In today’s Finshots, we talk about Amazon’s foray into India’s diagnostics space and whether it can disrupt the industry.

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The Story

Over the past week, you might’ve noticed something interesting. Shares of India’s diagnostic companies have taken a bit of a tumble. Stocks like Suraksha Diagnostic, Krsnaa Diagnostics, Thyrocare Technologies, Metropolis and Dr. Lal PathLabs slipped by up to 2%, even as the broader market moved in the opposite direction.

And you’ve probably guessed what’s spooked investors this time. But if you haven’t, well, Amazon just threw its hat into India’s diagnostics ring. It’s now offering at-home test collections, digital reports and bundled health services across six cities covering 450 pincodes. The buzz is that it could shake things up in a big way.

But here’s the thing. This isn’t Amazon’s first rodeo in Indian healthcare. It’s already dipped its toes into e-pharmacies and online consultations. Sure, those services are still around, but let’s be honest. They haven’t exactly set the world on fire. It’s more of a work-in-progress than a roaring success.

So why is Amazon doubling down and adding new pieces to its healthcare puzzle when it hasn’t really cracked the code yet?

Well, the simplest answer is that it already had e-pharmacies. But to figure out what to sell, it needed to know why people were buying medicines in the first place. That’s where online consultations came in handy. People could talk to doctors from home, get prescriptions and Amazon could plug into that system — supplying medicines and figuring out which pharmacy partners to work with in each region.

But what happens when a doctor suggests a blood test? People typically head to the nearest lab or get it done through a hospital. That’s a piece of the puzzle Amazon didn’t have. So diagnostics felt like a natural extension.

And when you zoom out, the diagnostics space in India does look like a ripe opportunity.

For context, right now, hospital labs control about 38% of the market. Standalone diagnostic centres take 37% and the big branded chains — the likes of Dr. Lal PathLabs and Thyrocare, hold the remaining 22%. But rewind to five years ago, and the picture looked different. Back then, standalone labs dominated nearly half the market, while big chains held just a measly 15%. Clearly, the winds have shifted.

Why?

Because starting a small diagnostic lab in India isn’t all that hard. You don’t need fancy equipment or major infrastructure. Regulatory checks are minimal, national accreditations aren’t mandatory and many labs operate without formal registration under the Clinical Establishments Act, which isn’t enforced in most states anyway. In fact, some labs even get by without trained pathologists or microbiologists on site.

That makes it easy to enter, but tough to trust.

And when it comes to health, trust matters. Patients are increasingly leaning towards branded labs that offer standardised procedures, reliable results and professional staff. That’s why chains have been gaining ground. They’re able to invest in better equipment, trained professionals and expansion — all while maintaining consistency across locations.

Add to that the growing demand, and diagnostics starts to look like a sweet spot. The Indian diagnostics market was worth $18 billion in FY24 and could nearly double to $35 billion by FY30. Operating profit margins are healthy too — around 30% in FY24, even though they’ve been weighed down a bit by the costs of digitisation and customer acquisition.

Naturally, Amazon’s been paying close attention to all of this.

Plus, it has the money. It has a trusted brand. It already owns an Indian delivery network and knows how to handle logistics. And now, it doesn’t even need to build everything from scratch. Instead, it’s partnering with Bengaluru-based startup Orange Health Labs — an accredited diagnostics platform backed by big investors like Accel, Y Combinator and General Catalyst.

Customers can choose from over 800 tests, get a sample collected from their home in as little as 60 minutes and receive reports within six hours for most routine tests. It’s fast, digital and designed for convenience, just the way Amazon likes it.

But we know what you’re thinking. Why partner with a relatively small startup instead of a big-name diagnostics chain?

Maybe it’s because startups are hungrier. They’re often more agile, focused on user experience and eager to build trust from the ground up — exactly the kind of partner Amazon would need if it wants to scale quickly and win customer loyalty.

But even with all that firepower, can Amazon actually disrupt diagnostics in India, you ask?

Well, that’s actually the tricky part.

As Amazon India’s Director-Medical, Jayaramakrishnan Balasubramanian, puts it in his media interviews — the goal is to make people trust diagnostics the same way they once learned to trust online shopping.

But health isn’t quite like ordering a pair of headphones.

Just think about it. You usually see a doctor only when something feels off. And for common stuff like a cold or fever, tests aren’t always necessary. When it is serious, you’re more likely to head to a hospital, just in case you need to get admitted. You wouldn’t want to book a test through Amazon and then run to the ER (emergency room) later. It just feels inconvenient.

Which means Amazon’s diagnostics model will likely lean heavily on preventive healthcare or getting tests done before something goes wrong.

But that’s a tough sell in India.

Preventive healthcare still has low penetration here. Most people think, “Why spend money when I’m not sick?”

It’s the same mindset that plagues insurance. And while Amazon may have excellent customer service, changing this behaviour won’t be easy, especially when the average Indian spends less than $15 a year on preventive care, compared to over $2,000 in the US.

So the real competition for Amazon’s diagnostics play probably isn’t the diagnostic chains. It’s actually the hospitals. After all, when things get serious, people still trust their local hospital more than an app.

And the only way Amazon could truly go toe to toe with that is if it builds its own hospitals someday.

Will it take that leap? Well, that’s anyone’s guess for now.

Until then…

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