PE-backed pathology chains get a shot in the arm as SC tweaks virus testing order
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The Supreme Court on Monday modified its recent order that had made it mandatory for private-sector pathology chains like Dr Lal PathLabs Ltd and Thyrocare Technologies Ltd to test coronavirus samples for free.

The implementation of the court’s April 8 order would have hurt private labs already battling a drop in their normal business due to the lockdown imposed by the government to help contain the spread of the new coronavirus.

The court has now clarified that free testing will be available only to those people covered under the central government’s healthcare insurance scheme Ayushman Bharat and other related schemes.

The apex court also said that private labs will be allowed to continue to charge a fee of Rs 4,500, as earlier capped by the government, to test coronavirus samples.

The order is a positive development for private-sector diagnostics companies and their investors. Most of India’s top pathology chains are backed by private equity investors. Dr Lal PathLabs, for instance, counts WestBridge as a PE investor while Thyrocare is backed by Nalanda Capital and Metropolis Healthcare Ltd by buyout giant Carlyle.

In fact, Nalanda had invested in Thyrocare just last month.

Thyrocare founder and chairman A Velumani said the chaotic situation that private labs faced after the court’s earlier order could have been avoided.

“In good times free-of-cost things can be considered but not during a pandemic when diagnostics firms themselves need to generate revenue to pay for the logistics and infrastructure to cater to the customers,” he added.

He also said that Thyrocare will go back to charging Rs 4,500 to test the coronavirus samples against Rs 3,500 it had decided earlier as he thinks that most people approaching its labs to get tested can pay for it.

In an earlier interaction with VCCircle, Velumani had said Thyrocare's normal business had come to a standstill after the lockdown came into place on March 25. He had also said that he didn’t expect the business to improve in the next two quarters at least.

Ameera Shah, managing director at Metropolis, said in a statement that the Supreme Court's new directive will allow private labs to scale up testing to support the government during this national crisis. “We are scaling up drive-through and home visit testing significantly,” she added.

Kiran Mazumdar-Shaw, chairperson and managing director at Biocon Ltd, who had been critical of the apex court's order to make it compulsory for private labs to do free testing, also welcomed the new ruling. “A very sound ruling which is fair to all concerned,” she tweeted.

VP Rajan, executive director at investment banking firm Veda Corporate Advisors, said this is a welcome move since the private labs can continue to serve their regular middle-class and rich customers without any hindrance.

Any overflow of poor patients in the short term is likely to be minimal, given that all states are increasing their testing capacity, including by tying up with private labs to process coronavirus samples, he added.

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