Tepid demand for MR in 2007 still dampens scanner sales

June 3, 2008

New models and upgrades for high-field systems continue to shape 2008 in lingering buyer's market After three years of declining sales, manufacturers are hoping for a rebound in the MR marketplace this year. If it comes, it won't be much.

New models and upgrades for high-field systems continue to shape 2008 in lingering buyer's marketAfter three years of declining sales, manufacturers are hoping for a rebound in the MR marketplace this year. If it comes, it won't be much.

Lingering fallout from reimbursement cuts, coming mostly at the hands of the Deficit Reduction Act, continues to dampen demand for capital equipment among outpatient imaging centers. Although not affected directly by the DRA, hospitals have been shaken by attitudes among payers, particularly the feds, that favor continued if not accelerated reimbursement cuts.

Coming off a slightly down year overall in MR scanners, the vendors of these systems are realistic. Predictions by executives at GE, Philips, Siemens, and Toshiba range from a slight upturn when the 2008 numbers are tallied to a continued downturn lasting this year and possibly next.

While 2008 is not shaping up well for manufacturers, it could work to the advantage of buyers, as slackening sales provide the groundwork for vendor price concessions. If there is an advantage, however, it will be selective, if the past year is a guide.

From 2006 to 2007, the average price of a 1.5T scanner was flat at about $1.4 million, according to consolidated industry estimates. The range of prices, however, has widened substantially. Vendors vying to meet the needsof buyers with tight budgets have deconfigured systems or, as Siemenshas done, minted a brand new product: the submillion-dollar Magnetom Essenza. Adding further flexibility for buyers is the availability of upgrades and enhancements, which provided vendors almost a quarter billion dollars in revenues last year.

"There are a lot of GE magnets out there that can be upgraded to the most current technology," said Dave Handler, general manager of GE's MR strategic global marketing.

New 1.5T scanners owe their popularity largely to their success in addressing patient comfort issues, through compact and tapered bores. This approach has undercut demand for open MR units, whose sales reached just $65 million last year compared with about $120 million the year before.

Offsetting losses in this sector have been gains at 3T. Last year, this superpremium product type, sold by GE, Siemens, and Philips, accounted for about $270 million in sales, an increase of about 4% over the previous year. There is consensus that demand will continue unabated for these systems in the months ahead. GE executives hope their introduction of a new 3T product, unveiled in early May at the International Society for Magnetic Resonance in Medicine meeting, will boost sales even more.

Another wild card will be the new open 1.2T Oasis from Hitachi Medical Systems of America. Hitachi lists the system, which was prominently featured at the ISMRM meeting, in the middle of the price range for 1.5T cylindrical systems. It is, admittedly, a wide range, spanning from under a million dollars to about $1.7 million for premium-performance configurations, according to industry executives. But the pricing strategy is significant in that Oasis features potentially game-changing technology that brings open scanners into the realm of true high-field performance.

The general manager of Hitachi MR, Sheldon Schaffer, predicts the new scanner will change the character of the MR marketplace.

"The open market as we know it is probably not going to exist," Schaffer said. "We will see the Oasis have an impact on the 1.5T segment the way midfield opens had an impact on the 0.5T market in the 1990s."

Back then, 0.5T scanners were the choice of administrators struggling to make do with tight budgets. By the turn of the decade, cylindrical 0.5T scanners had all but vanished under a wave of low- and midfield open MR scanners.

Hitachi executives would like to see history repeat itself. The mid-1990s established the Japanese company's position as a major provider of MR in the U.S., a power base that has been on the wane with falling demand for open MR. More choices and price points at 1.5T and 3T will benefit buyers as well.

-By Greg Freiherr