High-field MRI equipment loses market dominance

High-field MRI equipment loses market dominance – magnetic resonance imaging

Greg Borzo

Sales of midfield and low-field diagnostic magnetic resonance imaging systems in the United States are heating up and will surpass sales of the more powerful and expensive high-field systems for the first time this year.

Three major factors account for this, according to consultants. Community hospitals, which have lower patient throughputs that allow them to get by with lowfield and midfield systems, have stepped up their buying.

Meanwhile, sales to dedicated imaging centers, which typically buy versatile highfield systems, have stalled somewhat due to the lack of growth in the number of freestanding imaging centers and fears about how new safe-harbor regulations will affect them.

Finally, large and teaching hospitals, traditionally high-field customers, have shifted somewhat to the midfield and low field for overflow and backup systems.

Last year, the U.S. market was evenly split between high-field and midfield equipment, with only a handful of low-field installations. This year, however, low-field systems could account for 15% to 20% of the projected 400 MRI installations, according to Christine Hughes, president, Hadley Hart Group, Chicago.

“The high field has slowed,” said Bill Conn, product sales manager for mobile and high-field MRI at Philips Medical Systems North America. “Except for those doing spectroscopy, high-field sales are largely limited to those who still believe that bigger is better. That idea is going away as people realize that field strength is not all that counts.”

The MRI market totals $700 million, including imaging equipment, workstations, upgrades, peripherals, software and standard one-year service agreements, according to Greg Freiher, a consultant in St. Cloud, Wis. It will grow 7% to 8% annually to about $1 billion in 1995, he said. Market Intelligence Research Corp., Mountain View, Calif., predicted that the MRI market will top $1.3 billion by 1995.

On the other hand, Philip Drew, a principal at Concord Consulting Group, Concord Mass., predicts the total market will shrink to $550 million by 1995 due to falling prices and a shift to less expensive equipment–even though unit sales may grow as much as 10% annually.

Drew believes that the market will begin to be saturated by 1995, despite the introduction of new applications. He expects a maximum of 3,700 MRI units installed by then. “There are 5,000 CT (computed tomography) machines in the United States, and that number represents a plateau that MRI will not exceed, maybe not even reach,” he said.

In contrast, the American Hospital Association, Chicago, predicted that MRI equipment sales will grow 59% between 1989 and 1994.

What began in the 1980s as a technology for imaging the brain, spine and musculoskeletal system is rapidly expanding into new applications, especially orthopedics. Sophisticated systems offer MRI angiography and spectroscopy. Most important, rapid MRI could extend drastically the technology into vast new areas of imaging the heart, lungs and abdomen.

Price has become crucial factor

A few consultants suggested that prices, especially for high-field systems, will decline in the next couple years as technology improves and as low-field systems deliver image quality once limited to high-field systems. Low-field systems (.2 tesla and below) range in list price from $800,000 to $1.1 million. High-field systems (1.0 tesla and above) cost between $1.7 million and $2.5 million.

Manufacturers have began to offer free software, coils and extended warranties (beyond the typical 12-month warranty included in most equipment sales) in an effort to maintain their list prices. This is especially true of major and established players. “The software, a spectroscopy package and an upgrade for the workstation can add upt to $300,000 worth of gadgets thrown in for fee,” said Freiherr.

Meanwhile, many new entrants and smaller players are attempting to buy their way into the market. Picker International Inc., Highland Heights, Ohio, for example, sold 30 heavily discounted systems last year to gain market share, Freiherr said. Picker would not comment.

Discounts from 10% to 20% off list price are common across the market and have been reported as high as 30%, according to consultants and manufacturers. Discounts

MRI market shares, 1990

General Electric 43%

Siemens 23

Picker 11

Toshiba 7

Philips 6

Others 10

Note: market shares determined on the

basis of revenues from U.S. sales.

Source: Philip Drew, Concord Consulting Group,

Concord, Mass., 1991

vary greatly by region.

“During the past several years, manufacturers have been able to keep the MRI ball rolling by talking about what a great technology MRI is,” Freiherr said. “Now, they have to push the ball along with discounting and aggressive marketing.”

Another increasingly important factor in closing sales is creative financing. “Whoever puts together the most versatile financing options will gain share,” said Hughes. “The advantage will go to those companies with in-house financial arms; they can be the most creative and flexible.”

GE Medical Systems, Philips and Siemens Medical Systems have in-house financing, and Hughes expects several other companies to follow suit.

Low field improves image

The low field has shed its image as “something designed for the third world” and now produces images as good as those produced a few years ago on high-field systems, according to Michael Silver, North American director of MRI for Instrumentation Imaging Inc., Milwaukee.

There are 60 low-field systems in the United States today and at least 40 new installations are expected in the next 12 months, he added.

Hitachi Medical Corporation of America, Tarrytown, N.Y., and Toshiba America Medical Systems, Tustin, Calif., dominate the low field, which is growing rapidly. Although this article and most studies define the low field at .2 tesla and below, Hitachi defines and markets its .2 tesla MRP 5000 as a midfield system.

“We typically sell against midfield systems especially Philips’ T5 (.5 tesla), rather than the Toshiba Access (.064 tesla),” said Greg Janicik, technical marketing specialist for MRI at Hitachi.

Hitachi sells through a direct sales force of 30, which is growing fast, he said. Only in the U.S. market for 1 1/2 years, Hitachi has already installed 48 of its MRP 5000s here. It also sells a MRP 7000 (.3 tesla), of which two have been installed and 20 have been ordered, Janicik said.

Although some competitors and consultants dismiss Hitachi as a niche player with an insignificant market share, Hitachi claims to have 8% to 10% of the total MRI market (on a unit sales basis) and 25% to 30% of the midfield market segment. These figures would be lower on a dollar basis since the MRP 5000 ($1.2 million) and the MRP 7000 ($1.4 million) are less expensive than many midfield systems.

Hitachi sells a .5 tesla system in Japan, but has no plans to introduce it in the United States, according to Janicik.

Most of Hitachi’s early sales were to alternate sites, but the company plans to increase its marketing to hospitals. It will focus on 150-to 400-bed hospitals.

“When talking to community hospitals, we highlight our low siting (installation) costs, space requirements, electricity consumption and maintenance needs,” Janicik said. “Our permanent magnet requires no cooling material. That can save $35,000 to $60,000 annually for a system using a superconducting magnet, (which is common with high-field systems).”

Hitachi and Toshiba will face more competition in the low-field market. Siemens recently introduced a low-field machine, and Instrumentarian may soon establish a presence with its Mega 4 (.1 tesla). Although Instrumentarian only has one of the $1.1 million systems installed in the United States, Silver says the company is on target with its marketing plan.

“We only intended to install one system in our first year,” he said. “Now we are starting to market ourselves through ads and direct mail. We will have an important impact on the low field in 1992.”

Competitors chip away at GE

GE, Milwaukee, dominates the high field with its Signa line (1.5 tesla) and the mid-field with its “bread and butter” Max line (.5 tesla). More than 850 Signa systems have been sold in the United States and some 400 Max systems have been sold worldwide, according to GE.

GE says it has no plans to expand into the low field. It is however, developing a midfield (.5 tesla) Signa system that will have all the clinical applications of the high-field Signa line but the lower patient throughputs of the midfield Max line.

Although parts of the system were exhibited at recent trade shows, it won’t be commercially available until next year, pending 510(k) clearance from the Food and Drug Administration, which GE expects to receive soon. The Signa .5, which will cost more than the Max plus, is not intended to replace the older line.

More important to GE’s long-term position in the market may be its goal to develop a new rapid MRI technology. It could shore up sales of high-field systems.

“Given the recent technological advancements in midfield systems, the only significant reason to buy a high-field system anymore is for the higher patient throughouts,” said Freiherr. “GE hopes its rapid MRI will return the market orientation to the high field. Until it does, its high-field systems won’t show any significant sales growth.”

Philips, Siemens (Iselin, N.J.), Advanced NMR Systems Inc. (Woburn, Mass.) and others are also developing rapid MRI. Advanced NMR is already selling a rapid MRI upgrade for GE high-field systems. Hitachi expects to have rapid MR images to exhibit at the Radiological Society of North America show in December and a product commercially available by the end of 1992.

GE recently announced work on rapid MRI at a press conference, but the more was premature because it’s still a work in progress, according to a consultant who asked not to be named. “It was simply a marketing ploy, and it may not work because the paper (that the announcement was based on) hadn’t been published and there are still unresolved safety issues.”

Another consultant had a similar assessment of GE’s handling of rapid MRI. “We are seeing a repeat of history,” Freiherr said. “In the mid-1980s, GE put the word out they were developing the best high-field system and that everyone should wait. It worked, and now they’re trying to do the same with rapid MRI.” GE would not comment.

Rapid MRI could help GE retain its high-field customer base, which has been encroached upon by competitors, according to consultant Drew. “Companies have been picking away at GE’s lead for years,” he said.” At one time, GE had about 50% of the market and that fell to 43% in 1990.”

Siemens and Picker have been pulling market share away from GE, according to several sources, including Drew and Freiherr. GE would not comment.

“What distinguishes Ge is its marketing strength, its ability to know the market, work within it and come up with systems that have market appeal when the market is ripe,” Freherr said. “It has had its greatest success with high-cost, high-field systems, and I expect them to keep their emphasis there.”

Philips expects more competition

Philips, Shelton, Conn., manufacturers equipment for the high field, where it has an installed base of 65 units, and the mid-field, where it has an installed base of 100 units. Like GE, it says it has no plans to enter the low-field market.

Philips claims to have 12% of the U.S. MRI market, although Drew estimates its share at 6%. Part of the discrepancy may be due to recent gains against GE, according to Conn.

Philips is marketing two new systems: the high-field Gyroscan S15/ACS (1.5 tesla), and the midfield Gyroscan T5 (.5 tesla). The former lists at $2.1 million “with all the bells and whistles,” and the T5 lists at a maximum of $1.5 million.

“GE is positioning its new Signa .5 against our T5, and its marketing thrust has been aimed at the T5,” Conn said.

The greatest amount of sales activity has been in the midfield, he said. The high field has slowed, although it remains steady. “People are realizing that field strength is not all you need,” he said.

Philips sells direct through 140 general line sales people for diagnostic imaging and 25 MRI/CT specialists. Sales during the last two years have been evenly divided between hospital and alternative sites, but Conn expects the hospital market to be stronger in the next two years.

“Alternate sites will grow slower because people are worried about pending federal legislation that promises to discourage the development of alternate sites and joint ventures between hospitals and physicians,” Conn said.

Customers across the board are becoming more sophisticated, he added. “They used to come to us for everything–turnkey systems. Now they realize they can maybe save some money by doing the site construction themselves and getting leasing through a third party.”

Conn described Philips as a technology driven company that has always been flexible when it comes to price. “One thing that differentiates us from the competition is that we try to delineate a clear upgrade path so that customers know what’s coming and can budget for it,” he said.

Two vendors serve all fields

Toshiba and Siemens have staked out the advantage of offering equipment in all three fields. They differ in that Toshiba just expanded from the low field and midfield with the U.S. introduction of a high-field system for clinical study. Meanwhile Siemens, which is strong in the high field and midfield, just introduced a new midfield system and is awaiting FDA clearance on a low-field system.

Toshiba offers the MRT-150A (1.5 tesla); MRT-50A (.5 tesla);MRT-35 (.35 tesla); and Access Advance (.064 tesla). It says it has some 580 systems installed worldwide.

Siemens offers the Magnetom 63SP (1.5 tesla); Magnetom Impact (1.0 tesla); and Magnetom P8 (.2 tesla).

The Impact was introduced at the Society of Magnetic Resonance Imaging meeting in April and lists for $1.8 million. It is marketed primarily to what Siemens calls the “return-on-investment” market segment–sites that consider the cost vs. performance tradeoff as the most important factor. This could include freestanding clinics, small- and medium-sized hospitals and even large teaching hospitals, but all have strict parameters on project or operating costs.

The other two market segments are the low-throughput market segment and the performance-driven segment, which is relatively price insensitive and wants the “latest and greatest” systems.

Third-party servicing, widespread with CT but not yet common with MRI, will become an important and controversial issue in the near future, said a spokesperson for Siemens.

COPYRIGHT 1991 J.B. Lippincott Company

COPYRIGHT 2004 Gale Group