Agfa adopts new strategies in effort to stay on top of PACS heap

Agfa adopts new strategies in effort to stay on top of PACS heap

Vendor looks to maintain market leadership in digital imaging

Agfa is often credited as being the market leader in PACS, and for good reason. The Ridgefield Park, NJ-based company boasts over 200 PACS installations, as well as three filmless-hospital sites.

Agfa's leadership position will be hotly contested in the coming years, however. Siemens continues to loom as Agfa's top competitor for filmless-hospital contracts. GE Medical Systems also figures prominently in any discussion of the large-scale PACS marketplace, thanks to its acquisition of Lockheed Martin Medical Imaging Systems in April (PNN 5/97). Furthermore, it's hard to find a medical imaging company these days that's not ramping up its efforts in PACS or networking connectivity.

Agfa is not resting on its laurels, however. The company is transitioning its direct sales force from selling conventional x-ray film products to focusing primarily on digital image management, a move that should enable Agfa to give even more attention to the market segment where the company is seeing some of its strongest growth rates. Agfa also hopes to capitalize on its position as one of the most experienced implementers of PACS networks to maintain its market leadership.

Phased approach to PACS

Agfa's corporate parent is European film and imaging vendor Agfa-Gevaert of Mortsel, Belgium, and Agfa-Gevaert is owned by German healthcare giant Bayer AG. Although the Bayer connection gives Agfa the backing of one of the world's largest companies, there has been some friction between the firms. In 1995, Bayer executives hinted that they might look to divest or spin off Agfa if its profitability did not improve. Agfa has strengthened its profitability since then as a result of a cost-cutting campaign at the company's European operations, and speculation about a spin-off has dwindled.

Agfa's origins in PACS stem from the company's role as a vendor of medical imaging film. Like other film providers, the company faces the unpleasant prospect of declining sales in its core market as digital imaging technologies achieve wider penetration in healthcare.

To counter this trend, as well as to complement its work in computed radiography, the company started its PACS effort in 1990, according to Vishal Wanchoo, vice president of technical imaging. Agfa decided at the time that a step-by-step approach to developing its PACS products would be preferable, rather than focusing on large-scale filmless-hospital PACS, a market that was still in its infancy at the time. R&D efforts began on an ultrasound miniPACS in 1990, and sales of that system, the first version of Impax, began in 1991.

"We knew the PACS market long-term would have a lot of potential, but we knew that going into it full-bore in 1990 with a full-scale PACS development, given the technology and the market at the time, was probably an incorrect move," Wanchoo said.

While several other PACS companies chose to emphasize reading workstation software first, Agfa focused its early efforts on PACS infrastructure, such as database management, archive management, and the RIS interface to PACS. That gave the vendor a leg up in pursuing filmless-hospital contracts and also facilitated earlier implementation of the DICOM standard, Wanchoo said.

"With an archive, you have to do storage and query/retrieve, and all the HIS/RIS verification," he said. "With the workstation, you don't have to go through that."

The second version of Impax expanded the system from ultrasound to offer multimodality capabilities, but employed framegrabbing digitization technology and was non-DICOM-compliant, as work on that networking protocol had not yet been completed.

Once the DICOM standard was ratified in 1993, Agfa moved to incorporate the standard into its soft-copy reading workstations and PACS network infrastructure, and completed work in late 1994 on Release 3.0, a fully DICOM-compliant, multimodality version of Impax. Installations began in 1995 and Release 3.0 was formally introduced at the 1995 Radiological Society of North America meeting. Agfa's first filmless hospital, the Philips Division of Beth Israel Hospital in New York City, went online in January 1996.

Agfa's product line

Impax is based on workstations developed by Sun Microsystems and includes:

• Database management software that is scalable and can support multiple CPUs, with provisions for redundant power supplies.
• Archives that use magneto-optical disk jukeboxes with a capacity of up to 1.2 terabytes using 2:1 lossless compression. Agfa's dual-CPU, UltraSPARC-based archive server can support additional nodes as customers need them.
• Diagnostic workstations in 1K and 2K configurations, running on 200-MHz UltraSPARC platforms.
• The RP5 teleradiology software package, which is suitable for home teleradiology as well as for referring physicians in an office environment. It runs on either Windows 95 or Windows NT.
• The ADC-70 computed radiography reader. Agfa has sold CR in international markets for several years, and entered the CR market in the U.S. in mid-1995 following a patent licensing deal with Fuji.

Increasing competition

Agfa's early start in PACS meant that it was able to begin making sales in the early 1990s, while other vendors were still trying to figure out how to approach the market. With Siemens its only real competitor for nongovernmental PACS sales, the company locked up many of the early PACS contracts.

Despite its early success, Agfa no longer has the luxury of being one of the only players in town. Agfa has moved to emphasize its PACS products even more, however. The vendor this year adjusted its marketing strategy, retooling its direct sales force to focus on PACS sales.

Under the plan, film and other equipment, such as film-handling systems and laser cameras, will be sold and distributed by dealer organizations, including Picker International's Health Care Products subsidiary, NHD, Mary X-Ray, and Diagnostic Imaging. A small portion of Agfa's direct sales force will continue to handle conventional accounts, but the dealer organizations will distribute the products after sales have been made.

In addition to distribution, dealers will also take over service and support responsibilities for Agfa's conventional products. Under the plan, some of Agfa's service personnel who are more suited to handle conventional products will be hired by dealers to support the Agfa equipment. As a result, Agfa will be hiring additional service personnel to handle its digital products.

Additionally, parent company Bayer has formed a corporate healthcare group called Bayer Healthcare Partners of West Haven, CT, which will be charged with selling Agfa products to large group purchasing organizations and managed-care providers.

Agfa continues to place importance on its conventional products, according to John Glass, senior vice president of technical imaging systems.

"We are committed to remaining a leader in the digital arena," he said. "At the same time we are also committed to our conventional imaging products, and the growth of that area through our sales organization, dealer channels, and OEM relationships."

Future plans

Looking ahead, Release 3.5 of Impax is scheduled for debut in September, and will support digital linear tape (DLT) media, which offers storage capacities of 70 gigabytes per tape using 2:1 lossless compression. The new version of Impax will also offer both low- and high-end families of DLT archiving technology.

In computed radiography, Agfa is still investing in CR technology and has other products in the pipeline in addition to the work-in-progress ADC Compact, which was demonstrated at the 1996 RSNA meeting. With direct digital acquisition of x-rays looming on the horizon, the company is keeping all its options open regarding digital capture technologies.

While 80% of Agfa's PACS sales still come from North America, international sales continue to grow. Last year, North American sales accounted for 90% of the vendor's PACS revenues. Most of the international growth is taking place in parts of Asia and particularly in Western Europe, Wanchoo said. Agfa has won several large-scale PACS contracts in Europe recently, including the MIRIAM project in France and Copenhagen Hospital Corporation in Denmark.

Agfa estimates that its share of the large-scale PACS market in the U.S. ranges from 40% to 45%, and despite increased competition, the company remains in an enviable position. Agfa's redirection of its direct sales force to digital image management products places it in a prime position to tap into higher market interest in large-scale PACS and filmless environments. While the vendor may lose market share to some of the new players in PACS, Agfa's long-term prospects still remain quite favorable.

Agfa Division,
Bayer Corp.
100 Challenger Rd.
Ridgefield Park, NJ 07660
201/641-9565
fax: 201/440-1512
www.agfa-medical.com

Management:
John Glass, senior vice president for Technical Imaging Systems
Vishal Wanchoo, vice president of marketing, Agfa Medical
John Scarano, vice president of sales
Bob Cooke, senior marketing manager for Impax
Rik Primo, international marketing manager

U.S. PACS revenue growth:
1996: 110%
1997 (est.): 147%

PACS product lines
Impax networking system
ADC-70 computed radiography reader

Filmless hospitals

Beth Israel Medical Center in New York City, Medical University of South Carolina in Charleston, and Genesys Health Systems in Flint, MI (in conjunction with Toshiba)

Product distribution
Direct and OEM sales

OEM partners
Toshiba America Medical Systems (U.S. distribution rights only) and Elscint (worldwide distribution rights)

Long-term PACS strategy
To maintain market leadership by focusing its direct sales force on its Impax digital image management products. The company will also continue to invest substantial resources in R&D and in its service and support organization. Agfa also sees significant potential in Web server technology, especially for use in disseminating data to referring physicians and clinicians.