With at least half a dozen mergers and acquisitions by existing players and a heavyweight market entry by a pharma major in the last 12 to 16 months, India’s mostly fragmented medical diagnostics industry is getting consolidated and preparing itself for the next level of growth transformation and at the same time an unprecedented competition.
The top-rung service providers, including the newly-merged entities, in this Rs 700-billion market are also planning large investments in the next few years for expanding service portfolio as well as geographical reach. As a result, the industry is all set to see a breakthrough growth in terms of products and services. It essentially means the market will now see innovative tests, better technologies and enhanced access to novel diagnostics services.
The consolidation trend, according to market analysts, would also lead to further investments in the country’s medical tests and the imaging market in the next three to five years, mainly aimed at expanding market reach by the national players. This will leave the localised small laboratories just with the options of either surrendering to the buyout bids by the national players or succumbing to the competition.
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Key merger and acquisition deals in the country’s diagnostics services sector during the last 16 months included the 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; online pharmacy startup PharmEasy’s majority stake buyout in Thyrocare Technologies for Rs 4546 crore; Dr Lal PathLabs’ Rs 925 crore acquisition of Suburban Diagnostics; and the merger of Chennai-based Healyst Wellness Laboratory with Neuberg Ehrlich Laboratory.
In addition, one of India’s top drug makers — 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.
According to leading investor research organisation Edelweiss, this industry consolidation trend was imminent in the country. “The Indian medical diagnostics sector is highly fragmented and under-penetrated despite the presence of over one lakh labs. So, there is a huge opportunity for national players to consolidate and for organic expansion,” it wrote in its recent industry analysis report.
“With private 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,” says Edelweiss’ senior research analyst Praveen Sahay in the report.
However, this rising competition is unlikely to lead to reduced costs to patients as the domestic industry is still 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.
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The latest available industry data shows that the national players, including the top diagnostics chains such as Dr. Lal PathLabs, Metropolis Healthcare, PharmEasy-Thyrocare and SRL Diagnostics, all together command less than 20 percent market share currently. The remaining 80 percent is still shared by small local labs run by individual pathologists and regional players.
However, this position would reverse soon considering the rapid pace of industry integration witnessed in the market and large market expansion plans in process within the organised segment. The new generation genetic testing labs are another fast growing segment in the national diagnostics play as this industry has emerged as an attractive business component in India's growing healthcare sector and is one of the fastest growing services in the country.
The top-rung service providers, including the newly-merged entities, in this Rs 700-billion market are also planning large investments in the next few years for expanding service portfolio as well as geographical reach. As a result, the industry is all set to see a breakthrough growth in terms of products and services. It essentially means the market will now see innovative tests, better technologies and enhanced access to novel diagnostics services.
The consolidation trend, according to market analysts, would also lead to further investments in the country’s medical tests and the imaging market in the next three to five years, mainly aimed at expanding market reach by the national players. This will leave the localised small laboratories just with the options of either surrendering to the buyout bids by the national players or succumbing to the competition.
Also Read: Corbevax vaccine gets DGCI nod as a heterologous COVID-19 booster dose for adults
Key merger and acquisition deals in the country’s diagnostics services sector during the last 16 months included the 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; online pharmacy startup PharmEasy’s majority stake buyout in Thyrocare Technologies for Rs 4546 crore; Dr Lal PathLabs’ Rs 925 crore acquisition of Suburban Diagnostics; and the merger of Chennai-based Healyst Wellness Laboratory with Neuberg Ehrlich Laboratory.
In addition, one of India’s top drug makers — 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.
According to leading investor research organisation Edelweiss, this industry consolidation trend was imminent in the country. “The Indian medical diagnostics sector is highly fragmented and under-penetrated despite the presence of over one lakh labs. So, there is a huge opportunity for national players to consolidate and for organic expansion,” it wrote in its recent industry analysis report.
“With private 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,” says Edelweiss’ senior research analyst Praveen Sahay in the report.
However, this rising competition is unlikely to lead to reduced costs to patients as the domestic industry is still 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.
Also Read: One in every 36 infants still dies before first birthday in India: Data
The latest available industry data shows that the national players, including the top diagnostics chains such as Dr. Lal PathLabs, Metropolis Healthcare, PharmEasy-Thyrocare and SRL Diagnostics, all together command less than 20 percent market share currently. The remaining 80 percent is still shared by small local labs run by individual pathologists and regional players.
However, this position would reverse soon considering the rapid pace of industry integration witnessed in the market and large market expansion plans in process within the organised segment. The new generation genetic testing labs are another fast growing segment in the national diagnostics play as this industry has emerged as an attractive business component in India's growing healthcare sector and is one of the fastest growing services in the country.
— CH Unnikrishnan is Founder & Editor at Future Medicine India. Views expressed are personal.
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