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Cover Story: 2012 Hearing Aid Sales Predict Slow Start to 2013

Pallarito, Karen

doi: 10.1097/01.HJ.0000423561.76435.0d
Cover Story
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Hearing aids are not exactly flying off the shelves in the United States, although the year-to-year sales trajectory remains positive. Unit sales totaled 2,148,719 from January through September 2012, and that is up three percent compared with a year ago, according to the latest quarterly data published by the Hearing Industries Association. (HIA Statistical Reporting Program. Third Quarter 2012.) Sales to the Department of Veterans Affairs comprised 20 percent of units sold during those nine months. Manufacturers moved 2,214,338 units in all of 2011, a gain of 2.8 percent from the previous year. Eighteen manufacturers participated in the HIA's third quarter statistical report, which tracks hearing aid sales by units, not dollar volume.

The US market for hearing aids and audiology devices was worth $5.7 billion in 2011, and is expected to reach nearly $8 billion by 2018, according to iData Research, a market research firm in Vancouver, Canada. (U.S. Market for Hearing Aids and Audiology Devices.) Unit sales rose 5.3 percent in the first quarter of 2012, signaling a strong start, according to the HIA. Sales grew sluggish, however, and rose a mere 2.9 percent and 1 percent, respectively, in the second and third quarter. A similar pattern occurred in 2011: first quarter sales rose 4.4 percent, followed by tepid gains of 0.9 percent and 1.1 percent in the second and third quarter. Sales rebounded in the final three months of the year, up 4.9 percent. “If that pattern holds, we should have a good, strong fourth quarter,” said Carole Rogin, the HIA president.



Annual sales growth would still fail to climb out of the low single digits even if unit sales in the final three months of 2012 were to match first quarter performance. “The current unit sales in the US are below my expectation of [approximately] five percent,” observed Oliver Metzger, a life sciences equity analyst at Commerzbank AG in Frankfurt, Germany, who tracks hearing aid stocks. “I had imagined that the market growth would increase in units after it had grown only by [about] three percent in units in 2011 and after [the first quarter] was comparably strong,” he said in an email. Mr. Metzger speculated that audiologists are reducing their inventories in anticipation of new product launches.

The Consumer Confidence Index, a measure of the health of the economy, slid to its lowest level in August since November 2011 before rising again in September. (See FastLinks.) Consumer spending inched 0.5 percent higher in August — the largest gain since February — but much of the increase reportedly reflected higher gas prices.

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The HIA's report highlights a seismic shift in consumer hearing aid preferences, with BTEs accounting for 70.8 percent of overall commercial sales in the first three quarters of 2012. BTEs with an external receiver made up 64 percent of sales. The BTE category has seen steady gains over the years and accounted for 20.3 percent of sales in 1999. Ten years later, BTEs made up for 65.7 percent of commercial sales, with 36.5 percent for traditional BTEs. BTE models represented 67.6 percent of non-VA sales in 2010, with external models slightly outpacing traditional units. (HIA Statistical Reporting Program. Third Quarter 2012.)

So why the flip-flop? “This external receiver appears to be giving people better amplification, better speech discrimination, and very importantly, comfort with the open fit,” said Ms. Rogin. It also reduces occlusion, which is the head-in-a barrel effect users experience when they speak wearing hearing aids that plug the ear canals.



“It definitely, since I've been in the industry, has completely changed from where it used to be, which was all custom, small, in the ear,” said Shawn Parker, a consultant for ENT practices and the founder of Fuel Medical, in Vancouver, WA. The increasingly smaller size of BTEs with external receivers has made them nearly invisible and the technology has continued to improve. “It's not like it used to be where you have these giant things behind your ears, and they whistle and buzz all the time,” he said.

CIC models, meanwhile, have lost some ground. These almost-invisible hearing aids accounted for 8.5 percent of commercial sales in 2010 but only 7.7 percent in 2011. (HIA Statistical Reporting Program. Third Quarter 2012.) The popularity of different models is cyclical, experts said, moving from custom in-the-ear models to completely-in-the-canal models, from over-the-ear to receiver-in-canal products, and now invisible in-the-canal products.

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Returns for credit in the commercial sector remain in the high teens to the mid-20 percent range. The average rates of return to the factory in the third quarter were 21.5 percent for in-the-ear models and 21.1 percent for BTEs. “The industry has been concerned about the rate of credit returns for decades and continues to be,” Ms. Rogin said. “All of the companies work with their dispensing customers to reduce those rates because it's a cost that ultimately is reflected in the cost of hearing aids,” she explained.

Mr. Parker, who previously served as the director of operations for a hearing aid manufacturer, explained that the return for credit statistic is inflated. Hearing healthcare providers sometimes will buy two or three products to try on the patient before returning the two the patient didn't like, he explained. The rate of returns to dispensing practices is significantly lower. “I bet it's around 14 to 15 percent,” he said. But that, too, varies by the type of seller, with retail outlets having more returns than medical-oriented practices.

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Mr. Metzger said he thinks US unit sales will grow five percent for 2013 based on several new hearing aid launches in the premium segment of the market, adding that the increasing share of new hearing aids will boost the average selling price (ASP) by about two percent. “I expect the momentum to continue for 2014 as the technological downstreaming of technology into lower priced hearing aids will push forward the unit sales, but with a declining ASP of [approximately] two percent for 2014,” Mr. Metzger added.

Mr. Parker offered a more conservative forecast. The ENT practices his company advises have experienced “substantial growth” in hearing aid sales because of untapped opportunity, but he anticipates “slow and steady” growth in unit sales industry-wide. “We should really start seeing huge numbers just based off the amount of people 65 [and older],” he said, “but we've been talking about it for 10 to 12 years, and we just haven't seen that.”

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The encroachment of personal sound amplification products (PSAPs) into the hearing aid marketplace and the blurring of the lines between hearing aids, which are subject to federal regulation, and PSAPs, which amplify sound but are not intended for the hearing impaired, is one of the most controversial developments in the US marketplace. The Academy of Doctors of Audiology, the American Speech-Language-Hearing Association, and the International Hearing Society called on the US Food and Drug Administration in August to investigate several companies believed to be marketing or distributing hearing aids as PSAPs and to order violators to cease and desist. (See FastLinks.)

Mr. Metzger said he did not think PSAPs are real competition for hearing aids because these devices merely amplify the incoming sound and are adaptable only to a minor extent. “Therefore, they are only eligible for a mild hearing loss,” he said. “And according to industry statistics, the penetration rate with hearing aids for mild hearing loss is only around 10 percent,” he explained. “Even a simple (cheap) hearing aid results in a better outcome than a PSAP,” he added, “so I do not see a major risk for the manufacturers.”

On the other hand, Mr. Metzger said PSAPs could help hearing aid manufacturers motivate those with mild hearing loss accustomed to wearing something on or behind their ears. “The result could be a lower stigma of hearing aids that could support the whole industry,” he said.

Ms. Rogin said the HIA will release new qualitative data indicating that consumers who know the difference between a PSAP and a hearing aid. Still, she chided the media for publishing stories telling people that they can save money by buying PSAPs and bypassing professional evaluation and fitting.

Will online marketers pump up sales? Hearing healthcare providers note that online marketers have been around for years but have had little overall effect on hearing aid sales. That could change in the wake of UnitedHealth Group's attempt to offer hearing aids to senior citizens at sharp discounts on the Internet. The FDA banned the company's online hearing test in response to hearing healthcare industry protests, but consumers can still enter their audiogram results on UnitedHealth's site after being tested by a physician or hearing healthcare provider.

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© 2012 Lippincott Williams & Wilkins, Inc.