In this blog, we will discuss Market Drivers for the Indian Diagnostics Industry. These are around the future opportunities
(Featured Image Credits: The Battle For $20 Billion Indian Diagnostics Sector)
Brief Background of this Blog Series
Diagnostics Industry was of interest to me since 2017. However, I could spend dedicated time only during 2021 to study this industry. The contents that you see in the coming blogs were mined from Annual Reports, Concalls, RHP, Management interviews and a few Twitter spaces by Mr Aditya Khemka and Dr Velumani.
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Earlier Blogs in Diagnostics Industry
- The corporate sector is encouraging it employees to undergo preventive and wellness tests to support the well-being of their employees. This helps to reduce absenteeism and health risk level.
- Employer covers the cost of employee’s health screening in the packages. This is a new channel for revenue and growth opportunities in the Preventive/Wellness testing segment.
Convenience
- Diagnostic centres have started providing convenience to its customers through online booking, home collection of sample and online reporting.
- This model is getting customer attention as it reduces the burden to travel for testing.
- These would unlock greater opportunity for entities having strong network and high-tech lab to increase the revenue turnaround time by reporting a quick result.
Public-Private Partnership (PPPs)
- Public healthcare institution operating in rural areas lacks manpower and diagnostics services i.e. Pathology & Radiology
- To close this gap, private player comes in to play to deliver efficient services in the Government run hospital through PPP model.
- This is an advantage to private players to use this opportunity and penetrate the untapped market.
- Krsnaa Diagnostics is currently dominant in this model of business. More players could enter this model in future.
- It is seen that more States in India are showing interest in this model. This is evident from the tenders released by different States.
- PPP Model of business does have some pain areas. But at the same time, it is not a commercially viable model. Read my earlier blog on PPP, to get a 360 view of this model.
Sizeable Demand-Supply Gap
- According to estimates in 2017, the ratio of beds to patients in India was approximately 0.5 per 1,000 people. This is in contracts to the numbers in developed countries such as USA it is 2.9 and UK it is 2.5 beds per 1,000 people. (Source: https://data.worldbank.org/indicator/SH.MED.BEDS.ZS?locations=IN )
- In countries such as Brazil and China, this ratio is close to 2.1 and 4.3 beds per 1,000 people (year 2017).
- Thus, it can be seen that India’s healthcare infrastructure lags behind many of the developed and developing countries in the world.
- This low penetration of healthcare facilities provides a huge runway for growth in future.
- This along with trend of increasing healthcare demand brings in a substantial growth potential for the healthcare industry.
- When this happens there is growth in the diagnostics sector also.
Shift in Disease Profiles / Wellness and Preventive Test
- With rising income levels and changing lifestyles, the disease profile in India is shifting away from infectious diseases and towards chronic or lifestyle diseases, such as cardiovascular diseases, diabetes and cancers.
- The increase in chronic diseases has resulted in increased demand for diagnostic tests, including biochemistry diagnostic tests for blood sugar, cholesterol and lipid profiles.
- In addition to the foregoing factors, rising literacy levels of the Indian population have enhanced overall knowledge of chronic diseases and their increasing prevalence in recent years.
- The Indian population’s awareness to take wellness and preventive actions to identify pre-existing diseases or likely risks from particular chronic diseases is on the rise.
- With the growing awareness for preventive care there is going to be increase spend in Wellness and Preventive Diagnostics.
- As a result, the Wellness and Preventive Diagnostics segment can be expected to grow more in the coming years.
- Thyrocare is very active and a big player in this Preventive/Wellness segment.
Increase in Health Insurance Coverage
- As of 2021 over 65% of India’s private expenditure on healthcare was met through out-of-pocket expenditure.
- The current penetration rate of health insurance in India is low.
- Any increase in the penetration rate of health insurance in India is likely to contribute to the demand for healthcare services, particularly hospitalization rates, resulting in an increased demand for diagnostic services.
Source of data: https://www.statista.com/statistics/657244/number-of-people-with-health-insurance-india/
Growth in Medical Tourism
- India is emerging as a major medical tourism destination in the recent years
- This is primarily due to its competitive rates for healthcare services as compared to other developed countries.
- In addition, India offers advanced medical facilities in areas such as cardiology, joint replacement, orthopedics, ophthalmology, organ transplants and urology.
- The increase in medical tourists is likely to increase demand for healthcare services, including diagnostic services, in India.
Rising Income Levels
- Rise in income levels for the Indian population makes quality healthcare services more affordable
- This leads to demand growth for healthcare services and translate into healthy growth in the diagnostic services industry.
With this we end the discussion on Diagnostics Industry study. In the next few blogs will cover the Company Analysis (Read carefully, it is Company Analysis and not Stock Analysis) of the listed Diagnostics Chains in India. This will aim to give insights into the company, their business model, their strategy, vision, current size of operations, Management views etc. However it will not carry any investment recommendations or valuation related topics.
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