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

Health Industry Today, Sept, 1991 by 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."