An unworkable testing model

Private labs have costs. They must be compensated for testing

In a significant move, the Supreme Court, earlier this week, ordered that all coronavirus disease (Covid-19) tests be made free. This applies to both government facilities — which were testing for free — and private laboratories, which, as per a guideline set by the government, were charging ₹4,500. The court’s order, far from making testing accessible to all, could actually curtail the scale of India’s testing and limit it by making it unviable for private labs to test.

It is important to go back to first principles here. Private enterprises, including labs, are not charities. They invest capital in setting up infrastructure; they have working capital requirements to pay their staff, pay rent, and run operations; they charge patients and then hope to recover the cost — and make profits. It is true these are exceptional times. And that is why, to their credit, private labs agreed to test Covid-19 patients at cost price — as determined by the Indian Council of Medical Research. What the court order has done is remove even this layer by not allowing private labs to charge anything. How, then, is it possible for these labs to have the testing infrastructure, retain their employees, and run operations? In fact, the likely outcome of the court order is that at a time when India is desperately trying to augment testing capacity, private labs will scale down their operations and minimise, or even stop, testing. This will not just hurt public health objectives, but also weaken the already fragile economy further, especially if private labs decide to close operations.

The same logic applies to vaccine research; billions of dollars are spent on it; imagine if overzealous courts around the world decided that a vaccine should be made available for free. Who will then defray the research cost? Which is where the State comes in. In this case, the government must step in to compensate and reimburse the private labs, on an efficient basis, so that they can ramp up testing without needing to worry about business viability issues. It is important for courts as well as governments to realise that the primary onus of dealing with the public health challenge rests with the State, not private facilities, which can, at best, play a supportive and supplementary role. The order is also a reminder that what may appear noble at first glance can end up being counterproductive, even go against national objectives.