Greg Freiherr, Industry Consultant
Greg Freiherr, Industry Consultant

Greg Freiherr has reported on developments in radiology since 1983. He runs the consulting service, The Freiherr Group.

Blog | Greg Freiherr, Industry Consultant | Radiology Business | November 06, 2018

M&A Made Radiology What It Is Today

We can debate causality — whether a series of events makes others occur; if events just “happen;” or if conditions made their happening inevitable.

It’s easy to conclude that radiology was bound to get to where it is today. But it seems odd that modalities — particularly ultrasound — that do not expose patients to ionizing radiation are not being actively promoted by vendors as part of the overall push for patient centricity. The roots of this silence extend a couple of decades to the last great surge in radiological mergers and acquisition (M&A).

Back then, in the wake of extraordinary technological advancement, advocates of ultrasound — pioneers in their own rights — were purchased and absorbed by international conglomerates: Diasonics and Vingmed by GE; HP and ATL by Philips; Acuson by Siemens.

Today, there is only one easily recognizable sonographic name among the bunch. Once associated with an industry-leading innovator in ultrasound, it is now a brand name promulgated by Siemens, which purchased the company once called Acuson.

 

A Changing Industry

In the 1990s, ultrasound was intensely competitive. Every few months, one company would try to outdo the others with the release of a new product or version. So rapid was the pace of change that some pundits wondered if R&D mania had taken on a life of its own, subsuming common business sense. Literally spending fortunes in their engineering labs, these companies — many of which were publicly traded — regularly risked going into the red. Yet, like proverbial tiger riders, they could not stop or they would be eaten by the competition.

Radiologists and the sizable contingent of clinicians who used sonography in their daily practices (e.g., OB/GYNs) had other concerns. Chief among them: Was the pathology seen in the current exam there in past ones (but the equipment not good enough to see it)? Or (even more to the point), was what they were seeing in images a pathology?

Business and clinical concerns became less and less worrisome after innovators were gobbled up and the pace of R&D slowed. As we entered the mid- to late-2000s, I lamented the passing of invitations to engineering labs to report new developments. In their place came nondisclosure agreements (NDAs), proffered by companies that wanted to protect intellectual property, yet quell criticism that R&D had fallen off.

In the old days, what was on the engineering bench would be rushed to market as soon as possible. In the new world of radiology R&D, great ideas might — or might not — be commercialized. Who knew?

 

Looking Back

Some say the current state of radiology is the inevitable result of maturing technology; that the unbridled R&D that drove small, pioneering companies to innovate was not sustainable; that the crazy days of research and development were, in themselves, an anomaly. They might be right. But I still miss those days. And not just in ultrasound.

In the 1980s and ‘90s, SPECT was commonly called the “poor man’s PET.” New clinical paths, blazed by PET, were followed by SPECT Conestogas.

But as the new millennium approached, PET was on the ropes. Things had gotten so bad that GE tried and — due to a lack of financing — failed to sell its PET division. Then a miracle happened. PET joined with CTs.

Saved by a bell rung by academia and rejuvenated through an ongoing surge in M&A, commercial PET/CT was born. Multimodality vendors were positioned perfectly to take advantage of this.

Leveraging distribution and supply chains, they evolved not only molecular imaging (as nuclear medicine would come to be called) but other modalities, gathering up single modality vendors along the way to feed the burgeoning need for economies of scale. Their strategy touched innovators in all corners of radiology, including CT and MRI.

The giants of radiology found it relatively easy to implement this, particularly in X-ray, thanks to the M&A of midsize and holding companies of the time. Among the most voracious was Trex Medical, whose acquisition of Continental and Bennett led some to refer to the company as “T-Rex.” Then there was the M&A of companies that made teleradiology, radiology information systems and PACS equipment.

 

Inevitability

You can argue that the radiology world was overpopulated with small companies and, consequently, consolidation was inevitable. Regardless of the reason, the absorption of industry innovators by big multimodality effectively ended radiology’s days of sizzle.

At its height, a vendor on the Radiological Society of North America (RSNA) exhibit floor was handing out a poster showing the many companies in radiology. It was a twist on the New Yorker poster “View of the World” — glorious and extraordinarily undervalued (not the New Yorker poster, the one given out on the RSNA floor, although each could be argued).

Beyond debate is that the frenetic R&D that drove the development of individual modalities, particularly ultrasound, came to an end with the surge of M&A in the 1990s. A case can be made that radiology, medical practice and patients are today suffering the ill effects of M&A fever. Bolstering that point is how radically discussions have changed in the imaging community.

The relative value of different modalities was, at one time, a common topic of discussion. Ask the current major vendors of imaging which modality is best and you will be greeted by deafening silence. None is willing to advocate one modality over another — because each supplies them all.

 

A Simpler Time

To fully appreciate where radiology is today, we have to remember where it was. I don’t doubt that we enjoy tremendous advances today. And, yet, I feel a twinge of sadness.

What might things be like if the innovative spirit — so much in evidence in the 1990s — still permeated radiology? Would we be better prepared to put patients first?

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