CT market stumbles in first-half 2007

CT vendors came off the best sales year in their history in 2006, generating $1.75 billion in U.S. sales from new equipment. But they have little to be happy about now.

In the first half of 2007, revenues from CT sales in the U.S. plummeted to about $750 million--more than $100 million off the pace for the first half of 2006, according to industry estimates. If this keeps up, the industry will barely reach the $1.5 billion mark, some $250 million under last year's record and dead even with the 2005 tally.

Vendors might be lucky to fall only this far. Orders for new systems are running well behind shipments, an imbalance that bodes poorly for the future.

The Deficit Reduction Act, implemented at the start of 2007, shoulders much of the blame for stalling the CT market. The target of DRA reimbursement cuts, the outpatient imaging market, has been the source of vendors' greatest troubles.

"The cutbacks have hit this marketplace hard," said John Steidley, vice president of global CT marketing at Philips Medical Systems. "We've seen demand shrink quite dramatically among outpatient imaging centers."

And that's not all. The DRA, according to industry pundits, has had a carryover effect to the hospital marketplace. Hospital administrators worried about future reimbursement cuts that might affect them dampen interest in new purchases and exacerbate the overall problem.

The result, said Dom Smith, general manager of CT advanced technologies at GE Healthcare, has been the toughest period in the industry for a decade. "Everyone in the market is getting cold feet," he said.

Restraining demand further has been the widespread adoption of 64-slice CTs. Their introduction three years ago fueled an expanding market. The first wave of early adopters, however, has given way to the second consisting of mainstream customers, many of whom have made their purchases. This has pressed 64-slice scanners to the verge of becoming a commodity, said Andre Hartung, vice president of CT marketing and sales for Siemens Medical Solutions.

"More and more people perceive 64-slice as the entry level," Hartung said. "Hospitals a year or two ago that would not have decided to go with a 64 now believe they must."

This development has a silver lining, as increased demand for the most costly CT scanners currently available may be easing the market into a soft landing. A bump might be in the offing, as well, if the medical community embraces new applications made possible by advanced CT scanners.

Expanding reimbursement for coronary CTA alone could lead to a surge in demand for new systems. Clinical studies have already provided ample evidence that coronary CTA has an important role to play in managing cardiac patients. More documentation is expected in November when Toshiba luminaries release findings from their CorE 64 (Coronary Evaluation on 64) at the American Heart Association meeting.

This leads Doug Ryan, senior director of the CT business unit at Toshiba America Medical Systems, to believe the 64-slice scanner has plenty of steam left as a premium product. All that's needed is to extend its clinical reach.

"We're only beginning to explore the capability of 64 in advanced applications," Ryan said. "There are more things we can do with 12 or 18 months of more software development."

Some of this software development is already in hand and can further near-term applications such as virtual colonography. Results from the ACRIN (American College of Radiology Imaging Network) National CT Colonography Trial, likely to be presented at the RSNA meeting or sooner, could provide the foundation for a boom in CT demand.

Editor's Note: This is the first of a two-part series on the CT marketplace in 2007. An analysis of effects and consequences, as well as future predictions, will follow next week.