PET equipment boom pushes industry to new heights in 2001

February 20, 2002

Double-digit growth looks possible this yearPET equipment sales soared last year. Strong growth in the first half was moderated by concerns regarding PET reimbursement, but the industry as a whole still turned in its best

Double-digit growth looks possible this year

PET equipment sales soared last year. Strong growth in the first half was moderated by concerns regarding PET reimbursement, but the industry as a whole still turned in its best performance ever, according to Marvin Burns, industry analyst and president of Bio-Tech Systems, a market research firm in Las Vegas.

Total orders for the year reached 190 units in the U.S. and 250 units worldwide, said Burns, who conducted an analysis of the PET marketplace for SCAN. This represented an increase of 25% over the previous year, with the prospect that double-digit growth will continue in 2002 to 2003. Considering that the average PET system costs from $1.1 million to $1.3 million, equipment orders in 2002 could bring in an estimated $225 million in U.S. sales and $300 million in worldwide sales.

PET procedure volume also increased, although not as rapidly as equipment placements. The installed base currently has unused capacity, according to Burns. This excess will be absorbed, however, as more new procedures are approved for reimbursement and utilization increases. The effect of PET's widening range of applications is already apparent. About 160,000 PET procedures were performed in 2001 compared with 100,000 the year before. Procedure volume in 2002 will probably exceed 200,000, he said.

"During the past year, reimbursement was liberalized to cover initial diagnosis of a number of diseases, whereas previously it was limited to staging and diagnosis of recurrent cancers," he said. "Allowing PET to be used in the initial diagnostic workup has helped to increase its value and encouraged primary-care physicians to request more of these studies."

The Centers for Medicare and Medicaid Services (CMS) is considering approval of PET for diagnosing Alzheimer's disease, which would greatly increase the number of potential PET studies. These PET procedures are relatively easy and cost-effective to perform. CMS may also approve PET imaging for primary diagnosis.

"Advancing PET from a confirmatory modality to a primary diagnostic technique could positively impact patient management," Burns said.

As PET procedure volume increases with more mainstream applications, the economics of PET usage will change, he said. The primary effect will be lower reimbursement per procedure. The initial announcement that CMS was planning to adjust reimbursement rates downward sent a shudder through the industry, but the agency has since indicated a willingness to review arguments by users of PET and has delayed implementing its decision on reimbursement until April 1.

The most recent adjusted rate per PET procedure was $1375, down from $2300 initially (SCAN 1/23/02). This rate was based on data that showed costs were in a range between $1300 and $1800 per procedure, with an average of $1500. Since the nearest APC (ambulatory patient code) was $1375, this was the number selected. If the average cost goes over $1500, a higher code may be selected. Although still under review, the final number will probably not be much higher than $1500, Burns said.

The logic employed by CMS is based on a "zero sum" principle, in which total funds available for reimbursing PET procedures are fixed. Therefore, as the number of approved procedures increases, the reimbursement per procedure must decrease accordingly.

"This is not entirely arbitrary in that consideration is given to cost benefits derived from new imaging procedures, which replace or eliminate existing procedures," Burns said. "The economic justification for this is sometimes difficult to prove, however."

By the end of 2001, about 400 PET systems were installed in the U.S., about one-third of them in mobile configurations. The number of mobile providers has been increasing, and the services offered have grown increasingly sophisticated, Burns said. Mobile providers have also been able to negotiate effectively with FDG suppliers and regularly offer a dose for $400 or less in conjunction with a PET procedure. It is difficult for individual users to buy FDG at these prices.

Suppliers of FDG have been steadily increasing capacity to accommodate procedure growth. P.E.T.Net, the largest supplier, has 28 distribution centers nationally and has been adding one per month. P.E.T.Net serves about half of all PET providers and expects to keep growing. The company's plan is to have 60 distribution centers operational by 2004, increasing proximity to users.

Improved design and image processing capabilities are helping to fuel the growth of PET. Major objectives behind these technological advances were increased patient throughput and reduction in imaging time, Burns said. Image resolution has also improved to the range of 4 to 5 mm, allowing more definitive diagnoses. Both ADAC and CTI have introduced PET systems employing crystals with higher light output and greater sensitivity. ADAC has been using GSO (gadolinium orthosilicate) and CTI has been using LSO (lutetium orthosilicate). These faster crystals promise to reduce imaging time and improve resolution, helping to offset their higher cost.

Each manufacturer has also introduced a combined PET/CT system, in which the CT unit is linked to a PET system. The patient is first imaged in the CT scanner and then moved axially into the PET scanner. The idea is to superimpose the PET image on the CT scan to obtain better anatomical reference points through image fusion.

Manufacturers hope that sophisticated users will appreciate these benefits. In these configurations, however, CT utilization is relatively inefficient compared with freestanding CT systems. Whereas a typical stand-alone CT scanner may image 12 to 20 patients per day, the combined PET/CT units, limited by the utilization of PET, often perform just five to six procedures per day, Burns said. These hybrid scanners also incorporate the most technically advanced PET and CT components, raising the cost for buyers into the $2.5 million to $3 million range.

Image fusion software packages provide a moderately priced and effective alternative to the combined PET/CT units, Burns said. These packages allow superimposition of CT or MR images onto PET scans with good voxel-to-voxel registration as well as flexibility in image presentation. The software is relatively easy to use and can be purchased for $50,000 to $70,000 from such companies as Nuclear Diagnostics or TRW's Center for Image Analysis. Although this approach may result in better registration than the combined PET/CT systems on a single axis, there is a catch, according to Burns.

"In order for image fusion to be effective, the radiology and nuclear medicine departments have to work together," he said. "Where nuclear medicine has been separated from radiology, the nuclear physician may not be properly trained to analyze the CT scan. Consequently, organizational issues may have to be addressed before these technologies can be effectively implemented.