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Diagnostics And Laboratory Tests Outsourcing To India Hindered By Regulations

Some US and UK regulations are preventing the growth of Indian diagnostic chains that offer diagnostic and laboratory testing for firms seeking to outsource those services. Companies are required to establish labs in India to handle insurance claims and medical reimbursements, as well as to hire international physicians. Regulations also call for the accreditation of Indian labs, doctors and technicians to international standards.

High-end tests such as genetics and molecular biology, which are labour-intensive, are sent to India as they can be serviced at nearly one-eighth the costs of developed markets. Indian firms have vied for outsourced tests which account for 1-2% of the estimated $50-billion US diagnostic market.

“The need to have direct lab presence in the target country to service medical reimbursements and insurance claims is a roadblock,” chief executive officer of Lal Pathlabs, OP Manchanda said. In addition, companies are expected to employ international doctors which pushes up costs further. Lal Pathlabs, however, plans to address this market by entering into a revenue-sharing alliance with US-based Ssure Pathlabs.

Many Indian diagnostic firms are now betting big on the markets of Middle-East, South Asian and South-East Asian markets. “US regulations and lobbying due to fear of job loss has put pressure on our entry, and the focus is now on emerging markets as the return on investment is high,” said GSK Velu, managing director of Metropolis Health Services. He expects his company’s outsourcing revenues to go up from around 20% currently to almost 50 over next two years.

Apart from the US, even UK is a tough market to address because of certain regulations.

“Invisible trade barriers in the UK, where samples cannot easily be sent out of the European Union, is a limitation,” chief executive officer of SRL Ranbaxy, Sanjeev Chaudhry said. Meanwhile, experts such as Ajit Mahadevan, partner- Healthsciences Practice, Ernst & Young India say that despite challenges with outsourcing, regulations are important for the export markets. “The need for regulatory compliance and standardisation becomes important as faulty diagnosis can create a political uproar in regulated markets,” he said.