New developments in positron emission tomography are creating investment opportunities for physicians.
Now that the high-tech diagnostic imaging device has cleared Medicare and FDA hurdles, many physicians are seeing a greater demand for the device and more investors are taking an interest in the technology.
"It really is kind of an exciting thing," says Michael Lawson, M.D., medical director of the Samaritan PET Center, part of the Good Samaritan Regional Medical Center in Phoenix. "For those of us who have sort of paid our dues and been through the bad times, things have gotten a lot better." In the past, some have referred to companies involved in PET manufacturing as "black holes" for investors.
Positron emission tomography is a noninvasive, diagnostic imaging technique for measuring the metabolic activity of cells in the human body. Using radioactive tracers manufactured by a machine called a cyclotron, PET scanners are useful clinically for patients with various diseases affecting the brain and heart.
They also are useful for patients with certain types of cancer, including colorectal, melanoma and lymphoma.
PET, which came on the scene in the early 1990s, has been shown to be an effective diagnostic tool for physicians in the early diagnosis and subsequent treatment of patients.
More than 250 PET scanners are estimated to be in operation nationwide, according to the Institute for Clinical PET, based in Foothill Ranch, Calif. The institute is a professional association of 500 members who own and operate PET centers.
Robert Milligan, director of the Physician Services Group at the Phoenix law firm of Gallagher & Kennedy, says PET scans most likely will be viewed by the HHS' inspector general's office as a designated health service. That means that physicians cannot refer Medicare or Medicaid patients to a center that they own an interest in.
"Anybody who might send a patient to a PET scanner has to be careful about owning an interest in a PET scanner," Milligan says. Stark rules do not allow physicians to refer Medicare or Medicaid patients to services in which the doctor has a financial interest, including radiology and nuclear medicine, he said.
But nonreferring physicians, such as primary-care physicians, don't have to worry, he says, "as long as they're not making referrals to this entity."
Good Samaritan is Arizona's largest hospital and the only facility in the state to have a PET scanner and cyclotron.
It took about four years to get the first thousand cases at Samaritan PET Center. Now the center has nearly 3,000 cases since its inception in 1992.
Lawson also consults for a Denver company that is developing a "supercyclotron" that will produce efficiently and inexpensively radioactive tracers that are injected into patients and tracked by a PET scanner.
A supercyclotron will enable production of the tracers in mass volume, thereby increasing efficiency and decreasing cost.
"They're counting on this expanding market to really create this business opportunity for them," he says. "It also would allow them to be very, very price competitive and secure a significant percentage of this new market. No one that has access to these tracers who is in their right mind would really want to put in their own cyclotron." This is because it would be much more cost effective to contract the use of the machine at another site, similar to sending lab work to a separate entity.
Jennifer Keppler, executive director for the Institute for Clinical PET, says several mobile PET centers are forming around the country. In the past, PET scanners cost about $2 million. Now, they are available for half that amount.
"I have heard of lots of companies showing an interest in developing multiple sites around the country," she says.
One cyclotron can provide enough radioactive tracers to serve at least 20 PET scanners, Keppler says.
"What you're seeing is these regional cyclotrons being set up and lots of scanners can go into the area because they have access to the isotope." She says it's important to have a cyclotron near a PET scanner because the radioactive tracers have short half-lives. That means they are constantly throwing off their energy and become useless rather quickly.
Shipping radioactive tracers across the country is much like trying to get an ice cube to a customer before it melts, says Ruth Tesar, vice president and general manager of Knoxville, Tenn.-based PETNet Pharmaceutical Services. PETNet produces the radioactive tracers used in PET imaging.
"You can't store it," she says. "There's no inventory. Right now, it can be inefficient because of the distance we have to go."
Tesar says the company has 15 sites throughout the country and is scheduled to open six more this summer.
"We're planning on getting up to 50 sites within the next few years," she says. "The demand is there. We've doubled our volume in a year."
Tesar says there are a lot of investment opportunities in PET centers.
"There's a lot of physicians who are showing an interest in investing and owning PET centers," she says.
Leonard MacMillan, director of investor relations for Mobile PET Systems, says, "Physicians can buy stock in the market in our company but not in partnership because of conflicts of interest." San Diego-based Mobile PET Systems is a new publicly traded company that is establishing mobile PET units nationwide.
He says the physician buy-in is "much like a doctor can own shares in Pfizer, probably not more than 10% of the issued shares and still prescribe their products. They get into trouble by being a major owner of a business that they are referring clients to."
Radiologists don't need to be threatened by the increased demand for PET because it can complement their other radiological procedures, such as MRI and CT, Tesar said.
Physicians also can invest as shareholders in the publicly traded companies that make and distribute radioactive tracers as well as in companies that sell PET scanners.
As long as they do not refer to the PET centers, physicians can have ownership interest in the scanners and facilities.
Peter Conti, M.D., president of the Institute for Clinical PET and director of the PET Center at University of Southern California in Los Angeles, said PET is the best-kept secret of diagnostic imaging and is an exciting opportunity for the long-term investor in imaging technology.
Conti also is a member of the medical advisory board for Mobile PET Systems.
MacMillan says no doctors are investing as partners in any of Mobile PET's contracts.
Conti says mobile PET units are "going to help leapfrog the access to PET technology for a lot of hospitals that didn't have enough money to buy the scanner."
The emergence of radio pharmaceutical companies--businesses that make the radioactive isotopes--will help ensure the delivery of radioactive isotopes to small community hospitals that would never consider buying a PET scanner and cyclotron, he says.
"For somebody looking to invest in a company or companies that are related to healthcare and have a lot of potential for growth in the long run, this is a pretty good investment," Conti says.
Conti says the Food and Drug Administration is set to announce broad approval for the use of flurodeoxyglucose, or FDG, which is the sugar substance used for PET imaging in cancer and cardiac studies.
Eric Reiman, M.D., scientific director of the Samaritan PET Center, says he is a bit more cautious about investing in the technology.
"That (long-term investment) would not be my reason for going into the PET business," he says. Rather, the clinical and scientific benefits are why he's involved in PET research.
MacMillan of Mobile PET Systems says PET can offer early detection of diseases, which leads to earlier treatment.
Still, Reiman said, the economics of PET centers have changed. "At least many of the PET centers are no longer financial black holes," he says.
Ross Hartz, director of PET technology for Positron of Houston, which manufactures PET scanners, says the industry has seen a long dry period because it took so long for Medicare to start reimbursing for several applications of PET.
In March 1999, HCFA began covering additional uses of PET scans to diagnose and manage certain cancers of Medicare beneficiaries. Medicare already had covered PET scanning for the diagnostic evaluation of solitary pulmonary nodules and for staging non-small cell lung cancer. Three oncology indications were added in March 1999: detection and localization of recurrent colorectal cancer with rising carcinoembryonic antigen, staging and characterization of Hodgkins and non-Hodgkins lymphoma in place of a gallium scan or lymphangiogram, and identification of metastases in melanoma recurrence in place of gallium studies.
"Now that Medicare has opened things up for reimbursement with respect to oncology, there seems to be a resurgence in the industry," Hartz said.
Angela Gonzales is the senior reporter for The Business Journal in Phoenix, where she has covered healthcare issues for nearly 12 years.