Dispute with manufacturing partner delays Voxel’s holography systems

January 22, 1997

Firm gets good news with modification of CPT codeHolographic display developer Voxel is encountering delays inthe anticipated launch of its novel 3-D imaging system, due toa disagreement with the company it has hired to manufacture theproduct. The

Firm gets good news with modification of CPT code

Holographic display developer Voxel is encountering delays inthe anticipated launch of its novel 3-D imaging system, due toa disagreement with the company it has hired to manufacture theproduct. The dispute came just as Voxel, of Laguna Hills, CA,was beginning a program to install the systems at six beta sitesacross the U.S. in preparation for a commercial product launch.

Voxel's technology takes scan slices from CT, MRI, or othermodalities and converts them into holograms that appear to extendinto space when displayed on a special light box (SCAN 9/23/92).The company believes that the images, dubbed Voxgrams, are a usefulway of viewing 3-D data, particularly for angiography studies.

Food and Drug Administration clearance for the technology wasreceived in late 1995, and Voxel had hoped to begin commercialshipments last year. To manufacture a production version of theVoxcam system that converts scanner data into holograms, Voxelcontracted with General Scanning, a laser system developer basedin Watertown, MA.

Despite the mid-1996 target date, General Scanning's firstVoxcam wasn't shipped until late last year to Voxel's initialbeta site, the New Mexico Institute of Neuroimaging at New MexicoRegional Federal Medical Center in Albuquerque, which is operatedjointly by the Regional Federal Medical Center and the Universityof New Mexico. In addition to the delay, the system's image qualityhas not performed to the company's expectations, according toRaymond Schulz, director of marketing at Voxel.

On Dec. 24, Voxel announced that it believed General Scanningwas in breach of the contract between the companies for failureto meet engineering specifications, product performance requirements,and scheduled delivery dates. The announcement triggered the beginningof a 60-day period of informal negotiations between the companiesregarding the status of the contract. The dispute will go to arbitrationat the end of the period if a resolution has not been reached,Schulz said.

Voxel said that until a resolution with General Scanning isreached, it would work to establish an alternative source to supplyVoxcams. The company could select a new third-party supplier orchoose to purchase sub-assemblies and perform systems integrationin-house.

General Scanning denies that it is in violation of the contract,stating that it is in the process of completing and deliveringbeta units. It also stated that it expects Voxel to honor itsobligations under the contract, including General Scanning's exclusiverights to produce Voxcams.

The dispute hits Voxel at an inopportune time. The companyalready faces an uphill battle in winning acceptance for its technology,which differs considerably from the film-based slices that radiologistsare used to. A good beta-site program could help the firm generatea positive buzz for the technology, but that is behind schedule,due to the production delays. Voxel has five other beta siteswaiting to receive Voxcams, Schulz said.

Despite the delays, Voxel is refining its sales and marketingstrategy to emphasize leasing arrangements rather than outrightsystems sales. Voxel hopes to sign healthcare facilities to four-yeardeals in which systems are leased for $75,000 a year. The amountincludes a Voxcam to produce films, 10 Voxboxes for film viewing,Voxpads for routing data from modality scanners to the Voxcam,and enough film to produce about 1000 Voxgrams in a year. Serviceand maintenance are also covered. The systems use Konica holographicfilm, which Voxel sells to its customers.

Such leasing agreements may find favor with hospitals reluctantto take a gamble on acquiring such a new technology. The dealswill also help keep the cost of using Voxel technology out ofa hospital's capital equipment budget, according to Schultz.

"It minimizes the risk," he said. "After fouryears, if you don't want it anymore, you stop paying $75,000 ayear."

At last month's Radiological Society of North America meeting,Voxel emphasized the potential economic payback of using its technology.In fee-for-service situations, Voxel holograms can become a marketingtool by helping generate referrals from referring physicians,Schulz said. In a managed-care environment, Voxgrams may be ableto save money, such as by allowing radiology departments to conducta CT angiography study rather than a standard angiogram.

Voxel got some good news on the economic front a week afterthe RSNA meeting, when its application to modify an image reconstructionCPT code to include holography was approved. Using CPT code number76375, physicians can be reimbursed starting Jan. 1, 1998, forholographic reconstruction of data from MRI, CT, or other tomographicmodalities.