The Indian diagnostic sector’s poised for growth; however lack of regulations is a major deterrent By Raelene Kambli
In the last two decades, the Indian healthcare sector has taken several strides towards innovation and progress. With its innovative competencies and immense business opportunities, the healthcare sector in India leads the priority list of several global players. According to the India Brand Equity Foundation, the sector is expected to grow at a CAGR of 17 per cent during 2011–2020 to reach $280 billion. In India, private healthcare accounts for almost 72 per cent of the country’s total healthcare expenditure. The per capita healthcare expenditure is estimated to grow at a CAGR of 15.4 per cent during 2008–2015 to reach $88.7 by end of this year. Moreover, between 2012–2022, the diagnostic market is expected to grow at CAGR 20 per cent to $32 billion from $five billion in 2012.
There are over 1,00,000 diagnostic laboratories across the country, of which 70 per cent offer pathology services and 30 per cent offer radiology and imaging services. Although corporate players such as Dr Lal Pathlabs, Metropolis, SRL Diagnostics and Quest Laboratories are gaining a reasonable market share, major bulk of the industry is still fragmented and unorganised. This acts as a major detriment to the progress of the sector as it creates an uncertain business environment.
Moreover, there are no specific laws regulating the industry, which is the root cause of this issue. While corporate players depend on accreditation from organisations like the National Accreditation Board for Testing and Calibration Laboratories (NABL) which is an autonomous body under the Department of Science and Technology, and the College of American Pathologists (CAP), smaller players operate more like mom-and-pop shops in the absence of any binding regulatory norms. Only about one per cent of diagnostic labs functioning within the country have received accreditation.
Lack of regulation: A major issue
Although the Government did pass the Clinical Establishment Act in 2011 to bring the diagnostic industry in its purview, the law is yet to be implemented. Again, the implementation of this Act rests with individual state governments.
Says Sanjeev Vashishta, CEO, SRL Diagnostics, “According to a study that SRL conducted this year, the size of the diagnostic industry including pathologies and imaging centres in India is worth $ eight billion. Nine per cent of this is run by SRL, which means we have 600 labs across India. But the biggest challenge we face is lack of regulations which allows the unorganised sector to mushroom freely.”
Neeraj Raghuvanshi, Business Director-Preanalytical Systems- BD Diagnostics, BD India opines, “Diagnostic results play a very critical role in healthcare delivery and almost 70 per cent of the treatment decisions are based on the test results. Timely and reliable diagnosis has a great positive effect in not just ensuring the correct treatment but also in bringing down the overall cost of healthcare. However, for such a crucial element of the healthcare delivery process, there is no specific regulatory framework that governs the diagnostic industry in India. Very limited entry barriers, with registration under the Shops and Establishment Act as the only criteria to start a lab has led to the proliferation of a large number of small labs with varying standards and practices. There is no established guideline that mandates minimum standards in terms of quality, technology, infrastructure and qualification of personnel for setting up and running a diagnostic lab. Accreditation is voluntary and the patient largely depends on the doctor or physician’s referral while making the choice of laboratory. So, the regulations that would drive quality, reliability and standardisation in pathology services in India need to be upgraded and updated.”
Adding to this, Ameera Shah, MD and CEO, Metropolis Healthcare informs, “The Central Government has recently put in place a voluntary accreditation programme but no measures are taken to spread awareness on its importance. There are no inspections or quality checks that are mandatory.”
This means that the industry is left to function on its own whims and fancies. What kind of harm can this situation cause to the industry and the people at large?
No regulation leaves a lot of room for malpractices and over-pricing. “This is the most alarming part of the healthcare industry. In India, all it takes to open and run a medical laboratory is a ‘Shops and Establishment license.’ It can be operated without any permissions and quality control mechanism. Unqualified professionals, proxy signatories, sub-standard equipment and reagents combine to yield diagnostic results which may be a dangerous basis to initiate a treatment,” replies Abhimanyu Kumar, Co-Founder, Director and CEO, Preventine.
“It took us several years to prove ourselves about the sophistry of the work we do, and today we test the samples coming from 11 countries, a few of them being developed nations in Europe. Had the baggage of being operative in a low regulated environment not been there, we could have reached these markets long before and moving faster than we are. The collective reputation of the country builds only on the correctness of the regulatory environment and more importantly, the implementation of the same. India has to work hard towards this. One doesn’t need to be a global player to face the bottlenecks; the lack of regulations affects you in several other small and big ways also. For example; one of the ways is that since the quality mechanism is not so strict for laboratories, even the vendors and suppliers of reagents and consumables adjust to the cozy environment. The sub-standard supplies make it to the laboratory system, thereby affecting the diagnostic results; and hence the treatments,” he adds.
On the same lines, Shah says, “In India, laboratories are required to be registered with the respective health departments before setting up. There are no other checks. Quality of the personnel, equipment, systems and processes remain unchecked. The Indian Medical Council did issue an advisory that pathology reports need to be signed by a doctor. While that does add some amount of accountability and credibility, it would still not guarantee precision in results. Right from sample collection, to sample transport and registration, there are a variety of things that could go wrong with a sample even before it is tested. These are called pre-analytical errors. From sample collection to report delivery, it is important to uphold highest quality standard in each step to ensure that the final report is error free. It is important to eliminate any human or machine made error because with each report, it is a person’s health and wellbeing at stake.”
“Lack of regulations and low entry barrier has led to the proliferation of a large number of laboratories offering various degrees of quality and reliability with no specific minimum standard that the patient can expect. Huge fragmentation in the industry with only 10-15 per cent of the labs being ‘organised’ creates another big challenge of scalability of practice and process standardisation. Training and education efforts are also largely concentrated within the ‘organised’ segment of the industry. A large number of small laboratories in tier II and III towns are untouched by advancements in technology and practice,” adds Raghuvanshi.
Lack of regulations not only taints the image of the industry but has an adverse effect on consumers too. Consumers, on the other hand, are circumspect about the rising and differing pricing policies applied for similar services by players. Anoop Mehra (name changed to protect identity), a resident from Mumbai to whom this Express Healthcare correspondent spoke to, reveals that there is a huge difference of price when he gets a routine blood test done at a corporate diagnostic centre and a local centre owned by a pathologist. “The difference is as huge as Rs 2000-3000. This makes it difficult for me to make a choice as to which diagnostic centre I should get my test done,” he discloses. Like Mehra, there are many such consumers who are unable to evaluate the quality vis-a-vis the price.
Shah agrees that differing price is an issue, but she justifies the industry as well. “The biggest challenge faced by the industry is the disparity in price and quality. Accredited laboratories invest more in giving a report that is accurate, which also comes at a cost. Most of these accredited laboratories are national reference laboratories, and owing to the huge volume and work load, it makes it possible for us to provide tests at an affordable price to the patients,” she explains. “There are no rewards for voluntarily adhering to quality standards and no penalty for flouting these standards,” she further highlights.
“Cost of several high-end tests is a function of volume. With the fragmented nature of this market, the small and mid-size laboratories are either not able to provide the entire range of tests, or offer low-cost proxy tests which do not yield concrete findings. Quality control steps have a cost irrespective of the volumes. With low volumes, the cost of maintaining quality goes substantially up, which is why the smaller laboratories choose not to invest in the quality maintenance. The circle remains unbroken because the medical fraternity as well as consumers continue to remain fine with the results coming without an integral quality control process; either due to lack of knowledge of laboratory quality management or for a fact that better results means higher costs. It is also the continuing rapport with the small laboratory next door that relationship comfort makes up for the uncertainty with the quality they have,” Kumar reckons.
Certainly, Shah and Kumar have a point in saying that diagnostic centres that abide by quality control norms would invest huge sums in maintaining standards and using high-end equipment. It also means that the cost of test would be high at such labs. However, in India, accredited high- end labs stand for only one per cent of the overall number. What about the rest? And does high quality always mean high prices? Then, the industry also keeps talking about affordable healthcare. How can one provide cost-effective services if there will be no efforts taken to bring down diagnostic service cost to economical rates?
How do diagnostic laboratories abroad function? Do they have a similar issue?
India vs global
Some industry experts feel that that there are certain disparities between the Indian diagnostic sector and the other global markets. “Laboratories in most of the developed countries need to get licensed by fulfilling all criteria before going operational. In addition, since the markets are mostly organised, the players voluntarily go for more accreditations from independent bodies like CAP and ISO15189. Their entire ecosystem, which also comprises the consumer, has evolved such that the sub-standard laboratories can anyway not exist,” Kumar informs. Comparing our Indian ecosystem to another emerging economy i.e. Brazil, he analyses, “I feel that there are over concentrations in certain geographies and under servicing in others. If analogy is picked from one of the similar economies then even Brazil has got about 85-90 per cent of the industry well organised.”
Kumar also cites the instance of Germany which has built up a brand for itself to the extent that service takers across the world swear by their quality. “If the government actively works through a process of developing the brand for India by way of bringing a few, simple and sensible reforms, I am confident that we have very large opportunities to cater to,” he feels.
So, what are the efforts taken by the industry? Is the industry joining hands to urge the government to enact laws to regulate testing labs?
Efforts taken so far
Certainly! Even if the government has been overlooking the important issue of introducing regulations within the sector, industry experts have not turned a blind eye. SRL informs that industry bodies like FICCI and NATHEALTH have got together to frame some guidelines to regulate the diagnostic sector. They are already speaking with the government to review and introduce guidelines for establishing and running diagnostic labs in India. Further on, Raghuvanshi speaks about how BD, along with Dr Lal’s Laboratories, have initiated an education programme for doctors, patients and technicians to enhance laboratory skills. “Regulations or conformance to standards creates a mindset change and builds a sense of urgency to improve on the current state. Within the industry, efforts are being made through outreach programmes to educate the prescribing doctors on the quality and reliability aspects of the laboratory and raise criticality of the diagnostic results in their eyes. While it is still limited, some large laboratories have also started communicating with the most important stakeholder i.e. the patient through mainstream media. Organisations like BD have been working with laboratories and industry associations to drive practice change, paramedical curriculum building and skill enhancement of laboratory personnel to help ensure better patient outcomes. Recently, BD India and Dr Lal’s Path Labs launched best practices in phlebotomy in Gurgaon to reduce lab errors and improve patient outcomes. This landmark initiative will provide certified phlebotomy courses to healthcare professionals, laboratory technicians, assistants and nurses, and support them in driving best practices in pre-analytical processes for accurate and reliable diagnosis,” he says.
For better times ahead
Efforts like these are indeed appreciated. However, much more is needed from the government and industry as well. Lack of regulations puts the industry on the brink of a crisis situation and gives rise to malpractices. Hence, corrective measures should be taken on an urgent basis. Industry experts recommend measures for better times. “While there are many initiatives that the industry is driving, one of the big gamechangers would be the implementation of the Clinical Establishment Act in letter and spirit. It is really important to have a census of what can be classified as a pathology laboratory – some basic guidelines around staffing, infrastructure, personnel, quality that gives the patient some assurance on the reliability of test results. Diagnostic tests are largely out of the scope of insurance. As the government moves towards giving universal health coverage, there should be recognised focus on preventive cover in addition to curative cover,” suggests Raghuvanshi. “A strict, well-regulated environment, well-monitored and most importantly, a forum where the decisions against faulty quality can be addressed in minimal time,” chips in Kumar. Shah sums up saying, “Organised laboratories and laboratory professionals have voiced their opinion time and again to bring in minimum quality standards to effect for diagnostic industry. There is an urgent need for legislation. The NABL has done a commendable job in formulating a rigorous quality protocol in place. Health departments of all states need to work with NABL to bring more laboratories in the ambit of accreditation. Unless this is mandated, it is difficult to raise the overall quality standard of diagnosis in India.”
All in all, there is no doubt about the potential of the Indian diagnostic sector to prosper in future. However, lack of regulations is a major deterrent. It adds to the cost, gives rise to malpractices and medical complications due to wrong diagnosis and even leads to high mortality. It is necessary for the government to intervene for added impetus to the burgeoning sector. A legislation is the need of the hour.
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