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Testing times for India’s diagnostics sector

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The COVID-19 pandemic has shaken out the kinks in Indias diagnostics sector. Today, pandemic panic has given way to increased investments in technologies like digital pathology, heightened customer experiences like drive-thru testing, and a renewed focus on training and protecting their employees. Revenues are picking up again but so are expectations, both from the government as well as patients/customers. A look at the sectors evolving post-pandemic playbook

 By Viveka Roychowdhury

As India struggles through the second COVID-19 wave, diagnosis has approved to be the first, if not the surest, barometer of the ferocity, pace and depth of this pandemic. As the first step in the government’s Test-Track-Treat strategy, diagnostics companies will continue to be at the forefront of the pandemic, keeping pace with the ebb and flow of these infection waves across different states.

Therefore is it no wonder that an August 2020 Edelweiss research report on the diagnostic sector predicted that the domestic diagnostic industry estimated at $9 billion (around Rs 675 billion), would grow at a compounded annual growth rate (CAGR) of ~10 per cent over the next five years. The pathology segment contributes ~58 per cent of total market revenue, the bulk of this sector. In a market where diagnostic chains command approximately 16 per cent market share, the Edelweiss report predicted consolidation, with national players increasing their market share.

Over the past year, diagnostics labs have been expanding their infrastructure and services to meet market demand. And the RBI decision in early May, to extend the on-tap liquidity window of Rs 50,000 crore at the repo rate to banks, with a tenure of up to three years, will no doubt give a further fillip to these CAPEX plans. With the loans classified as priority sector lending, this decision allows entities in the healthcare sector, including hospitals, diagnostic labs, manufacturers of vaccines, medical devices, COVID-19 drugs, and importers of these products to borrow at lower interest rates. As Kapil Banga, Assistant Vice President, ICRA summarises, “The facility will enable the players in the health- care sector to access the much- required funds at a low rate of interest, which will aid the CAPEX and investments in the sector, improve the accruals, the liquidity position and the debt protection metrics.”

But India’s testing policy has been criticised. As have the pricing decisions. In fact, equitable, cost-effective, and scalable COVID-19 testing and tracing in India is the subject of a detailed report put out by the Principal Scientific Adviser to the Government of India and The Rockefeller Foundation (RF). The report outlines how the country can strengthen its testing and tracking capacity to adapt to this moment, break the surge, and control future outbreaks, focusing on five critical opportunities for devising an equitable, cost-effective, and scalable COVID-19 response.

So while testing and tracing will ensure that the diagnostics sector expands over the next few years, what changes has the COVID-19 pandemic triggered within the diagnostics sector in India? Will diagnostics players be able to revert to pre-pandemic strategies and profit margins? Metropolis Health- care reported a 17 per cent YoY increase in revenue for FY21 despite the pandemic’s severe impact in Q1FY21.

How have government policies, for example, on price capping of RT-PCR tests, lock- downs, the centre-state tussle, impacted these companies and their evolving strategies? And what are the elements of the post-pandemic playbook of these diagnostics companies as they adapt to the new normal?

A different ball game

Looking back to when SARS- CoV-2 was first detected two years back, Aishwarya Vasudevan, Group COO, Neuberg Diagnostics recalls that they did not even think or speak about it, as they were not sure about the scale of its presence. When Neuberg Diagnostics completed the first few 100 tests, they thought the scale would come down in the coming few months, but today they are clocking more than 30000 tests a day.

Testing for SARS-CoV2, the virus which causes COVID-19 infection, turned out to be very different for diagnostic companies. And the first few months were about adjusting to the new paradigm.

Firstly, COVID testing is about swab testing and collection, and thus the testing, infra- structure and safety aspects were new to clinical chemistry laboratories, points out Dr A Velumani, Promoter, CMD, Thyrocare Technologies. Secondly, he says working under price and timelines con- trolled by the government puts too much pressure on laboratory staff. Third, the uncertainty of demand due to waves (of infection) was a huge challenge for the management of labs, inventories and capacities. And fourthly, COVID-19 testing is not a product that is any different from competitors, and hence it does not help big players to gain any brand based cost advantages.

Thyrocare responded by building capacities faster, training faster and though the company had its own pains in various aspects of business, the year 2020- 2021 ended with a decent 20 per cent growth in troubled times, inspite of Q1 being a complete wipeout, with COVID business tiding over the company even though there was no growth in non- COVID business. Dr Velumani adds that it was not easy to motivate the workforce to work under “pandemic panic” but it worked well for the company, finally.

Digital pathology saves the day

Dinesh Chauhan, CEO, CORE Diagnostics too mentions that since testing has been at the centre of measures to tackle COVID-19, it provided a booster dose to the diagnostic industry across boundaries, thanks to the adoption of digital technology to maintain contactless services with patients in several ways. A majority of CORE Diagnostics’ pathologists shifted to working remotely through dig- ital pathology solutions to avoid challenges related to physically being in the labs/hospitals.

In fact, CORE does this at a global level. “In order to access the best pathologists globally, we have been scanning and get- ting slides reviewed wherever needed. While the surge and convenience have driven the home collection and online re- porting practices in the industry, we have also expanded our network of phlebotomists to cater to increased home collections,” says Chauhan.

Digital pathology thus served ensured employee safety as well as business continuity. SRL Diagnostics too established digital pathology labs in their reference laboratories in Gurgaon, Mumbai, and Bangalore, which allow technicians to read images remotely, enabling real-time virtual collaboration between their multi-disciplinary care teams.

“Remote reviewing of pathological cases is also essential to prevent delay in critical patient diagnosis and care, particularly during a crisis and our association with Microsoft will also pave the way to this transformation further”, explains Anand K, CEO, SRL Diagnostics.

Dr Anupa Dixit, Lab Director, Suburban Diagnostics too highlights their digital pathology platform and predicts that the advent of home health will see an upsurge in the post-COVID era, influenced by the need for safety of the patients and customers.

 Innovative diagnostic delivery options

This huge disruption also had a positive fallout. According to Anand, “The year 2020 has tested the resilience of the Indian healthcare industry in bringing innovations to market quickly and it won’t be wrong to say that we’ve made a decade of progress in just a year. During the lock- down, healthcare delivery options like home collection, drive-through testing sites, mobile vans for COVID sample collection, telemedicine, and telehealth services stepped up and gained momentum in preventing, diagnosing, treating, and controlling diseases.”

One such example he flags is the transformation of buses into mobile COVID sampling and collection units. Moreover, Anand points out that the industry has witnessed a drastic shift from a remote care model to a model which is focused on the more measured assessment of health- care needs of the population and creating a long-term survival strategy for hospitals and health systems.

Also commenting on the difference between COVID-19 testing and other services, Vasudevan of Neuberg Diagnostics points out that, unlike other tests, demand (for COVID-19) is driving the market, rather than marketing creating the demand.

According to her, the company has ramped up for testing by putting more machines, hiring manpower and training them meticulously to ensure smooth functioning. Like other market peers, Neuberg Diagnostics too has introduced various testing options based on customer conveniences, such as home collection, walk-in kiosks, and drive-throughs.\

Change in consumer mindsets

Pandemic norms like lockdowns and social distancing triggered a change in consumer mindsets and industry players highlight a few of these changes.

◆             Home visits trump lab walk- ins:

The change in consumer mindset also gave way to the increasing demand for home vis- its vis-à-vis lab walk-ins, with the sector witnessing a 70 per cent growth, as per Anand. People have also started to realise the significance of molecular/ genetic testing and hence this has resulted in augmented investments, largely by private labs. Vijender Singh, CEO, Metropolis Healthcare also agrees that home testing has become the need of the hour for the diagnostic sector in India, and he nar- rates how Metropolis created their own special app to meet the nation’s demand for home testing which in turn provided easy ac- cess to everyone to register and get themselves tested. This has led to an increase in online bookings not just for COVID testing but for other non-COVID tests as well, according to Singh.

◆             New era of self-monitoring:

Another consumer change Anand mentions is that with the growing relevance of connected devices, IoT, and wearables, a new era of self-monitoring has been ushered in. Easy-to-use medical equipment for self-diagnosis like glucometers, BP monitors, oximeters, etc., and AI technologies has widened and enhanced the role of diagnosis drastically. This is a trend that he expects to continue, with the healthcare sector, in general, further embracing technology and automation to better lever- age growth in 2021.

◆             AI-driven customer care: To improve customer experience, SRL Diagnostics started using AI tools and ChatBots to automate and expand the customer support team to respond to simple queries like rescheduling, order status, etc., thereby mitigating patient anxiety.

◆             Digital test reports on the go: Additionally, SRL Diagnostics started providing QR Coded test reports, which will aid authorities in scanning and verifying the reports online much quicker and increase the efficiency as well. They also launched a COVID Risk assessment tool on their website, which is a set of solutions designed to help patients quickly identify coronavirus symptoms and introduced WhatsApp for Business to share test reports, which has been useful in reducing patients’ waiting time and provide information on the go.

Abha Chaudhary, Head of Marketing, Suburban Diagnostics opines, “Technology will be heavily used to enhance consumer experience and convenience. Focus on the wellness segment following the growing endurance of the people to re- main healthy will be a focal area.”

Building a robust supply chain: Chauhan of CORE Diagnostics also highlights that they realised that a robust supply chain is extremely crucial to ensure the effortless stream of reagents and kits even during unprecedented times. Streamlining logistics is the need of the hour which further includes being able to cope with sudden demands and speed up the mitigating response to a crisis.

Dr Dixit of Suburban Diagnostics too agrees, pointing out that leveraging technology to improve logistics and supply chain will result in better-operating metrics. Since March 2020, Chauhan reveals that CORE has partnered with several state governments to scale up the testing capabilities of the nation against this pandemic. The high volume of samples that they have been processing pushed them to invest more in automation and automate many functions in their lab that will improve their regular operations.

Lessons for the future

Singh of Metropolis Healthcare analyses that as the diagnostic sector played a crucial role in 2020 and is continuing to grow this year as well, India’s perspective towards the sector has also changed over the past year. “From being a centre to conduct annual health check-ups to now playing a crucial role in being a lifesaver for several Indian families, the role of the sector is constantly evolving. The impact of the pandemic has thereby led to the sector not only being able to take up the challenges brought by it, but also become an integral part in the medical healthcare system of the country,” according to him.

With the country now facing the second wave of coronavirus, extensive testing is yet again a tool that will help us in the Test-Track-Treat strategy, points out Anand. But what are the learnings from year 1/wave 1 that are influencing our response this time?

Need a consultative approach on policy decisions

Most companies would put better insight into health policy decisions on top of their post-pandemic strategy. Simply because these decisions can make or break the sector, especially the smaller players.

Dr Velumani’s observation that the pricing policy was “harsh and implementation were rude in some states”, is very valid. His wish that there was one nation and one rate is something that should be considered very carefully by policymakers.

Also alluding to the pricing and other policy decisions at the centre and state levels, Metropolis Healthcare’s Singh suggests that it would be ideal if the government would also consult with the private sector while making such decisions as it affects operation costs, especially for the smaller diagnostic players.

Harking back to the experience of the past year he says, “The pandemic has taught us how an integrated health system is a way forward for tackling any future hurdles for the country. With constant communication between the private sector and the government, it important to maintain this bond in the future as well.”

Need for more PPPs

Perhaps the stress of the year gone by and future uncertainty has left most industry leaders with the realisation that collabo- ration is better than confrontation. Singh thus believes that public-private partnerships (PPPs) could be part of the post- pandemic playbook in the diagnostics sector. According to him, “The government needs to also look at PPPs with the private di- agnostic sector as it will help in giving access to the latest in technology as well as facilities and services to the remotest areas in the country. It will also help strengthen the government’s reach in the rural sector as well.”

Such partnerships also lead to every citizen gaining access to world-class facilities and services. He cites Metropolis Healthcare’s partnership with the National AIDS Control Organisation (NACO) as one of the most successful PPPs through which the company helped the government continue its ongoing campaign to reduce the number of HIV/AIDS cases. He suggests that similar partnerships can be explored in the future as well.

Constant evaluation of risk with strong company culture

Perhaps the most important part of the sector’s post-pandemic playbook from a revenues perspective will be constant risk evaluation. As CORE Diagnostics’ Chauhan, reminds us, “Considering the dependency on imports of diagnostics kits and supplies, Indian healthcare was not well prepared for a situation like COVID-19. Thus, it made across industries think about the preparedness for the next pandemic. There is a dire need to enhance the supply chain and make it agile enough to cope with situations like this in future. Moreover, prioritising risks will help clear the fog and stay focused.”

Most companies have made this part of their new normal. For Anand of SRL Diagnostics, the main learning as a corporate is that they have realised the importance of a contingency and business continuity plan. “In the post-COVID era, we plan to begin by reviewing and renewing business continuity plan – using the lessons learned from our COVID-19 experience to bolster the plan and increase efficiencies. This pandemic has not just changed our lives, it has forced businesses to re-engineer their entire processes. The pandemic has also taught us that, for laboratories to stay relevant in the future, they have to focus on the overall well-being, and give importance to training and development of human resources.”

For Dr Dixit of Suburban Diagnostics, the focus is clear, “Our investments during the coming years will be focused on keeping us medically relevant for the next decade.” The role of technology, in building better accessibility as well as better testing capabilities will be the focus for the company.

But Chauhan also highlights the fundamental importance of company culture, saying, “While having a strategic plan certainly helps, you simply cannot adequately prepare upfront for unanticipated events like COVID. Our strong company culture helped us navigate through last year, and by keeping it our top focus, we know it is our biggest strength.”

Just as improving the customer experience has become vital, so has employee experience. The pandemic proved that corpo- rates are only as strong as their employees. As a frontline staff, lab technicians and phlebotomists were exposed to the virus as part of their work. As infection levels swelled in the population, diagnostics companies found themselves struggling to recruit, train, retain and most importantly, motivate employees.

Expanding on this aspect of risk, Chauhan highlights that COVID-19 has brought about multi-dimensional effects – remote working, the looming fear of going out for business, job insecurity, financial instability, etc. As a result, the mental well-being of the employees has become an urgent priority for companies. CORE Diagnostics has recently hired a Health & Wellness Officer to ensure that they have programmes and systems in place that put their employees’ wellbeing first.

The next Laboratory of the World?

Thus, most of the larger companies in India’s diagnostic sector have emerged stronger and more agile thanks to the disruptions wrought by COVID-19. In fact, many are well on the way to turning the challenges into opportunities.

For instance, Vasudevan of Neuberg Diagnostics believes their work and experience in this pandemic will help them get recognition “as a global diagnostic consortium with several centres of excellence.”

And this could translate at a national level too. In the long term, Anand believes our country can very well be turned into the ‘Laboratory of the World’ with the government joining hands with the private sector, while slightly redirecting its focus on life science, healthcare, and diagnostics. According to him, this can be done through funding researches on infectious diseases by making significant investments to strengthen the capabilities of institutions like the National Institute of Epidemiology in Chennai, the National Centre for Disease Control in New Delhi, the Centre for Infectious Disease Research in Bengaluru, and the National Institute of Virology in Pune.

But for these plans to pan out, we first need to get to grips with the COVID-19 pandemic. SAR-CoV2 is still on a roll, with many variants and myriad tricks. Till then, all bets are off.

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2 Comments
  1. Vipin Varma says

    Very useful insights Viveka. Kudos.
    Dr. Vipin Varma
    Delhi

    1. Viveka Roychowdhury says

      Thank you for the feedback Dr Varma

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