The global consulting firm Frost & Sullivan (F&S; Palo Alto, California) is projecting a slowdown in the medical imaging market in 2005, estimating that while it will grow to almost $14 billion in revenues this year, that is less than 10% in growth over 2004 totals.
"We do see a continuing downward trend in the slope of the growth rate, so for the first time in many, many years, we are predicting . . . less than double-digit growth in the revenues in the medical imaging market in the U.S.," Frost & Sullivan Industry Manager Antonio Garcia said in a conference call last week.
The rate of growth is specifically expected to be about 9.6% over 2004. However, he said that if you "disaggregate the revenue data for 2004," it shows that "market segments were already growing well below 10%."
"In 2004, revenues from medical imaging sales in the U.S. totaled about $12.7 billion," Garcia said, noting that growth rates actually began to decline in 2002-2003.
For the last several years, medical imaging has seen double-digit growth that appears to have peaked in 2002 at 17.1%, which was driven largely by product launches toward the end of 2002, he said. Among the events that were occurring were increasing penetration rates and demands for digital radiography and digital mammography, as well as higher-slice computed tomography (CT).
"What we're seeing is that growth rate is not sustainable," he said.
In 2003, 51% of the medical imaging market was split among the "core modalities" like X-ray, CT, MRI, ultrasound and digital mammography. The remainder of the revenue was generated by non-medical imaging modalities, such as radiography contrast pharmaceuticals (16%), medical imaging information technology (IT) and the equipment services market (23%).
That all changed in 2004 when the core modalities contributed less than half, or about 49%, of market revenues, according to F& S.
Among the trends affecting the industry over the past decade were industry consolidation and vertical integration, Garcia said.
"I think that the double-digit growth that you saw throughout the better part of the last decade has been sustained by achieving the economies of scale that are enabling competitors to drive the adoption of the technologies and the services into the end user environment," he said, adding, "I suppose a good thing can't last forever."
One of the things the industry has seen in recent years is new technologies, such as 32-slice and 64-slice CT, positron emission tomography (PET), flat-panel X-ray and flat-panel mammography, which have spurred buyers to replace their obsolete equipment at two to three years. Now, however, the "replacement cycle" is drifting back toward a mean of every seven to eight years, he said.
Earlier in the week, F&S had reported that "the enhanced capabilities of fused positron emission tomography-computed tomography technology offers is driving demand" in the diagnostic imaging market.
"Dual PET-CT's superior imaging capabilities enable detection of hard-to-localize cancers including neck and ovarian cancers," the firm said.
As a result, stand-alone PET is experiencing a "downswing" in demand as the hybrid PET-CT scanners are be-coming more popular. The firm said its research indicates that U.S. PET and PET-CT markets totaled $496.5 million in 2004, and it projects that market to reach $725.1 million in 2011.
Frost & Sullivan also said that the availability of lower-cost stand-alone PET systems sold on the used equipment market is "further deteriorating" the market for new stand-alone PET systems.
Regarding the interest in PET-CT scanners, that technology is "still facing lower than optimal" procedure volumes, which are also "beginning to restrain new purchases."
In the area of reimbursements, Garcia said that after several years of "incremental increases" in reimbursements, "four major procedure categories have come under pressure." That applies to modalities that have had very high reimbursement historically, he said, such as PET and MRI. Even ultrasound and specialty imaging studies which historically have not been that high in reimbursements are expected to decrease "slightly," he said.
A "major reimbursement victory," Garcia noted, was the "substantial" reimbursement for computer-aided detection in X-ray mammography, which is expected to "give a boost" to that market segment. He also projected expanded coverage for PET and PET-CT applications.
And while President George Bush's call for every American to have an electronic health record by 2014 is generating a lot of interest, it isn't going to have much of an impact on the industry in the short term.
"We're very far away from any type of budgeting or appropriations," Garcia said, "so we don't see that as a real driver, at least in the short to mid-term."