It’s my understanding that MRI machines cost upwards of $1-3 million… Now I’m sure a mammoth amount of funding went into R&D and engineering of the machine, but has there ever been any estimates of how much profit per machine is made by the creators of these machines when sold to hospitals?
When I worked for T.S.A. as a security screener at Dulles Airport, a company called L3 Communications Systems are the ones who made the machines we used. I can’t get into specifics as to what the machines were exactly, but I will say that the technician calibrating one of the machines told me one day that the machines cost L3 roughly $375,000 to build and they sold them to T.S.A. for approx. $1.5 million each.
But that is just for security screening, not the medical industry. But the machines are similarly designed, just not magnetic.
But those are X-ray machines, aren’t they? MRI (magnetic resonance imaging) is a completely different technology.
Technicians will typically be aware of the manufacturing cost but not the R&D and support cost. You need to design a machine and how many of those are you actually going to be able to sell until you have to design a new one? I would say $400K is within the range for manufacturing cost I would expect for any precision imaging or measurement device of that scale.
Yes. The profit margin is quite large. Much of the machine is made overseas, and the markup is similar to any high-end computer equipment.
Furthermore, virtually all MRI’s are under a company service contract at about 10% of purchase price per year. The profit on this is potentially enormous – provided you’ve made a quality product that doesn’t break very often. Then there is computer applications training for operators, software upgrades, hardware upgrades, etc. Lot’s of profit there. Many MRI’s are also leased – very expensive, but no capital expenses.
Of course, reimbursment of MRI exams is quite large, so you can’t really fault the machine manufacturer for wanting their share. Wait until molecular imaging hits it’s stride in the next 5 years. We should see another double-digit sales growth for MRI’s at that time, provided the reimbursment rates are as predicted.