by Harvey Abrams, PhD.

Harvey Abrams PhD

“Peeling the Onion” is a monthly column by Harvey Abrams, PhD. 


Disclaimer: I am a paid consultant to the Hearing Industries Association (HIA) and contributed to the post-workshop filing submitted to the FTC on behalf of HIA which I review in this article. However, the opinions expressed here are entirely mine and do not necessarily represent those of HIA.


Assumptions that Concern


In my last post I commented on my observations while attending the Federal Trade Commission (FTC) Workshop held in Washington DC on April 18th.  Specifically, I expressed my concern regarding the apparent preference for assumptions and anecdotal remarks, at the expense of data, voiced by some of the presenters in support of the creation of a separate classification of hearing aids that could be sold over-the-counter (OTC) without professional intervention. I listed the following examples:

  • Cost is the key reason that people with hearing loss do not have hearing aids.
  • “Information costs” are unusually high, and consumer doesn’t have opportunity to try hearing aids or specific features.
  • Competition does not exist at any level – more choices and “better access” will drive down prices.
  • PSAPs and hearing aids are the same; the only difference is regulatory.
  • PSAPs are safe and effective.
  • The current FDA standards apply to just 6 companies.
  • Eyeglass/contact lens industry is an appropriate model for hearing aids.
  • Many websites are set up by manufacturers to trick consumers.


Evidence-Based Refutation 


I did not provide any specific evidence to refute those comments as part of my last article so I will do that here by summarizing HIA’s post-workshop response to the FTC, which addresses each of the assumptions listed above. I strongly encourage the reader to access and read the complete HIA filing for a more comprehensive review of these issues to include specific citations in support of each position discussed below. 


Cost is the key reason that people with hearing loss do not have hearing aids


Cost is certainly a reason that some people do not acquire hearing aids. However, objective research and market analysis have shown that cost is not necessarily the primary driver.

For many individuals with hearing loss, the major barrier to purchasing hearing aids is perceived need, a finding supported by both Consumer Reports and MarkeTrak data. Similarly, a 2014 study released by the Consumer Technology Association (CTA) showed that the most common reason for consumers with “a little trouble hearing” not to take action was not cost, but a perception that their hearing difficulties were not bad enough.


“Information costs” are unusually high, and the consumer doesn’t have opportunity to try hearing aids or specific features


Information sources are plentiful, varied and free. In addition to commercial sites, one can easily find information from impartial sources such as the American Academy of Audiology (AAA), American Speech-Language Hearing Association (ASHA), Academy of Doctors of Audiology (ADA), Better Hearing Institute (BHI), Hearing Loss Association of America (HLAA), International Hearing Society (IHS), Consumer Reports, Food and Drug Administration (FDA) and the FTC to name but a few.

In terms of opportunities to try hearing aids or specific features, more than 30 states have adopted laws that mandate trial periods of 30 days or more, and many retailers allow consumers to “try before they buy.” Costco, for example, has a national policy of a 180-day trial period. Manufacturers offer return-for-credit policies of at least 30 days.


Competition does not exist at any level – more choices and “better access” will drive down prices


At the retail level, consumers may purchase hearing aids from many sources including online retailers, speech and hearing clinics, hospitals, manufacturer-owned hearing aid centers, ENT offices, Costco, Sam’s Club, audiology offices, hearing instrument specialist offices, and not-for-profit organizations. CVS has just opened seven hearing centers within stores in the Baltimore-Washington area, with plans to expand to 50 locations by the end of 2017.

The U.S. Bureau of Labor Statistics reported that 6,221 retail businesses sell hearing aids in the U.S. as of July 2014. On the manufacturing side, there is robust competition across the industry. Critics imply that the largest six manufacturers control the market to the exclusion of other manufacturers. However, according to the Department of Justice and the FTC’s own economic measures of market share concentration, six manufacturers is an “unconcentrated” market with a healthy level of competition. At last count, there were 97 entities in FDA’s registered manufacturer database listed as manufacturers of hearing aids.


PSAPs and hearing aids are the same; the only difference is regulatory


PSAP manufacturers have not presented convincing clinical evidence indicating that their products perform at least as effectively as hearing aids across the hearing loss spectrum.  Furthermore, to the extent that PSAP electroacoustic analyses have been performed and published, such data do not demonstrate how well these devices will address hearing loss when used by a consumer to self-diagnose and self-treat.


PSAPs are safe and effective


The long-term effects and safety-related performance of PSAP devices are unknown. The literature on PSAP safety and efficacy in clinical use is meager, at best. Studies have shown that some PSAPs are potentially unsafe due to their high output levels. Even with the adoption of the current CTA voluntary standard, PSAP manufacturers can choose not to comply and may continue to market and sell these devices regardless of their safety or efficacy.


The current FDA standards apply to just six companies


While six manufacturers hold the majority of market share, there are 97 companies registered as hearing aid manufacturers with FDA. FDA’s regulatory authority extends to all 97 manufacturers and would apply to any other future hearing aid manufacturers.


Eyeglass/contact lens industry is an appropriate model for hearing aids


I doubt that the readers of HHTM need to be convinced that this is an absurd statement. It ignores the fact that vision and hearing (and vision loss and hearing loss) are different physiological and pathophysiological processes. The appropriate visual analog for presbycusis is macular degeneration, not presbyopia. I can’t imagine PCAST, FDA, or FTC supporting a recommendation that individuals with macular degeneration manage their visual difficulties with OTC readers.


Many websites are set up by manufacturers to trick consumers


One of the presenters at the FTC workshop told of her experience on WebMD, which reportedly redirected her to a manufacturer website after failing a hearing screening. I searched and could find no such hearing screening test on WebMD. What I did see was a clearly marked advertising banner for one of the manufactures at the top of the WebMD page. Clicking on the banner took me out of WebMD and into the manufacturer’s website where I had the opportunity to take an online hearing test.

Furthermore, six of the top seven Google hits for “online hearing test” unambiguously identify the manufacturer or distributor offering the test. The seventh site is not affiliated with any manufacturer. These practices could hardly be described as “trickery;” on the contrary, the process for the consumer could not be any more transparent. Worthy Opposition


I am not naïve; quite the contrary. I’m perfectly aware that what I write here in opposition to, what I consider, a “rush to legislation and regulation” will not have any impact on what currently appears to be an inevitable outcome to this issue.

I do believe, however, that it’s important that we create and preserve a written record which questions the misleading comments and unsupported assumptions that have characterized this OTC debate from the beginning.




Callaway S, Punch J. An electroacoustic analysis of over-the-counter hearing aids. Am J Audiol. 2008;17:14-24.

Federal Trade Commission. Now Hear This: Competition, innovation, and consumer protection issues in hearing health care. April 18, 2017.

Rønne, F., Rossing, R. (2016). Are Hearing Aids the Better Rehabilitative Choice When Compared to PSAPs? Hearing Review, 23(11):26-29


Harvey Abrams, PhD, is a consulting research audiologist in the hearing aid industry. Dr. Abrams has served in various clinical, research, and administrative capacities in the industry, the Department of Veterans Affairs and the Department of Defense. Dr. Abrams received his master’s and doctoral degrees from the University of Florida. His research has focused on treatment efficacy and improved quality of life associated with audiologic intervention. He has authored and co-authored several recent papers and book chapters and frequently lectures on post-fitting audiologic rehabilitation, outcome measures, health-related quality of life, and evidence-based audiologic practice.  Dr. Abrams can be reached


Images from Ross Land/Getty and Picture Quotes

But ya don’t gotta see an audiologist to hear better, if you do it the Costco Way.  That Way is putting pressure on the traditional medical model of hearing aid dispensing, which is under siege from all quarters — Big Boxes, Internet, PSAPs, OTC legislation, Hearables — and is not likely to sustain in its present form and clout for much longer.

In contrast to our venerable but crumbling model, Barclays rates Costco’s business model as”sustainable and defensible,” able to thrive in spite of, and alongside, e-commerce giants like Amazon. True, Barclay’s analysis focuses on food purchasing at Costco (57% of its sales), but we already know that Costco hot dog buyers like to bundle hearing aid and hearing aid battery purchases into their shopping experience.  It’s not a stretch to predict sustainability of the Costco hearing aid model as the fortunes of independents decline. 


A Perfect Economic Substitute in the US Hearing Aid Market


Substitute goods in economics are “cross elastic,”  meaning that Demand for the”substitute” good increases when Price for the “normal” good goes up. The usual example is Coke and Pepsi: people buy more Pepsi when Coke raises its prices. They do so because they benefit economically without experiencing loss of utility (both taste good) by making the trade off.  Some goods are substitutes (e.g., store brand colas vs Coke; PSAPs vs hearing aids), other goods approach “perfect” substitutes (e.g., Pepsi vs Coke; Costco hearing aids vs traditionally dispensed hearing aids). 

Some, maybe most, of us audiologists will balk at the suggestion that Costco-dispensed hearing aids approach perfect substitution for what we do.  Based on our clinical experiences and education,  we have a valid view from a Supply side perspective. No doubt the “goods” supplied differ in terms of manner and method of service delivery. Outcomes probably differ as a result of manner and method of fitting, though that has yet to be demonstrated for the comparison under discussion.


Demand Decides What’s a Substitute


But substitutes are only about Demand, not Supply. Regardless of what we informed hearing healthcare professionals believe on the Supply side, the only relevant variable on the Demand side is the consumers’ perception of utility. Outcomes are the key. When consumers compare two goods–hearing aids obtained from “us” versus hearing aids purchased as part of their Costco shopping trips–their conclusions are measured by their purchase decisions.  A previous post speculated that:

Costco’s success may be more significant than just taking market share from existing providers by putting pressure on Price.  Instead, it’s success (or audiologists’ failure) may be due to a new, frequently-preferred distribution channel for a substitute good which is undifferentiated from traditionally dispensed hearing aids in the minds and wallets of a growing group of consumers.  

Achieving a “perfect substitute” in the hearing aid market is tricky, as many articles and commentators have made clear in recent times, and as previous failures (think Songbird) have demonstrated. The tricky part isn’t the instrument itself, it’s the aforementioned professional expertise thought by audiologists to be part and parcel of a successful fitting. Whether that expertise is the exclusive provenance of audiologists is the issue.

The Costco model shows no prejudice on provenance. It hires and/or trains according to state hearing aid licensing requirements and staffs its hearing aid centers accordingly. Likewise, Costco consumers are equally open minded when weighing the utility of hearing aid services delivered elsewhere or at Costco. The Costco hearing aid service providers, be they audiologists or hearing instrument dispensers, are undifferentiated in Costco’s and Costco consumers’ minds.


Costco May be an Economic Perfect Substitute


Low Price for similar hearing devices is the hallmark of Costco hearing aid centers, satisfying the first half of the equation for a qualified substitute.  The other variable in the equation is the service/fitting component, comprised mainly of dispensers fitting in- and on-ear devices to adults in the Costco model.  Hearing aid dispensers employed by Costco fitting technologically advanced instruments from major manufacturers may be a perfect, or near-perfect economic substitute for stripped-down hearing aid fittings1 because:

  • they are licensed to dispensed hearing aids;
  • At Costco, they are not tasked with billing out diagnostic services or products to Medicare or other insurers;
  • At Costco, they are not tasked with performing cerumen management;
  • At Costco, they do not fit children;
  • they are Willing to Work for lower wages than audiologists;
  • their training is vocational, relatively short and can be done in-house, rather than the 3-4 year graduate training required for audiologists.


Whither Costco Goest, so Goest Us?


Previous posts in Hearing Economics’ Costco series noted Costco’s dual success at growing the US hearing aid market while capturing more market share. Growing the market is a good thing for everybody so long as everybody continues to get a piece of the proverbial pie. It remains up in the air whether Costco’s growing dominance is leaving some of that pie for audiologists, squeezing them out of the market, or absorbing them into the Costco model. 

Fig 1. Aggregate data for 25 US states with most Costco presence (“Top”) compared to 25 states with lowest presence (“Bottom”).

The last post in this series promised a rudimentary analysis of the notion that “one way to test that idea is to look at market growth in states with lots of Costcos versus states without Costcos .” Figure 1 is a first stab at it.

For simplicity, the US is divided into two slices of pie: the 25 states with the most Costco stores per capita (“Top”) and the 25 with the least Costcos per capita (“Bottom”). To put Top and Bottom into perspective, there are more than three times as many Costcos in the Top (381) than the Bottom (120) states.2 The Top group averages 8 Costco stores per million residents; Bottom group averages 2 stores per million including six Costco-free states. 3

Aggregate state data are compared between Top and Bottom states for several provider-related variables in Figure 1. In order to fit everything proportionally into the graph to get the visual, the data are not all to the same scale (see legend below graph), but the purpose is served.

A quick glance tells you that every variable is bigger for Top states than for Bottom states. Which means:

  • More hearing aids are sold per capita in states where there are more Costcos per capita. An average of 5.2 more hearing aids are fitted for every 10,000 adults 50 and older in Top states than in Bottom states. That may not sound like much, but it adds almost 400,000 aids to the pie in Top states.
  • More audiologists work in Top states than Bottom states. There are more audiologists per capita of total state populations (not shown in Figure 1). More importantly, there are 17-21% more audiologists per capita for seniors and oldest old groups in Top states than in Bottom states.
  • More hearing instrument dispensers work in Top states than Bottom states. There are fewer dispensers than audiologists in the current labor force, but those out there express a strong preference for the same states that audiologists and Costco prefer. Top states have 55% more dispensers per capita of the senior population than Bottom states.
  • Higher annual wages, by about $7K on average, are paid to audiologists in Top states than Bottom states.
  • Medicare billing growth in Top states (3.1%) for hearing evaluations (92557 code), compared to negative growth in Bottom states (-0.8%). 


This is Not Causality


Which doesn’t mean that Costco is calling the shots. Lots of things could explain Figure 1, beyond the preponderance of Costco centers. Maybe the Top states are wealthier and more heavily populated, luring Costco and hearing service providers. Or maybe it’s the climate, politics, social services, rents, etc.  Maybe the aging population is proportionally larger, richer and healthier in Top states than Bottom states. Maybe everybody just likes hot dogs.

The point is that Figure 1 is interesting to look at but doesn’t tell us what’s behind the curtain. Nevertheless, next post will feature more rudimentary stabbing at the perfect substitute idea, along the lines of Figure 1.

 Subsequent posts will introduce actual economic modeling of the entire data set to determine probabilities that we’re stabbing the right spots.  



1For example, Costco hearing aid centers do not fit CROS/BiCROS instruments. 

 District of Columbia and Puerto Rico are not included in the analysis, but they have Costco stores.

3 In 2016, Costco had yet to  occupy Arkansas, Maine, Mississippi, Rhode Island, West Virginia or Wyoming, 




feature image from tumblr