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Diagnostics players in India are hellbent on reducing testing costs further to make more Indians opt for regular checkups. But they face a peculiar challenge. Medical testing is highly fragmented in India, with many individuals running single-store operations and people are not usually concerned with the brand when accessibility is a factor. Are subscription models the answer?
Diagnostics chains in India have seen their stocks correct sharply. A major reason has been disruptive pricing — some standalone testing prices have decreased from Rs 500-600 to Rs 100.
But diagnostics players are still hellbent on reducing costs further to make more Indians opt for regular checkups. Here, diagnostics labs face a peculiar challenge. Medical testing is highly fragmented in India, with many individuals running single-store operations. People are not usually concerned with the brand when accessibility is a factor.
So, to create a loyal base of customers who would return in hopes of a packaged deal, chains such as Tata 1mg and MedPlus Health Services have launched subscription models. And to protect its profits, even a player with deep pockets like Apollo is dabbling with the idea.
Suneeta Reddy, managing director of Apollo Hospitals, in an exclusive interview with CNBC-TV18, said the company is seriously thinking of a subscription-based lab testing model and gauging the risks right now.
“I don't think we are ready to roll it right now out because when you do a subscription-based model, you have to be prepared to take all the risks. We are looking at what we can do to derisk the model," she said.
Reddy said working with a partner may be the right way of doing it and said when launched, the model would be open to all, not just its Apollo 24x7 members.
MedPlus also recently launched a scheme where one can pay between Rs 1,000 and Rs 1,700 annually for a single person or a family, respectively, to get tests worth the money paid. Any additional tests are being offered to scheme members on 75 percent discount, and there are no caps on the number of times one can get tested at a discounted rate.
Madhukar Gangadi, founder and CEO of MedPlus, told CNBC-TV18 about the tremendous response. "The subscription model is a pilot project and not just a promotional scheme. We have rolled it out in Hyderabad and thousands have already enrolled. Once we get what we are really looking for, we will go across the country," he said.
Think of it like insurance, Gangadi explained, adding, "We buy health insurance to make sure costs are less when you actually need the service."
Reddy said Apollo would not just offer a similar scheme, but would sometimes bring in what is offered at its hospitals as well because they have an added advantage over other diagnostics players.
"It would not just include pharmacy and tests, it would include the whole preventive healthcare space," she said, adding the players are following a deep-discounting model similar to the telecom pricing wars India witnessed 10 years ago.
The diagnostics subscription model, however, is not new.
Tata 1MG told CNBC-TV18 they had launched a scheme over four years ago. The plan now has 500,000 paying users. Gaurav Agarwal, co-founder and chief technology officer at Tata 1mg, said their subscription plans bundled not just diagnostics but pharma and consultation services as well.
"We charge around Rs 279 every six months. I don't think it will put any pricing pressure, and I'm glad others are doing this as well. India does not have outpatient insurance, which prevents many people from going out and getting day-to-day care as required," he said, adding such plans will go a long way in helping Indians to utilise more healthcare services and take better care of their and family's health.
In May, Agarwal had said 1mg continues to innovate in driving prices down further. “We can offer 30-40 percent cheaper prices than what exists in the market,” he had said. At the time, Devendra Rajput, the national head and director at Apollo Diagnostics, had also said that with competition, the market should expect a price correction in the top 50 or 30 tests.