Why Do Hearing Aids Cost So Much?

Why Are Hearing Aids So Expensive?

Forget what you have heard from the industry pundits about the reasons for the high cost of hearing aids. The main reasons are that the manufacturers of hearing aids and the audiologists who dispense hearing aids have a sweetheart deal to keep the cost to the end-user for hearing aids at as high a price as possible.

The hearing aid distribution monopoly

In the United States, the licensing of hearing professionals is the responsibility of the individual states. The audiologist and dispenser lobbies have had varying means of success at making sure they are the only ones allowed to dispense hearing aids. Some states require an audiologist or dispenser in that State to dispense a hearing aid, and some allow reciprocity from other States i.e. a person in one state can purchase from an audiologist in another State. There are a small number of States that do not require a licensed audiologist or dispenser for a person to purchase a hearing aid.

In order that audiologists and hearing aid dispensers not be controlled my the medical profession (MD's), they lobbied the FDA for a Waiver procedure so a patient would not need a prescription for hearing aids. The Waiver procedure was granted and allows audiologists and dispensers to have a patient sign the Waiver that essentially says that they (the patient) waive their right to visit a physician for a checkup before a hearing aid is dispensed by an audiologist.

The FDA does require that this waiver be signed and kept on file at a dispensers office. Most States follow the FDA requirements and require that all purchasers of hearing aids sign the Waiver before purchasing a hearing aid.

Lets talk numbers and hearing aid costs

It doesn't matter what a hearing aid sells for: $300 or $3000, the cost to manufacture is between $75 and $300. (some low cost and low end hearing aids can be manufactured in China or India for about $12 - $15 but they are extremely bulky, noisy and the batteries wear out in a few days). Regardless of the features and functions on a hearing aid; regardless of the hype and advertising, nothing can take away from the fact that a hearing aid costs less than $300 to manufacture. So why do hearing aids cost so much?

Lets go through the hearing aid supply chain

The Hearing aid manufacturer:

A hearing aid manufacturer will mark up his hearing aid between 75% and 150%, depending on features and competition. So the manufacturer is getting between a 35% and 75% gross margin. Not a bad business to be in. This means that the cost of the hearing aid to a reseller will be somewhere between $150 and $600 on the average (some of the newer "open fit" hearing aids are sold to the reseller for up to $800).

The Hearing Aid Reseller Chain:

Hearing aid resellers consist of mainly audiologists and audiologic dispensers. There are also a few ENT (Ear Nose, Throat) physicians who also sell hearing aids. Some family doctors team up with these resellers to also sell hearing aids. There are only about 9,000 audiologists and about 3,000 dispensers in the USA. There are over 10 major hearing hearing aid manufacturers with the top 3 being Starkey, Seimens, and Phonak. Audiologists and dispensers are courted aggressively by the manufacturers as once a product is chosen, it takes a lot of effort for another manufacturer to dislodge the manufacturer in place at that office.

For the most part, Audiologists and Dispensers have offices where a person comes into their office, gets tested, and then gets recommended for a hearing aid, and gets fitted .

So who is making the money on hearing aids?

The only conclusion that one can come to if the above is anywhere near the truth is that the hearing aid reseller chain is the one that is making the money and forcing the cost of hearing aids to remain high. If an audiologist is selling a hearing aid for $3,000 and purchases it for even $600, that is a 500% markup. It is very inefficient market-wise, and causes unnecessary costs to the consumers. WHAT A RACKET!!!

Audiologists and dispensers can whine about the cost of overhead: office space, personnel, heat, electricity etc. They can also talk about service: handholding, making sure the hearing aid is programmed properly etc. But when it comes right down to it, they are making money hand over fist on each hearing aid. (Whether they sell a lot of them is a different story)

A solution to high cost of hearing aids

The best way to drive down the cost of hearing aids to the end-user is to have more competition in the supply chain. Competition can be expedited with two basic actions:

1. Allow consumers to have choices in who they go to for a hearing aid, and
2. Minimize or change the Federal and State regulations regarding the dispensing of hearing aids

To expedite the choices for consumers, States should scrap the laws that require a citizen of a State to go to a professional audiologist to get a hearing test and a hearing aid.  States should use the history of eyeglass dispensing industry as a template. Allow consumers to to to one person for testing, and go to someone else for purchasing. Purchasing can be locally, from another State, or over the Internet. In fact some audiologists and dispensers are already accelerating this process by setting up shop online and dispensing hearing aids over the Internet.

To minimize regulations further, the FDA should separate out hearing aids into two groups for regulation: those that require a professional for fitting (molds etc.), and those hearing aids that do not need a professional for fitting (non- mold ITC and ITE hearing aids and the newer OTE/Open fit hearing aids). For the last category, the FDA only needs to set up a category of hearing aids that are OTC (Over The Counter), just like items on a Pharmacy shelf that do not require a professional or a prescription.

Summary

The argument of the audiologists and the dispensers that hearing aids are somehow special is a red herring. Most people can fit the newer hearing aids themselves.

Another false argument is that a person needs to be tested so that rare diseases (cancers etc.) can be caught in an early stage. Rare hearing diseases such as ear-related cancers occur in only .00001% of the population. That's 1 in 1,000,000 people in any population may get a rare ear-related cancer. The claim of a need for audiologist testing is self-serving at best, and plain greedy at worst.

Another argument that hearing aids are unique and need to be dispensed by experts is that they can produce loud sounds and need to be programmed properly. However MP3 and IPOD users put plugs into their ears, and the sounds they produce sometime exceed 120Db - a danger level not even found in hearing aids. Are they regulated? No.

 A certain class of hearing aids deserve the same uninhibited access by consumers. Only then will prices come down.