Investors Are Getting Interested in OTC Hearing Aids

I was contacted recently by an investor at a prominent financial firm in NYC looking for my perspective on the new OTC hearing aid bill. His firm was trying to understand the impact of the bill on the various industry players and which companies might be the winners and losers from any disruption in the space. I didn’t have all the answers, but I found his interest very exciting! If Wall Street is getting curious, significant industry change is probably coming soon. This can only be good for people with hearing loss.

He had lots of questions. I certainly didn’t have all the answers, but I was happy to provide my thoughts below. Please share yours in the comments.

Why are hearing aids so expensive?

High prices are driven primarily by (1) limited competition and (2) a lack of pricing transparency. Only a handful of large hearing aid manufacturers exist, which makes it easier to maintain prices at high levels. Some of the high price may be justified as companies need to support significant research & development budgets to create new and improved products.

Hearing aid pricing is also confusing. In most cases, audiologists bundle the cost of the devices with their fees for hearing tests and ongoing servicing of the patient. Pricing would be clearer and more competitive if consumers had an opportunity to compare the individual cost of each item more directly.

Why aren’t existing “OTC-like” hearing products doing well?

Existing products (like hearing enhancers used in hunting) are marketed specifically as “not to be worn by people with hearing loss.” This certainly does not help their uptake with people with hearing loss. Product and sound quality are reportedly quite mixed, although the Consumer Technology Association recently released a voluntary quality standard for these types of devices which may help to weed out some of the worst performers.

More recent “OTC-like” products like those launched by Bose, NuHeara, SoundWorld and others, are more focused on enhancing speech and may be more popular. Still, marketing dollars remain limited as these companies are likely waiting for the change in regulations to market these new products aggressively.

What is the next step? What are we waiting for from the FDA?

While the bill has passed, companies are awaiting further guidance from the FDA before OTC products can be marketed and sold. The FDA’s role is to provide uniform safety and efficacy standards to ensure the devices are safe for people with mild to moderate hearing loss and that the devices do what they are supposed to do. They will also set and publicize appropriate metrics that can be used by consumers to compare across devices. Finally, the FDA will provide appropriate package labeling and informational inserts to increase the likelihood that the devices are used properly and by the appropriate people.

Why would hearing aid usage improve with a new OTC category? Free hearing aids don’t seem to increase the penetration rates in other countries like the UK.

Obviously price is not the only thing driving low penetration. Stigma is also a big factor. Uptake will be determined by the ability of these new products to create a “cool” factor, breaking down the stigma of wearing hearing devices and allowing for broader usage in a wider variety of hearing situations. Many people with mild to moderate hearing loss may only need help in large meetings or loud restaurants. If these devices work well in these situations and are sufficiently “cool,” penetration will increase and stigma will recede.

Who will educate the consumer about these new products?

While the FDA will provide appropriate labeling and informational inserts, the companies themselves are likely to provide much of the consumer education through mass marketing and other means. This is good news given the high marketing budgets of consumer electronic companies who are the likely new entrants into the OTC market. Mainstream magazines and technology focused expos will be an important part of the new messaging.

Audiologists and hearing loss advocacy groups like Hearing Loss Association of America will also need to be involved in educating the hearing loss community about these new alternatives. Consumers have a lot to learn so they can choose which devices to use both safely and effectively.

Will audiologists become less important now that they are no longer the sole gate keepers to hearing devices?

Absolutely not. In fact, audiological services, like hearing tests and helping to fine-tune device settings will become even more critical. I hope the audiologist community will be excited to add these new OTC wearing consumers to their practices. Unbundling and more transparent pricing will be critical, however, if devices are sometimes bought through the audiologist and sometimes not. Recent studies showed that the involvement of an audiologist had positive impacts on the quality of hearing outcomes with both traditional and non-traditional hearing devices. Audiologists will remain a critical component of care.

Which companies will be winners in this new environment?  

I wish I knew! I am excited that many consumer electronics companies seem interested in the space. More competition will improve product quality, drive innovation and keep prices down. Traditional hearing aid manufacturers will also likely offer separately branded products through this channel over time.

Readers, are you excited to see how OTC hearing aids change the industry?

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