Imaging diagnostic market in Poland and Hungary: boom or bust?

2010-05-04

The Eastern European market for imaging diagnostics is young and considered to be in its growth phase. Poland and Hungary comprise the fast growing countries of Eastern Europe swiftly embracing the healthcare model espoused by Western Europe. However, political instability and infancy of the democratic system in these countries remain the stumbling blocks for the imaging diagnostics market. The unpredictable and cyclical nature of centralised investment resulting from political instability is a deterrent, leaving the imaging diagnostic market in desperate need of some private investment.

Private sector has started to assert itself in Poland and Hungary, with private diagnostic centres becoming an increasingly regular feature of the healthcare landscape. There are some optimistic signs indicating that Polish and Hungarian systems are on the right track including tackling the problem of over-provision of hospitals and hospital beds by reducing the lengths of stay and shifting the appropriate treatments to the primary sector. The cost savings realised by combating unnecessary infrastructure are channelled towards the modernisation of hospitals, meaning newest modalities in medical imaging will now be supported.
Another source of optimism with regard to funding lies with the prospect of funds from the EU structural funds for Hungary, Poland, Czech Republic and the Baltic States for the years 2007-2013. Unlike Western Europe, where workflow enhancements and technical features of a modality are important, Eastern Europe diagnostics imaging market is primarily driven by price sensitivity, not features. The main modality vendors are thus compelled to offer competitive prices in the face of local competition, causing severe erosions of profit margins.

Imaging diagnostic market in Poland
Poland is one of the biggest healthcare markets and the most developed and technologically advanced countries in the Eastern European region. Public hospitals purchase their medical equipment through the competitive bidding process and private clinics prefer buying the most advanced modalities from any source they prefer. Equipment purchases and maintenance procedures at public hospitals are funded by the government or by medical foundations, which also raise money to purchase equipments for hospitals. Poland is amongst the world’s top 20 markets and is on the path of decentralisation. The country has a lower healthcare expenditure in terms of GDP as compared to Hungary. Hospitals and the government face an increasing pressure to curb healthcare expenditure.




Imaging diagnostic market in Hungary
The country is currently shifting from the centralised system to a decentralised model by privatising healthcare facilities and encouraging private investment. Continued economic development and technological progress will fuel demand for improved and advanced medical imaging modalities, resulting in imaging diagnostics market growth. However, the Hungarian healthcare system is fraught with certain problems such as excessive number of doctors, lack of training to physicians, inadequate infrastructure and others.




Market forecasts
The Polish market for imaging diagnostics is expected to grow at a compound annual growth rate (CAGR) of around 10% over the period 2010-2014, while the Hungarian imaging diagnostics market is anticipated to witness a growth rate of 9% from 2010-2014. The growing medical imaging modalities market can be attributed to the increasing number of procedures involving diagnostic imaging. The well-established and key modalities that form the major market sectors in Eastern Europe are: X-ray, ultrasound, CT and MRI.
The most common class of procedures performed are radiography, followed by ultrasound, CT and MRI. The transition from film to digital imaging and replacement of old radiography systems will remain the main drivers for the X-ray systems market. Ultrasound market, being the most preferred modality and less prone to cyclical investment, is expected to show high growth especially in the private sector. New 4D ultrasound systems, laptop or hand held devices for point of care testing and improved contrast media will contribute to the growth of the market. CT scanning is one of the most promising areas in the medical diagnostics market in Eastern Europe as the old single and dual slice CT machines are anticipated to be replaced. Favourable reimbursement and better return on investment prospects have made healthcare institutions inclined towards opting for CT machines, thus providing the necessary impetus for market growth. MRI, the modality positioned highest in the value chain, is also expected to show high growth due to the burgeoning private sector. With an increasing number of MRI procedures and with eroding prices of MRI hardware, the market is expected to achieve high growth rates in the forecast period.






Market share analysis
The imaging diagnostics market in Poland and Hungary is characterised by large global players providing solutions in each of the imaging modalities. A lot of regional companies with one key modality or a few products are aiming at niche markets. Siemens Medical Solutions, a German company with a broad product portfolio across all the modalities, dominates the imaging diagnostics market with a market share of around 30% during 2009. Siemens is followed by Philips with 26% and GE Healthcare with 24% of the market. Philips is known for its ultrasound systems and Siemens for its high-end CT and MRI modalities. Toshiba is the fourth largest vendor, accounting for 10% of the entire Polish and Hungarian market.





Will the imaging diagnostics market emerge out of the market slump?
Major modality vendors are looking to expand into the emerging countries of Eastern Europe like Poland and Hungary. Government sponsored healthcare programs are now resorting to the outsourcing of imaging diagnostics to private imaging centres. Most public hospitals are looking towards private finance companies to enable them to invest in medical imaging modalities. As the utilisation rises and healthcare gets reformed, demand for high tech imaging will create a need for MRI scanners and CT. The future seems promising as the new technological developments take place and the nations see new reimbursements rates pertaining to imaging equipment from the start of 2010.

A peek into the trends that would sell
A steady increase in demand for quality medical imaging services is expected to boost the medical imaging market in the next decade. Technological integration or development of hybrid modalities like PET and MRI will help the diagnostics imaging market to combat competition and provide comprehensive diagnosis. Molecular imaging is one of the most exciting technological advances to come in imaging and it is the number one focus of most of the tier 1 vendors. Incorporating PACS to store data (3D and 4D images) obtained from the imaging modalities will pave way for another trend in the imaging diagnostics market. Innovations like higher resolution and digitisation initiatives are spurring growth in the imaging diagnostics market in Poland and Hungary.
Global medical imaging vendors are now also opting for strategies such as leasing, product life cycle management services, rental and financing options to boost revenues and maintain sustainability. Also, a lot of their growth strategies are focused towards post sales servicing, support and innovative consulting services for hospitals.

Recommendations for modality vendors

• Vendors with financing capabilities are likely to attract end users and have a better scope in the Eastern European market. GE Healthcare is one of the companies to set up its own financing wing, making it easy for healthcare organisations to acquire high-end modalities like MRI.
• Tie up with local distributors to broaden the company’s product portfolio. The Eastern European market, being an extremely price sensitive market, demands low-priced equipment. In order to facilitate high penetration, brand building and make end users receptive towards high-end products, low priced-vendors will allow major participants to reinforce their market presence. Tying up with local participants will help major vendors to extend towards the low-end spectrum and fill any gap in a company’s product portfolio.
• Hospitals in Eastern Europe lack surplus capital, which has resulted in reliance on old equipments. Vendors are required to focus on competent pricing policies and quality of the medical imaging modalities. Offering upgraded solutions to cost-conscious end users and better payment options to the private sector help companies to gain end-user confidence. Companies which offer additional features such as software and hardware upgrades, free maintenance and replacement of the imaging equipment are able to attract customers.
• An efficient cost-distribution network will help companies achieve more sales and help to cut down the costs associated with customer service support. A distributor typically handles a lot of products of different brands, it is thus very important for the vendor to establish a strong relationship with the distributor. A distribution network, if established appropriately, will encourage distributors to focus on products of a particular vendor and provide services, which has similar qualities to direct sales.

Smruti Munshi
Imaging Diagnostics Market Analyst