Diagnostic imaging, business  

Digitisation and high costs driving consolidation in European medical imaging market

17 August 2006

London, UK. Novel picture archiving and communication systems (PACS) and moves towards digitisation are spurring growth in the European medical imaging market, but this is set against pressures from cost reduction, reduced hospital beds, lack of radiologists and a trend towards multi-modality deals. These factors are driving greater consolidation in the industry, but there is uncertainty whether traditionally strong participants will continue to dominate their smaller competitors.

"Consolidation in the medical imaging industry in Europe will be driven by a continued movement towards complete digitisation of the radiology department and workflow integration through PACS," explains Frost & Sullivan Research Analyst Karthik Arun B. "The need to reduce costs and, at the same time, maintain the high standards of quality expected from medical imaging equipment will further influence the trend towards consolidation."

Alliances and acquisitions by various companies over the past three years indicate a definite trend towards vertical integration. Most of these companies are looking to integrate or align themselves with independent PACS developers as well as sub-system producers. Based on the current scenario, this trend is set to continue for the next three to four years.

Given the prevalence of strict legislation and the presence of strong Tier 1 participants, however, consolidation is unlikely to be an easy task. Moreover, issues such as cultural integration, change management as well as certain reimbursement rules could hamper potential consolidation in the medical imaging industry in Europe.

"The increasing trends towards price reduction is minimising the bottom lines for companies," observes Mr. Karthik. "In addition, regulatory policies such as reimbursement rules that restrict the use of certain modalities in favour of others also have a strong impact on consolidation."

The challenge for suppliers, therefore, will be to enter into mutually beneficial partnerships. Companies should look to acquire or form alliances with others that can help them broaden their product portfolio rather than increase their market share.

"By expanding their product portfolio, smaller companies can hope to actively compete with the larger multi-modality vendors," elaborates Mr. Karthik. "With the growing trend towards institutions offering large multi-modality tenders, vertical integration will also help to reduce costs and provide a more efficient deliverable."

More information: www.medicalimaging.frost.com

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