October 22, 2014
Is there a hearing aid price bubble?
If you have been through the process of getting a hearing aid, you probably must have scratched your head when looking at the bill. Hearing aid prices typically range from $1,500 to $3,500 per unit. Double that if you need one for each ear! To the average American household, this is equivalent of up to 2 months of income!
Escalation of Hearing Aid Prices: Why No Low Price Hearing Aids?
While the price itself seems exorbitant, what is even worse is its continuous pace of growth: in the last decade the price of an average Behind the Ear (BTE) hearing aid has more than doubled. Even today, price points are not receding. Typically, we don’t see low price hearing aids.
Most hearing aids today are made up of digital signal processors. What is surprising is that digital technology was expected to reduce the production cost of a hearing aid. After all, digital technology has also made consumer electronics far less costly: think of how the cost of an average DVD player has plunged over the last decade.
The components of a hearing aid are indeed commoditized: they cost at most $50 to $150 per device but can go as low as a few dollars. If on top of this, most major manufacturers have shifted their production to low-cost China (e.g. Phonak), why do consumers still see rising price levels?
For a while, increasing amounts of R&D spend shifted towards developing sophisticated signal processing software that tackled anything from complex speech recognition situations to effective noise cancellation. However, that has become standard too.
Manageable Hearing Aid Prices: Where are the Low Price Hearing Aids?
More importantly, manufacturers have spent substantial R&D resources making the devices smaller, more powerful and packed with myriads of new features: Bluetooth, wireless integration, remote controls, 20+ channels. However, the improvements in alleviating hearing loss are becoming increasingly marginal: for most people there is no notable perceived benefit beyond 4-5 channels. Many argue that devices nowadays are over-engineered for the average user with mild or moderate hearing loss – however it gives manufacturers an excuse to charge higher prices by introducing “newer and better” models. Think about it this way: if you need to get from A to B, a Rolls Royce would definitely make the ride more enjoyable than a Honda. But the Honda will get you from A to B just as well, in a safe and comfortable manner. It seems that when it comes to hearing aids you don’t have the choice to opt for the Honda: you are forced to buy the Rolls Royce.
However, by far the most important factor for the current hearing aid price levels has to do with the underlying industry structure; the relationship between manufacturers, audiologists and end-patients. Have you ever pondered at how on earth a few components costing at most $100, assembled in China, suddenly turn into a $2,500 hearing aid? While many recent events suggest that low price hearing aids might be right around the corner (Audicus is one example) this pricing bubble is material for many posts to come.
Read more about the rising hearing aid prices versus other consumer electronics.