Your Lordships have (virtually) decreed that the tests relating to COVID-19 shall be conducted “free of cost” in all private laboratories. As the nation grapples with Coronavirus, judiciary’s intervention in Coronomics is troublesome because in times of crisis, it is even more critical that Judges not turn myopic in their zeal ‘to do something’.
Mandatory philanthropic services to the privileged defy logic
When the guardians of the Constitution choose to not convince but command people into mandatory philanthropic action, it leads to no less than an unwarranted mutation of our Constitutional ethos. In 2017, while delivering the verdict in Shivshakti Sugars Limited v. Shree Renuka Sugar Limited & Ors., Supreme Court itself acknowledged the necessity of adopting an interdisciplinary approach, and considering the economic consequences of a decision. However, lack of institutional accountability, and absence of economic audit has meant that the Court has prescribed a blanket free-for-all testing pass, which treats the rich and the poor alike.
Death knell to the Indian diagnostic industry
At the highest, the Court could have asked the government to foot the diagnostic bill of those who are below the poverty line. But it has instead decreed that a private laboratory, which has chosen to obtain requisite accreditation with the understanding that it will be allowed to recover its procuring and operational costs by charging up to Rs. 4,500 for a test, will now be forced to operate out of pocket. Instead of pushing the Executive to streamline the process of procuring kits and deploying resources for testing, what the judiciary has prescribed takes away every element of incentive which a private establishment needs, to function. The decision fails to take into account that at a time when markets are reeling under financial distress, and employers are struggling to pay salaries, a judicial decree of this kind may be a death knell to the Indian diagnostic industry.
Singling out testing procedures is arbitrary
Assume for a moment that it is the solemn duty of a private enterprise to render free services as a philanthropic exercise. Even in such an authoritarian discourse, singling out testing procedures in the fight against the COVID-19 pandemic is arbitrary. According to a report published by the Healthcare Foundation of India in 2019, in cases of hospitalisation, the total cost of diagnostics is ordinarily not more than 10% of the overall hospitalisation cost. There is, therefore, no economic or legal rationale in mandating free testing, which will simply amount to putting disproportionate burden on private diagnostic centres, which have no other source for revenue generation.
Impact on innovation, and efficiency of service
Pune-based Mylab Discovery recently obtained commercial approval for its innovative testing kit, which is produced for around Rs. 1,200, as against the kits imported from abroad, which cost around Rs. 4,500. Given that laboratories are not even allowed to recover procuring costs, will such a kit have any takers? Simply put, free testing will harm the economic model of the diagnostics industry, and discourage innovation. According to the Healthcare Foundation of India, the Indian laboratory diagnostics industry is characterised by high fragmentation, with the largest organised player having a market share of less than 5%. This makes the market ideal for competitive pricing, and free testing will take away the incentive to compete by testing efficiently.
Bypassing Clinical Establishments Act
As India scales up testing and contact tracing, the object behind allowing private laboratories to start testing was to ease the burden on the government machinery, by utilising the capacity of private enterprise. The government is already testing for free in its 118 labs, and had the ability to cross-subsidise testing in private laboratories for the needy. All private laboratories are governed under the Clinical Establishments (Registration and Regulation) Act, 2010, and the government could have exercised statutory control in any manner necessary. It is in these circumstances that the Apex Court has chosen to bypass the Executive by taking a policy decision, which has the potential to do more harm than good.
Under the doctrine of necessity, this too shall be made to pass.