
felt there was a strong opportunity to tap the market for healthcare
services in semi-urban and rural areas. The investors also identified
diagnostic services, medical devices/equipment, hospital chains and
wellness products and services as favorite sectors for investments.
The emerging trend in the healthcare sector and initiatives mooted by
the government and interests from the PE/VC community will boost the
upcoming and growing diagnostic market in India.