• 10 May 2005
  • News
  • By Narayan Kulkarni

Promising Future Ahead For Indian Diagnostics Market

The major factor boosting the growth of the diagnostic market in India is the cost advantage that Indian laboratories offer over countries like the USA.

The manufacture of diagnostic kits and reagents in India is a relatively new segment in the healthcare industry. At present India has about 25 companies manufacturing diagnostic kits. These diagnostic companies are manufacturing and selling kits mainly in the areas of pregnancy, ovulation, estimation of T3, T4 & TSH, HIV, HBV and HCV infection, rheumatoid diseases and disorders, cancer (cervix, colon, prostate, lung, mouth etc.), kidney function and liver function.

There has been an increase in the utilization of diagnostic devices and tests in last few years. This is mainly due to increased awareness about healthcare, hike in the pay packages of the middle class families in the urban India, health insurance schemes are also driving the utilization of diagnostics kits in the country. The number of tests conducted in the last decade has doubled from 180 million to over 400 million. There are over 11,500 hospitals and 14,000 diagnostic laboratories in the country that utilize large volumes of diagnostics. The major factor that is driving the growth of manufacturing of diagnostic kits in India is the 70-80 percent cost advantage that Indian laboratories offer over countries like the USA.

Considering the demand for diagnostic kits and reagents against supply, the country has no other way but to look for imports. As noted earlier, only a handful of companies have manufacturing facilities in the country and most of the demand is met through imports.

If we look at the diagnostic market ratio of import vs indigenous, it is quite interesting. In 1976 there were only two major players in diagnostics and they are Ortho Diagnostics, a division of Johnson & Johnson, Mumbai and Span Diagnostics, Surat. The ratio may be approximately five percent indigenous as against 95 percent imported. Today the situation is totally different. About 25 manufacturers with an ultra modern manufacturing facilities are registered with global technology. The Indian companies have been manufacturing kits for blood grouping, serology, clinical chemistry, pregnancy detection, HIV detection and other Rapid tests that are accepted globally and imports of such products are negligible in finished form.

"I think it is the "Made in India" stigma. Now we have very good Indian companies making good quality products meeting global standards but we still face problems in convincing labs and institutions in the country to use kits manufactured by Indian companies." -
Dr Shama Bhat, managing director, Bhat Biotech India (P) Ltd noted,

"Today the diagnostics business is mainly based on technology. The Indian companies with their R&D facilities have developed a range of good quality products for the local market with such competitiveness that imported kits cannot stand in the 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 very fast. At present these products are being imported. In the coming days, the Indian diagnostics industry will surely develop this technology and make the products available locally," said Dr D K Joshi, managing director, Beacon Diagnostics Pvt Ltd.

Sharing similar views Suresh Vazirani, managing director, Transasia Bio- Medicals Ltd, said, "A large number of instruments are based on proprietary reagents due to the closed system. Besides, indigenous developments have received thrust only in recent years but the trends are encouraging and we can hope there is a reduction in imports in the coming years."

Ramesh Chakraborty, area manager, Rapid Diagnostic Pvt Ltd noted that the price, quality and availability are still driving the imports of diagnostic kits into India.

However, M J Dashora, managing director, Accurex Biomedicals Ltd has different views on on India's dependency on diagnostics imports. He said, " India still doesn't have the infrastructure to manufacture diagnostic kits. I strongly feel that patriotic feelings are missing among Indians. Students with specialization in biochemistry, molecular biology are looking for options outside India. These are some of the factors which have led to India still depending on imports."

Dr Shama Bhat, managing director, Bhat Biotech India (P) Ltd noted, "I think it is the "Made in India" stigma. Now we have very good Indian companies making good quality products meeting global standards but we still face problems in convincing labs and institutions in the country to use kits manufactured by Indian companies."

Presence of pharma players
In addition to diagnostic manufacturers, we find the presence of the big pharmaceutical companies in this space. It is making all the difference to small and medium players. These big pharmaceutical companies, most of which are not into manufacturing kits, are driving the business in high volumes at lesser margins. This has created problems for local manufacturers who depend on import of raw materials at high costs.

"The big pharmaceutical companies are still in diagnostics business because both pharma and diagnostic sectors are related to health. Now more rapid test products are available for diagnosis. It is easy for the pharmaceutical companies to sell the diagnostic kits through their huge market network and also make profits," said Ramesh Chakraborty.

"There is good scope for the diagnostics business in India due to increasing awareness among the public in rural areas. When these products reach small towns and villages, the utilization and demand will increase,"
- Umesh Kaushik, operational manager, Nano Biotech P Ltd.

Sharing his long experience in the field of diagnostics, Dr D K Joshi observed that the big pharmaceutical companies have not been successful in the diagnostics market. He has a reason to say so. "In my view, compared to the pharmaceutical market which is estimated to be worth Rs 50,000 crore, the diagnostics market which is estimated to be worth Rs 800 crore, is a very small market for pharmaceutical companies. To operate in a diagnostics market, a company requires highly trained staff which is very expensive. The diagnostics market requires "after sales service" and it is purely based on continuous quality supply. Keeping these facts in mind, for a big pharmaceutical company there will be a greater operational cost against the revenues generated which is not feasible. Hence there is no lucrative margin or profit in this business."

Expressing similar views Dr Shama Bhat said, "Companies like Dr Reddy's Labs, Nicholas Piramal and Merind are not doing business in the diagnostics space. Some of the leading companies like Ranbaxy are also considering shifting their focus on the pharmaceutical side."

Market scenario
According to the Confederation of Indian Industry (CII), the market for diagnostics in India stood at about $100 million during 1997 and it is estimated to reach $200 million by the end of this year. Around 50 percent of the demand is met by imports.

The total Indian diagnostics market in 2003-04 stood at Rs 260 crore and accounted for 10 percent of biopharmaceutical sector sales. The segment grew by about 46 percent over the previous year. The size of the immunodiagnostics market is expected to increase by four to five times. Monoclonal and polyclonal antibodies for disease immunodiagnosis, tissue typing, clinical assays and research constitute a huge portion of the market. Immunology, kits for pregnancy detection, blood grouping, amoebiasis, filariasis. leishmaniasis, typhoid, hepatitis B, HIV, TB and malaria have been developed locally and capture a small portion of the diagnostics arena.

Government support

The National Biotechnology Development Strategy of the Department of Biotechnology, Government of India, has talked about the diagnostics for emerging medical paradigm in the sectoral road map and also suggested some strategic actions for the sector. The strategic actions include establishing a cell for diagnostic biotechnology to encourage and support studies into the clinical application of pharmacogenomics. This cell should be well positioned to overcome barriers in its work to bring pharmacogenomics to the clinical setting; encourage research involving investigators with both clinical practice and pharmacology/ pharmacokinetics expertise while at the same time keeping the overall goal of clinical application/utility in focus; provide incentives for this group of clinician-researchers to bring these scientific advances to the patient bedside; support education programs to providers of the importance of this field and its utility; encourage biopharmaceutical companies to include pharmacogenomic data in their drug submissions.

According to Dashora of Accurex Biomedicals, " It is very difficult to determine the exact size of the diagnostics market in India. It involves different segments such as home segment, urine chemistry, diagnostic kits, and reagents. If we consider only diagnostic kits and urine chemistry, the market size will be about Rs 200 crore. Even Chinese kits are available in plenty in the grey market in Bhagirathi area of Delhi. Therefore it is very difficult to estimate the size of the diagnostics market in India."

Industry people from across the country have come up with different figures on the size of the market. According to Ramesh Chakraborty, the market is around Rs 500 crore. Suresh Vazirani has different figure. He said it would be over Rs 1100 crore. Dr Shama Bhat said, "It is about Rs 1500 crore excluding the instruments such as MRI and catscan." Dr Ravi Kumar, managing director of XCyton Diagnostics noted that at present the Indian diagnostic market was about Rs 250 crore for a population of over 100 crore. Hence, as rightly pointed out by Dashora, it is very difficult to estimate the size of the Indian diagnostic sector.

Contrary to the above reports, Dr D K Joshi said, "The Indian diagnostics market can be categorized into two major categories - one is the reagents and allied business and the other is the instruments business. Considering the overall business of diagnostics in the reagents and allied category, the approximate size of the market is about Rs 800 crore. For instruments, the market is bigger than reagents. But I do not have any exact idea or I do not have any exact data available with me. If we look at the markets in western countries, the diagnostics reagents market ratio is on an average of 12 to 15 percent of the pharmaceutical market, but in India it is approximately 2 percent of the pharmaceutical market."

ADMI – driving the diagnostic sector

About 19 diagnostic manufacturers - both Indian and multinational companies have joined hands and decided to work together for the growth of the sector and also wellness of the public health. They formed an association called the Association of Diagnostic Manufacturers of India (ADMI) in January 2002. The main objective of ADMI is to appraise the government (state as well as Central) about the difficulties and bottlenecks faced by the diagnostics industry with as view to ensure healthy growth of this industry. In general, the ADMI maintains a close liaison with Drug Control Administration and the National Institute of Biologicals to ensure proper compliance of regulatory requirement prescribed under Drug Rules by it members.

Dr P K Desai, president of ADMI said, "We have been working very closely with the government on many issues. We have represented and convinced the Drug Controller General of India to design and implement an uniform licensing policy for the diagnostics industry in the country. We have also made representations to the finance department to include Hepatitis C test kit in the life saving list so as to exempt it from excise duty."

Dr Desai further noted that the GMP requirement and Inspection Report for FDA were prepared jointly by a working group committee comprising officers from the Drug Control Department and industry experts who worked together and prepared official document of GMP, which is now duly published by the Drug Controller General of India.

Besides organizing lecture series for its members by a renowned expert in the field of IPR-related matters, the ADMI had made a representation to the VAT committee for implementing uniform VAT tariff for diagnostics throughout the country, at par with that applicable to drugs and medicines. The ADMI has made a representation to the finance ministry for classification of diagnostic product as per HSN guidelines for the purpose of excise as well as customs tariff.

The business of diagnostic products is increasing very rapidly at an approximate rate of 15-20 percent growth per annum in India. Though there is presence of diagnostics manufacturing units in the country, the demand for products like rapid tests, ELISA and biochemical kits are met by imports. "There is good scope for the diagnostics business in India due to increasing awareness among the public in rural areas. When these products reach small towns and villages, the utilization and demand will increase," observed Umesh Kaushik, operational manager, Nano Biotech P Ltd.

Stumbling blocks
Although there is an investment opportunity for local production, it is yet to be tapped to its fullest potential. At present, more than half of the diagnostic kits are imported at higher cost and are often ineffective as they are not designed for Indian climatic conditions or variant Indian strains of microbes. Substitutes for these would be an excellent opportunity. There is a market at both national and international levels for diagnostic kits. But a beginning has to be made in a small way by overcoming problems facing the sector.

"High import duty and custom clearance procedures, competition, logistics, lack of knowledge, licensing, slow pace of approvals from statutory authorities, lack of national laboratory network for evaluation and approval of new products are some of the factors slowing down the pace of indigenisation, "noted Suresh Vazirani.

Elaborating on the lack of proper guidelines in this niche market, Umesh Kaushik said, "There are no standard guidelines to grant license for manufacturing diagnostic products and for the approval of all ranges of products (for either imported or products manufactured in India). These vary from state to state. There is also no special package and exemption in taxes from the government for establishing diagnostic manufacturing units. The number of cheaper and efficient technology transfers in the area of diagnostics is limited."

Expressing anguish Dr Shama Bhat said, "Regulatory issues and corrupt consumers have crippled the growth of local diagnostic companies. I mean to say that the corruption in India is not just restricted to the government staff. It has spread its tentacles into the private sector too. People do not mind discarding good company for petty personal gains, particularly the lab technicians and purchasing officers. Coupled with this is the lack of qualified technicians which makes it difficult to sell new products to small to medium labs."

Red tapism, lack of strong will power to remain in the business of diagnostics, regulatory confusion and lesser margins are some of the issues confronting the growth of the segment. Moreover, as the segment is very small, it is difficult to drive the struggle. Importing raw materials at high cost is also a major issue facing the segment. To take up these issues with government bodies, all the leading manufacturers of diagnostic kits in India have come together under a banner called the Association of Diagnostic Manufacturers of India (ADMI). It has been actively working to promote the segment. ADMI in its short stint has already made many representations to government bodies.

Opportunity versus lack of market knowledge
In spite of growing market and opportunity, entrepreneurs are not looking at the diagnostics market as a lucrative sector. Industry people observed that entrepreneurs do not have sufficient knowledge about the range of products and the market that they have. Even the complex nature of the manufacturing process is coming in their way. "The industry being fragmented and due to lack of knowledge, the entrepreneurs will have to make a lot of efforts to develop the market and make it a non-viable one, " said Vazirani.

Diagnostic manufacturers
in India 
Agappe Diagnostics
Amar Immunodiagnostics
Bayer Diagnostics India Limited
Beacon Diagnostics Pvt Ltd
Bhat Biotech India (P) Ltd
Biolab Diagnostics
Fairdeal Diagnostics
J. Mitra & Co Ltd
Labcare Diagnostics Pvt Ltd
Mediclone Biotech Pvt Ltd 
Medtek Asia Pvt Ltd
Monozyme India Limited
Ranbaxy Diagnostics
Reckon Diagnostics Pvt Ltd
Span Diagnostics
Transasia Bio Medicals Ltd
Tulip Diagnostics (P) Ltd
Importers of diagnostic kits in India 
Abbott Healthcare Pvt Ltd 
Amar Immunodiagnostics 
Applica Bio-Diagnostic 
Arun & Co
Biomerieux India Pvt Ltd 
Bio-Red Laboratories (India) Pvt Ltd 
Cambindia Biotech Kits (Pvt) Ltd
Erza Brothers
Genetech Diagnostic Pvt Ltd 
Johnson & Johnson Ltd
LG Chemical India Pvt Ltd 
Lilac Medicare 
Monozyme India Ltd 
Morepen Labs Ltd
Qualigens Fine Chemicals
Ranbaxy Diagnostics 
Ranbaxy Laboratories Ltd
Rapid Diagnostics Pvt Ltd 
Roche Diagnostics India Pvt Ltd
Ruchi Corporation 
Saxsons Biotech Pvt Ltd
Spectra Pharma & Health Products 
Suyog Diagnostics Pvt Ltd 
Transasia Bio-Medicals Ltd 
Vector Biotech Pvt Ltd 
Source: Central Drugs Standards
Control Organisation (CDSCO)

"The diagnostics market involves laborious work. It is more demanding. One has to take up bigger challenges. Quality is the key factor in this small and niche market. Lack of skilled and technical talents to handle, push the entrepreneurs to surrender instead of facing challenges. And finally they end up making losses owing to many reasons," said Dashora.

Dr Joshi shared similar views. He said the sector required a great degree of expertise and the the size of the total market was very small. And hence people do not find it to be a very profitable business, he felt.

However, the fact remains that diagnostics is one of the major investment opportunities in the healthcare industry. India's large population base has created a huge demand for immunology kits for pregnancy detection, HIV, TB and malaria. Further, there is an increased utilization of diagnostic devices and tests in public hospitals.

Recognizing the opportunity, the Government of Gujarat is encouraging private players to set up a facility for manufacturing of diagnostic kits in the state. The unit can focus on the manufacturing of diagnostic kits for humans, animals, plants or fisheries. The different diagnostic areas include immunoassay, clinical chemistry and hematology.

At present about 25 companies are into manufacturing diagnostic kits in India. These include Accurex Biomedicals, Beacon Diagnostics, Bhat Biotech, Bio-systems Diagnostics J Mitra & Co, Monozyme India, Span Diagnostics Ltd, Transasia Biomedicals, Tulip Group and XCyton Diagnostics. The Department of Biotechnology (DBT) has been facilitating the transfer of many technologies for diagnostic kits to the industry developed at the CSIR labs. In India, there is still a gap between the industry and academia. India needs to work towards enhancing public-private partnership. This will result in proper utilization of public funds and more technology transfer.

Umesh Kaushik noted that there is scope for new companies venturing into manufacturing diagnostic products. Many companies are seeking technology transfers of foreign and in-house developed technologies for diagnostic manufacturing in India. The existing manufacturers are also upgrading their manufacturing facilities and increasing the number of products.

Owing to globalization, more and more kits will be entering the Indian market. The current market will grow manifold in the next few years. New and emerging technologies will also be introduced. Albeit margins being low, the diagnostic market is growing at a healthy rate and increase in spending on healthcare both by the government and individuals has shown a promising future ahead for the diagnostic kits market in India.

Narayan Kulkarni with inputs from Rolly Dureha


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