MR demand holds steady despite DRA

October 9, 2007

Editor’s Note: This is the first of a two-part series on the MR marketplace in 2007. The second, examining analyzing market forces, will appear next week.

Editor's Note: This is the first of a two-part series on the MR marketplace in 2007. The second, examining analyzing market forces, will appear next week.

Soft demand for new MR scanners in the U.S. has vendors believing this year will be flat compared with last year. That's good news, considering the circumstances.

By midyear, vendors had shipped about $630 million in new MR units to U.S. customers, almost exactly the revenues achieved at the 2006 midway mark. By the end of 2006, vendors managed to about double this mark, reaching about $1.2 billion in U.S. shipments. Vendors expect shipments by the end of 2007 to at least be in line with those of last year's. Signs indicate that the final tally may be even higher.

MR appears to have dodged the bullet fired by the Deficit Reduction Act, faring much better than other big-ticket radiology items. CT, in particular, has been hard hit by cutbacks in spending among imaging centers (See DI SCAN looks inside the declining CT market). Customers have started to get a handle on the DRA, at least as it affects MR, according to Jeff Bundy, vice president of the Siemens Medical Solutions MR division USA.

"They are coming to understand what it means in terms of their practices, and they are making the adjustments needed to be successful," he said.

Conrad Smits, CEO of Philips MRI, refers to the DRA in much the way one talks about death and taxes.

"We try to influence what is happening in the DRA, but in the end we have to live with it and build a business out of it," he said.

The DRA has had an effect, Bundy said, but he believes the worst may be over. If so, the first-half performance may give way to better numbers in the latter half of the year.

"Demand is starting to pick up again, as we expected," he said.

One of the market drivers is 3T. Having grown to about $260 million in U.S. shipments in 2006, 3T could eclipse that mark this year. Industry sources indicate that overall U.S. 3T sales put more than $140 million in vendors' pockets in the first half of 2007. If this year's fourth quarter resembles last year's - which was a big one for 3T - shipments could near $300 million, a 17% increase over 2006.

In stark contrast, the market for open MR has not done well at all. This segment, defined by low-field open scanners, has been crushed in recent years, accounting for $160 million in 2005 and only $120 million last year. The picture appears even worse this year.

In the first half of 2007, shipments of low-field open systems to U.S. sites totaled less than $30 million, according to industry sources. Bundy notes that Siemens is still selling some low-field opens, "but they are a small part of the marketplace right now."

Helping to offset these losses have been upgrades. A huge shift in that direction did not materialize, however, as new unit sales continued to plug along, said Dave Handler, general manager of global MR marketing for GE Healthcare.

Handler, Smits, and Bundy are upbeat about the future of MR. They point to a historical trend upward and the confidence that comes from the increasing demand for MR as a diagnostic modality.

"Clearly the demand for new systems will not go away when we see an increase in MR diagnoses," Smits said.