EP Vantage interview – GE Healthcare adapts to painful spending cuts
Purchasers’ reluctance to spend heavily coupled with falling reimbursement from governments and insurers is bad enough for companies manufacturing a stent that costs $800 or a diagnostic kit that costs $1,200. For those whose machines can clock in at around half a million dollars the situation is little short of nightmarish.
“There are reimbursement cuts almost everywhere – 10%, 15%, even more in some activities – and we adapt ourselves,” Christophe Lala, general manager for molecular imaging and CT at GE Healthcare, tells EP Vantage. “But it’s painful for us.”
In a sense, GE is a victim of its own success. It is the second-largest diagnostic imaging company in the world, EvaluateMedTech data show, with its 2012 worldwide sales of $8.4bn translating to a market share of 23.3%.
This means that its machines are already installed in large numbers throughout the developed world. The economic situation being what it is, the owners of these MRI, PET and other scanners are reluctant to upgrade, instead making the devices they already have last a little longer.
And where customers have already stretched the scanners as far as they will go and can no longer put off buying new equipment, they are shying away from the more advanced systems. “In Europe we are facing some constraint due to the fact that in nuclear medicine and PET/CT we have a trend in the market where the customers are not buying the super high-end systems any more, but instead, more and more, the value systems,” Mr Lala says.
As a way of addressing this, GE has bought into the concept of reverse innovation: where simpler technologies, often initially designed for use in emerging markets, find a niche in richer countries.
“Five or 10 years ago we had the idea to develop what we call value products,” Mr Lala says. “These affordable products use technology to boost efficiency and productivity … and then the machine can provide the best results as quickly as possible.” They permit a facility to increase the number of patients it can scan in a single day, cutting the cost per patient.
At the higher end a lot of emphasis is on software. The scans newer machines deliver are so detailed that new software is needed to cope with the sheer quantity of data. GE is developing new imaging processing software called PET regularised reconstruction technology that can eliminate “noise” – random confounding data – enabling easier interpretation of PET images.
“The technology is able to present a very good-looking, sharp, clear image, and you get the quantitative accuracy as well,” Wei Shen, General Manager for the PET/CT segment at GE Healthcare, tells EP Vantage.
But even this is being developed with an eye to cost-effectiveness. “One area of benefit could be smaller lesion detectability, because it’s a sharper image,” Ms Shen says. “It brings out the smaller lesions much more.” This ought to enable earlier treatment of cancers or neurological or cardiac defects, not only boosting cure rates but also saving hospitals and insurers cash.
Furthermore, the sharper images should allow doctors to tell more rapidly whether a treatment is working, as the differences in, for example, tumour size will be more clearly visible. “It should help the clinicians to have more confidence and be able to make that decision earlier and better,” Ms Shen says. If GE can show that its technology allows doctors to get the right therapy to the patient more quickly and thus more cheaply, that could help boost its uptake.
Ms Shen says that GE is the only company to make PET regularised reconstruction technology commercially viable, though a US regulatory submission has not yet been made.
More with less
It is unclear how much this focus on cost reduction will help when pricing pressures are so great – particularly considering the scale of the initial outlay. “The average selling price is going down almost everywhere in the world but particularly in Europe,” Mr Lala says.
“The investment is huge. The average selling price in CT, from the value systems up to the top-end systems, was something like €800,000 five years ago, and we have been losing something like €200k or even more in some regions.”
It is worth remembering that GE is not alone in its suffering; the same pressures are affecting all medtech companies and its competitors in the imaging space will be feeling them more than most. The company that adapts fastest and best to the medtech market’s “new normal”, with its cost containment and dwindling reimbursement, may be able to steal a march on its fellows.