Imaging accessory growth cushions scanner softness

September 16, 1992

While medical imaging equipment sales plod along, burdened bythe recession and hospital capital cost constraints, demand forimaging accessories marches to a different drummer: a steady clinicalneed for diagnostic imaging. Experience at Picker

While medical imaging equipment sales plod along, burdened bythe recession and hospital capital cost constraints, demand forimaging accessories marches to a different drummer: a steady clinicalneed for diagnostic imaging. Experience at Picker Internationalshows how imaging accessory sales can serve to balance the upsand downs of the scanner business.

While Picker's overall revenue in fiscal 1992 (end-March) roseby 10%, sales of its Health Care Products division rose 21% (SCAN8/12/92).

"The market we serve is procedure-driven," said JosephA. Largey, president of Picker's HCP division. "Even thoughcapital acquisitions may be slowing down in a recessionary periodand customers want more productivity out of the equipment theyhave, they are still running procedures through."

Cost pressures proliferate in the accessories market despitesustained product demand. Medical film sales, for instance, areintensely price-competitive; hospitals shop for the best bargains.While overall sales rise, margins stay tight, said Jerry C. Cirino,HCP vice president of marketing.

Largey and Cirino spoke to SCAN at last month's American HealthcareRadiology Administrators meeting in San Francisco.

"Our situation is complex. Users will try to achieve higherproductivity and efficiency for their dollars. But look at thehealth-care population. The 15-year span of baby boomers is aging,and the fact is the older you get, the sicker you get," Cirinosaid.

Not all of Picker's imaging accessories revenue growth hascome through growth in the market. Picker is also building itsposition as the largest medical imaging accessories distributorin North America, Largey said.

"Market share is key. We have tripled our share in thelast five years," he said.

Picker maintains 22 distribution sites throughout North America.The firm sells a line of about 6000 different products, all inmedical imaging. Distributed brand name products constitute 75%of the HCP portfolio. Picker produces the other quarter of itsproducts itself, Largey said.

There is a system for sharing leads between the equipment andaccessories business, but Picker encompasses two distinct organizationswith different business cultures, he said.

"We (HCP) have a distribution mentality. We have on filein our computers 45,000 people who purchase from us. They viewus as the day-to-day type of supplier," Largey said.

Picker's HCP division maintains a field sales force of 65 representativescalling on 100-bed hospitals and above. This makes up the lion'sshare of the unit's business. About 8% of sales are made to smallersites handled by the firm's Medtel telemarketing group, he said.

PICKER'S LARGEST ACCESSORIES LINE continues to be medical filmsales, although contrast agents are quickly catching up. HCP distributesfilm for Kodak, Du Pont, Konica and 3M, Cirino said.

Contrast agent sales over the last two years rose from HCP'sfourth or fifth largest business to second place behind film,overtaking Picker's film chemistry line, he said.

Picker is the largest distributor of Schering's Magnevist gadolinium-DTPAMRI agent. HCP also showed preliminary information at the AHRAmeeting on Alliance Pharmaceutical's Imagent GI, a perfluorocarbon-basedoral agent that darkens the bowels and enables clearer imagingof abdominal organs. Alliance signed HCP as an exclusive NorthAmerican distributor for the agent last year (SCAN 9/25/91). Marketingapproval from the Food and Drug Administration has not yet beenobtained for the agent.

HCP is also a major distributor of x-ray contrast, handlingSanofi Winthrop's ionic and nonionic agents as well as bariumfor E-Z-Em, Lafayette and--on an exclusive basis--Smith and Nephew,Cirino said.

X-ray contrast, at well over $1 billion in annual sales, remainsa substantially larger market than MRI. The expected proliferationof new MR agents, however, and growth in the use of contrast forMRI procedures should bring that worldwide market to $500 millionin two to three years, Largey said.

"Our research tells us that only 25% of MR proceduresare using contrast. All the experts we talk to believe that thisis going to increase significantly," Cirino said.

Among the products Picker manufactures itself are protectivegarments and film chemistry. HCP introduced a new Ultima lineof lead aprons with stylish design and improved weight attenuation.The vendor also developed a patented self-contained caddy systemfor film chemistry that helps hospitals meet occupational healthregulations.

Opportunities for products that reduce chemical and silverdischarges from film processing are on the rise, Cirino said.California, for instance, is implementing a "permit by rule"regime that will limit the number of gallons of chemistry thatmay be disposed of by a hospital. Picker introduced a new filmfixer called SilverLite that helps reduce fixer consumption.

Picker has also signed on as a distributor of Polaroid's newdry-processing Helios laser camera and is now taking orders forthe unit. A firm release date has not been set, but Picker hopesto ship by the end of the year, Cirino said.

HCP will be distributing Helios to existing users of nuclearmedicine and ultrasound systems, while Picker's equipment businesswill be an OEM user of the camera. Helios will be introduced firstwith an 8 x 10-inch film format suitable for the nuclear medicineand ultrasound modalities.

Picker believes it has a competitive advantage with its wideline of imaging accessories and is approaching large hospitalswith a Prime Partners program to consolidate purchases from differentvendors and reduce inventory and materials management costs.

Three years ago, the vendor introduced an electronic data interchange(EDI) capability for accepting and processing orders. EDI gainedground fast in other medical supply fields but had not yet infiltratedmedical imaging departments, Largey said. Since that time, 20%of HCP's order volume has been brought on to the EDI system, whichis a requirement for participation in the Prime Partners program,he said.

"A typical material manager in a hospital might spend20% to 30% of his or her time every day fixing (supply) errors.We are trying to minimize these errors and free up time for moreimportant business," Largey said.

Computerized ordering in radiology has more room to grow, hesaid. Other nonradiological health-care suppliers, such as Baxter,have reached a 60% level of EDI order conversion. It is necessaryin imaging, however, to first increase ties between hospital materialmanagers and radiology departments, which are accustomed to functioningon their own, he said.

BRIEFLY NOTED:

  • U.S. ultrasound market growth will slow to an averageannual rate of 6.7% through 1995, according to a report by BiomedicalBusiness International of Santa Ana, CA. The total ultrasoundmarket in the U.S. is projected to grow from $806.9 million in1991 to $1.2 billion by 1996.

While maturing technology will slow the growth rate for scannersales, there will be significant niche opportunities, BBI saidin its study, The Diagnostic Ultrasound Market in the U.S. Intravascularultrasound sales in this market are projected to grow from $14million in 1991 to $55.5 million by 1996, with a rise in marketshare from 2% to 5% (see graphs).