VA awards contracts to all “Big Six” hearing aid manufacturers

By David H. Kirkwood 

DENVER–The Department of Veterans Affairs (VA), which is far and away America’s largest purchaser of hearing aids, has awarded contracts, effective November 1, to buy products from the U.S. divisions of all six of the world’s largest hearing aid manufacturers.

header-logoAlthough the contracts with GN ReSound, Oticon Inc., Phonak LLC, Siemens Hearing Instruments, Starkey Hearing Technologies, and Widex USA, are officially for only a one-year base period, they include an option allowing the VA to renew them for four additional one-year periods. Typically, the VA has extended the hearing aid contracts awarded by its Denver Acquisition and Logistics Center to the full five years.

Widex is the only company added to the VA’s new roster of suppliers, who were notified of their selection on August 20. ReSound, Oticon, Phonak, Siemens, and Starkey Hearing Technologies were also chosen by the VA in 2009, when it last solicited bids from hearing aid makers.

Four years ago the agency also contracted with four smaller companies. Three of those were subsidiaries of “Big Six” companies: Bernafon, which is owned by Oticon’s parent company, William Demant; Unitron, a sister company of Phonak in the Sonova Group; and Micro-Tech, a Starkey-owned company. Sonic Innovations, which also had a 2009 contract with the VA, was an independent company then, but was purchased by William Demant the following year.

 

HIGH-VOLUME, LOW-MARGIN BUSINESS

Being selected to make hearing aids for the VA means a lot of additional business. Last year, the VA purchased 617,000 hearing aids, 21% of the entire U.S. market, and both figures are expected to continue growing. In 2013, the VA bought 93% more hearing aids than it did in 2004.

Of course, the prices and the profit margins for devices made for the VA are much lower than for those sold to smaller U.S. customers, i.e., everyone else. The VA contracts stipulate fixed prices for the hearing aids they buy. Under the current contracts expiring in October, prices range from $275 to $400, depending on the manufacturer and model.

Elaine Holloway, a contract specialist at DALC, told this blog that the prices stipulated in the new contracts are generally in that same range. That represents a deep discount, of about 60% to 85%, from non-discounted commercial customer pricing. Holloway said on August 26 that specific prices would be available online “in the next couple of days.”

The contracts do not dictate how many hearing aids the VA will buy from the individual participating companies. VA audiologists are free to choose instruments from any manufacturer under contract.

The great majority of the hearing aids purchased by the VA are dispensed, at no charge, to qualified military veterans. In addition, the contract covers hearing aids provided by the federal government to active military personnel.