Pharma companies band together to offer contrast, nuc med agents

October 13, 2004

Four makers of contrast agents and radiopharmaceuticals have begun selling their products to the imaging community as part of a single, consolidated portfolio. They have come together as an alliance, called the Imaging Choice Consortium, with the goal of broadening each other’s reach into the marketplace by leveraging the distribution channels of all four.

Four makers of contrast agents and radiopharmaceuticals have begun selling their products to the imaging community as part of a single, consolidated portfolio. They have come together as an alliance, called the Imaging Choice Consortium, with the goal of broadening each other's reach into the marketplace by leveraging the distribution channels of all four.

Each is a leader in at least one market segment. Two offer competing products.

Berlex, the U.S. affiliate of Schering, is a market leader in MR with its Magnevist agent, but the company also sells other MR and x-ray contrast agents. Bracco Diagnostics, a leader in x-ray contrast and ultrasound media, offers MR agents and radiopharmaceuticals. E-Z-EM is a leader in gastrointestinal imaging contrast, injectors, and virtual colonography products. PETNET Solutions, a subsidiary of CTI Molecular Imaging, produces and distributes positron-emitting radionuclides.

"We all have customer contacts, and we are, in essence, sharing those customer contacts," said Bob Milos, general manager for diagnostic imaging at Berlex. "We ask our providers if they would be interested in a consortium bid approach. If they are interested, we share that information with the rest of the consortium."

Companies in the Imaging Choice Consortium submit blind bids to customers. They determine the pricing themselves, discount the products any way they want, and choose the terms of their bids. In the event that products in the consortium portfolio compete, as happens when Bracco and Berlex each offers its own MR or x-ray agents, neither knows the other's bid price.

"We coordinate the bids so they arrive at the same time, but nobody knows what they are," Milos said.

Members of the alliance essentially compete against each other, he confirmed. But the cannibalistic effect, if any, is minimal. Each of the companies is a leader in a segment of the marketplace where the other companies have lesser shares. This breeds the confidence that alliance members will not take sales away from each other, at least not routinely.

"Market leadership in a particular area provides the confidence that when we go head to head with other companies, we will come out okay," Milos said. "When we lose, it is when the decision is not based on which is the best product."

The benefits of the consortium outweigh the negatives for members of the alliance and the imaging community, according to Milos. Practitioners are afforded a greater choice of products, and the prices they pay tend to be more competitive. Consortium members receive improved access to customers, potentially increased sales volume, and improved efficiency, which can translate into lower costs.

"Fundamentally, the core of the consortium is that we gain efficiency," Milos said. "We are building on the capacity we all have to reach customers, and (the consortium) allows us to share that capacity. We can then turn that improved efficiency into savings for our customers."

Notably missing from the alliance is GE Healthcare, which by any account is a leader in at least one segment of the imaging agent marketplace. In x-ray, the company offers Omnipaque and Visipaque. In MR, GE has Omniscan and Teslascan. In ultrasound, it has Optison. Radiopharmaceuticals include Myoview for the heart and indium oxine for labeling white cells to assess infection. The company even offers brachytherapy products and a bone pain relief product. But GE failed the litmus test for inclusion in the group.

"GE is more of a competitor than a collaborator," Milos said.

Since GE's merger with Amersham was finalized (SCAN 4/21/04), the company has begun providing not only the hardware but many of the imaging agents needed by practitioners. The company has been actively looking for synergies between these two sides of the business. One has appeared in ultrasound, where the company has used its extensive distribution channels for sonography equipment to hawk Optison. Others are being developed.

Although formidable, the GE-Amersham merger was not the spur that led Berlex, Bracco, E-Z-EM, and PETNET to form an alliance, according to Milos. Rather, it was a generalized reaction to an increasingly competitive environment. Contributing to that environment was Tyco Healthcare, which - like GE - was not invited to join the consortium. The company, through Mallinckrodt Imaging, offers x-ray and MR contrast media, delivery systems, radiopharmaceuticals, and even urology imaging systems.

"When you have companies with such broad product lines, what you have left is a group of other companies that are more specialized in specific areas," Milos said. "This has brought us closer together in order to compete effectively."

The consortium has been in the works for almost two years. Much of that time was spent getting used to the idea of competitors working together and working out the details of how it would operate, he said. A major concern was structuring the consortium to keep it from turning into an illegal cartel.

"There were a lot of issues," he said. "We had to protect each company from (breaking antitrust laws). We have been very careful to do that."

The last six months have been spent testing the mechanisms of operation and working out the details. With that done, the consortium is ready to go forward.

"The willingness to offer choice in our market is our primary source of efficiency," Milos said. "Efficiency creates savings for us that we can pass on to the customer. It is fundamentally good for us, and we think we can make it good for our customers as well."