A little late in the game, last month, Odisha government joined the states that have chosen to offer free diagnostics to people. Every time states say ‘free diagnostics,’ path labs sense a big opportunity. Which is why Dr Lal, SRL and other organised large pathology labs bid for the tender, confident in their chance to win. After all, they have the ability to conduct thousands of tests, keep the prices low and maintain quality in labs.

Except none of the large, publicly-listed companies that dominate major Indian cities won the bid. Instead, 10-year-old Techmed Healthcare walked away with the contract. It impressed the Odisha government by promising to make each of the 32 government path labs in district hospitals capable of giving out test results in three to four hours. Whereas, larger path labs centred in cities—Bhubaneswar, in this case—would have relied on collection centres to send samples to the lab and receive the result. A process that would take up to three days.

Techmed earned a revenue of Rs 20 crore ($3 million) in FY17. The leading path lab chain Dr Lal earned Rs 881.87 crore ($135 million). In an industry growing at 27.5%, it’s the regional players that are pushing the market, which, experts estimate, will reach $13 billion in the next two years. One of the biggest growth drivers? The government.

Consider this. Under the National Health Mission (NHM), the central government had approved Rs 649.29 crore ($99.5 million) for 24 states in 2016-17 for the free diagnostic services initiative. Since then, many states have announced their own separate schemes. Odisha government announced free diagnostics last year by earmarking approximately Rs 300 crore ($46 million) to be spent in the next five years under a scheme called ‘Nidaan.’ Together, central and state governments would be outsourcing lab tests worth up to Rs 7000 crore ($1 billion) annually.

The PPP opportunity

Together, central and state governments would be outsourcing lab tests worth up to Rs 7000 crore ($1 billion) annually

On 21 March, the Modi government gave a booster dose to the NHM by approving its 2017-2020 budget of Rs 85,217 crore ($13 billion). Contributing to this opportunity, beyond centre and state missions, are unsuspected buyers like the National Aids Control Organisation (Naco). For instance, Metropolis Labs in Mumbai won a contract from Naco to conduct HIV viral load-testing across 525 antiretroviral therapy (ART) centres in the country.

Further, Wipro GE Healthcare is the leading provider of radiology labs to the government. It runs 150 centres across 15 states which are operated by clinical partners. The state budgets, in return, contribute to approximately a quarter of Wipro GE’s Rs 4,031 crore ($621 million) revenue (FY16), said Rajat Ghai, director at GE Healthcare who is responsible for government sales and public-private partnerships (PPP).

AUTHOR

Ruhi Kandhari

Ruhi writes on the impact of healthcare policies, trends in the healthcare sector and developments on the implementation of Electronic Health Records in India. She has an M. Sc. in Development Studies from the London School of Economics.

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