The hearing aid market is growing slowly. So, what else is new?


By David H. Kirkwood

WASHINGTON, DC–Consider all the reasons why hearing aid sales should have risen through the roof over the past decade or two. For one thing, there have been dramatic improvements in technology, fueled largely by the introduction of digital signal processing in the 1990s.

Powerful 21st century hearing aid hardware and software provide consumers with far more customized hearing solutions while addressing problems like background noise, distortion, feedback, and the occlusion effect that bedeviled hearing aid wearers of yesteryear. What’s more, this great new technology comes in much smaller, less noticeable packages.

Add to that the growing population of older people, as more and more baby boomers have passed age 65, when hearing loss becomes more and more common.

On the other hand, think about the various factors that should be driving hearing aid sales down, especially over the past several years. The economy has still not fully recovered from the Great Recession of 2007-2008 and the financial crisis that accompanied it. Meanwhile, at a time when many consumers are reining in their spending, the retail prices of top-of-the-line hearing aids have reached unprecedented heights—as much as $3000 or $4000 apiece.

Add to that the growing competition from increasingly sophisticated personal sound amplification products (PSAPs). Priced at a fraction of the cost of actual hearing aids, these devices are being targeted at people with mild to moderate hearing loss, even though the Food and Drug Administration says they must not be marketed as hearing aids.

So, what is the story with hearing aid sales? Is there a boom or a bust? Well, to the surprise of absolutely no one who has been following the industry for a while, the answer is neither. The situation is basically same old, same old.

 

LATEST SALES FIGURES

 

US net unit hearing aid sales from 2007 through June 30, 2014, as reported by HIA. This table, which ran in The Hearing Review, is republished here with permission. [Click on image to enlarge.]
US net unit hearing aid sales from 2007 through June 30, 2014, as reported by HIA. This table, which ran in The Hearing Review, is republished here with permission. [Click on image to enlarge.]
 

According to the Hearing Industries Association’s first-half statistical report, total unit sales at the midway point of 2014 were 2.9% ahead of last year at this time. That’s in the same ballpark as the year-to-year growth rates for the preceding three years: 3.0% in 2011, 2.9% in 2012, and 4.8% in 2013. It’s also not far from the average annual growth of 3.9% for the past decade, 2004-2013, or from the mean annual growth of 4.2% since 2000.

To be sure, there are years when the market grows faster. For example, unit sales in 2009 rose by 8.5% over 2008. But that was basically catch-up from 2008, when the world economy was tanking and hearing aid sales were down by 0.7%.

Something similar occurred in the 1990s. Food and Drug Administration investigations of the industry and accusations of misleading advertising made it almost impossible for manufacturers to market hearing aids, and sales dropped by 7.0% and 5.9% in 1993 and 1994, respectively. During the following three years, as marketing resumed, pent-up demand was freed and annual sales grew by an average of over 6%.  However, in normal times, growth seems permanently fixed in the range of 2%-5%.

 

NOT AS GOOD AS IT SOUNDS

Viewed through rose-colored glasses, the sales numbers this year and most years suggest steady gains in the hearing aid market. However, when you consider that the number of Americans older than 65 has grown by 27% since 2000, it appears that half the 55% increase in hearing aid sales over that period can be attributed to growth of the target population.

Another development over the past 20 years or so casts a further shadow over the modest gains reported by HIA, the Washington, DC-based trade association for the hearing industry. What HIA reports to its members is how many hearing aids are sold by manufacturers to their thousands of customers around the country. That number, 2,990,104 in 2013, is considerably larger than the number of hearing aids that were sold by dispensers to consumers.

Why is that? The main reason is that last year more than one-fifth of all hearing aids sold by manufacturers in this country were bought by the Department of Veterans Affairs, which fits them at no charge on qualified hard-of-hearing veterans.

As the population of veterans with hearing loss has grown and the VA has loosened its rules on who qualifies for free hearing aids, the number of veterans being fitted has increased dramatically. In 1998, sales to the VA represented only 8% of the total U.S. hearing aid market. By 2013, the VA’s share had grown to 21%.

Last year, the VA purchased 617,000 hearing aids, a 93% increase over 2004 when it bought 320,000. In the private sector, hearing aid sales have grown by just 39% over that period, less than half as fast. Thus, the statistics show that without sharp growth in the over-65 population and the expansion of the VA’s audiologic activities, the hearing aid market would have scarcely expanded at all in the past decade.

Perhaps, the pro- and anti-growth factors cited at the beginning of this post above have pretty much neutralized each other. Whatever the reason, the state of the hearing aid market seems destined to remain just about the way it always has been.