Editors' pick: Originally published May 4, 2016.
A brutal brawl is shaking up the staid hearing aid business as new technologies - and new players - seek to grab market share. The probable winners: Baby Boomer consumers who will have a wider range of product choices, at lower prices.
The new technologies could not have come along at a more opportune time. According to the Hearing Loss Association of America, about 48 million of us report some hearing loss. At age 65, one in three of us has hearing loss. The aging Baby Boom population means that every day there are more seniors who need hearing aids.
Many are not buying them. According to Alina Urdaneta, vice president of marketing and learning at Signia (formerly formerly Siemens Hearing Instruments), maybe one in four of those who need hearing aids get them.
Why such poor adoption? Two reasons. Traditionally hearing aids have been big, bulky and uncomfortable, and would-be users did not want the stigma of wearing a badge of old age. Reason two: traditional Medicare and many private insurers do not cover hearing aids, even though a typical cost is $4,000 to $5,000 for a pair. That makes this an out-of-pocket expense and, for a senior on a fixed income, it may be prohibitive. Also remember - both vision (eyeglasses) and dental get scant Medicare coverage. Seniors have a lot of health care to pay for out of pocket, and hearing aids may fall off the to-do list.
The good news: new technology is making smaller, better, smarter hearing aids that, in many cases, are invisible (they sit in the ear canal rather than behind the ear, which is where legacy products resided).
There even is good news on the payments front. Urdaneta said that more Medicare Advantage plans - a managed care version of the federal government's health care initiative for seniors - do in fact cover hearing aids. As more Americans shift into Advantage - currently 17 million, 31% of Medicare recipients are in Advantage, according to data from the Henry J. Kaiser Family Foundation - more will be able to get coverage for hearing aid technology.
Hearing aid prices also are primed to tumble, said Patrick Freuler, CEO of Audicus, a seller of new style hearing aids. "We see prices falling to perhaps $500 per ear. It should be in the hundreds of dollars not in the thousands."
Raphael Michel, CEO of Eargo, another newstyle hearing aid company, also predicted falling prices: "We can lower the price of hearing aids. Eargo costs $1,980 for a pair." That price tag, mind you, is well under half of the cost of traditional hearing aids.
Know that, right now, a no-holds-barred fight has erupted between traditional hearing aid companies - such as Signia, a market leader - and the disruptors. The former position themselves as medical device makers. The latter have their roots in the consumer electronics industry.
The federal Food and Drug Administration (FDA) regulates hearing aids. It does not regulate what it calls sound amplification devices, which is what many newstyle devices say they are.
The traditional players sniff at the threat posed by the disruptors. "There is a place for the consumer electronics industry," said Urdaneta. "Their devices carry a big warning that they do not correct hearing. They are not medical devices. They are all about amplification. That's not the only thing required when there is hearing loss. It's a complex condition." Of course, said Urdaneta, treating it requires significant involvement of a trained professional.
Michel, meanwhile, sees matters very differently: "We are on the edge of disruption of the hearing aid business. There is a shift to consumerized healthcare. People want to take care of their health of their own. Medical devices are turning into consumer medical devices."
He added this zinger: Traditional devices require a lot of hands-on involvement by a hearing aid technician, for proper fit and calibration. "Back in the day, hearing aids required a lot of custom work. Today's hearing aids are digital and the device calibrates itself, it does not need a technician." Right there, suggested Michel, there's significant cost savings.
Who's right, who's wrong? That can't be called right now but what can be said is that the hearing aid industry suddenly is alive with new ideas and new products. "Disruption is healthy," Urdaneta said. "It keeps us innovating."
Who will win out? Probably everybody, at least in the short-term. Bulging Baby Boomer numbers - with their hearing deteriorating with age - mean good times are ahead for all makers of hearing aids and amplification devices. The need is real and the customer numbers are becoming massive.
But Boomers, too, just may hear better - at lower costs and while using spiffier gear. That's win-win-win.
This article is commentary by an independent contributor. At the time of publication, the author held TK positions in the stocks mentioned.