Venturing Opportunities in Hearing Loss
New upstarts are _quietly_ preparing as deregulation looms
New upstarts are _quietly_ preparing as deregulation looms
Beginning next year, consumers should have access to over-the-counter (OTC) hearing aids that are expected to bring down the price and hassle associated with purchasing the devices. The change comes thanks to a federal law passed in 2017 directing the U.S. Food and Drug Administration (FDA) to lower barriers to buying a hearing aid. Next year, the deregulation will take effect.
How big is this market?
Over 35 million children and adults in the United States have some degree of hearing loss. Hearing loss can have a negative effect on communication, relationships, school/work performance, and emotional well-being. Annually, hearing aid manufacturing and in the US generates $4 billion in revenue — across just 5 incumbents.
Hearing aids are prohibitively expensive, with a custom-fit pair ranging between $3,000 and $4,000, while some of the industry’s high-end pairs priced at $7,000+. Medicare and many commercial insurers don’t cover hearing aids, so revenue is driven by out-of-pocket payments. Only 3 states — Arkansas, New Hampshire, and Rhode Island — mandate coverage for adults, and just 20 states require that children’s hearing aids be covered by health insurance.
Rising rates of hearing loss, the large population of aging Baby Boomers, and technological advancements in personal audio devices have led to a recent increase in demand for hearing aid technology. It’s is predicted that the hearing aid market be worth double — $9.8 billion — by 2022. Over $120M in venture funding has poured into new companies in the last 12 months.
Regulatory Notes 😴
(it’s okay, you can skip this part )
In the FDA Reauthorization Act of 2017 (FDARA) Congress outlined certain requirements to establish a category of over-the-counter (OTC) hearing aids and the requirements that apply to them. This statutorily mandated process requires FDA to publish proposed regulations for public comment, and then to publish final regulations.
At this time, there are no products that can claim to address hearing loss that are, or can claim to be OTC (over the counter) hearing aids within the meaning of section 520(q) of the FD&C Act as amended by FDARA. Currently, hearing aids continue to be restricted devices, for which sales must follow applicable federal and state requirements.
Recently, the President’s Council of Advisors on Science and Technology (PCAST), and the NAS issued reports recommending ways to improve the access and affordability of hearing aids.
Certain documents identify applicable legal requirements under the Food, Drug, and Cosmetic Act (the FD&C Act) for hearing aids and for personal sound amplification products (PSAPs). Hearing aids and PSAPs both affect our ability to hear sound, but the products have different intended uses and are therefore subject to different regulatory controls.
While the FDA currently regulates hearing aids, which are medical devices, it does not consider sound amplifiers (PSAPs) to be medical devices when labeled for recreational or other use by individuals with normal hearing.
Customer Journey
Step 1: Hearing test (audiogram)
The first step is to have your hearing evaluated. An audiologist, a professional who specializes in evaluating and managing hearing loss, will determine the type and degree of your hearing loss and its impact on your ability to communicate. On average, customers will go 4.1 years with mild hearing loss before escalating to a hearing aid purchase.
Step 2: Hearing aid evaluation
During this appointment, the audiologist will discuss the various types of hearing aid styles, the latest technological advances, and what you can expect from your hearing aids.
Step 3: Hearing aid fitting
You will return approximately 1–3 weeks following your last appointment to be fit with your new devices. During this visit, the devices will be fit to your ears and programmed to meet your specific communication needs.
Step 4: Hearing aid adjustment
During your “Right-To-Return” period, another appointment will be scheduled. This visit may involve adjustments to the hearing aids which will be based on your feedback and discussion with the audiologist. Some patients receive more than 5 in-person adjustments before finding their auditory sweet-spot.
Journey Map Transformation
Everyone wants a slice
We’re seeing interest from all sides. The market is big and the tailwinds are strong — 5 incumbents and their audiologists downstream have dominated a market because of regulatory entrenchment that will no longer exist. It’s not often we get to see this type of staged deregulation in a marketplace.
Incumbents
A few weeks ago, I had an interesting conversation with an ex-PM from Sivantos (3rd largest hearing aid manufacturer with approx. 20% market share). He believes the incumbents aren’t ready for the change. He went so far as to state that their “bureaucracy already lends to complacency — which will lend to losing”. It felt a bit harsh but could be right. Conversely, these companies have the benefit of large cash reserves, well-worn distribution channels, and might play the role of active acquirers over the next few years.
Big Audio
This segment is made up of companies already in the sound and audio engineering space. These include groups like Sony, JBL, Beats, etc. As the lines begin to blur between hearing-aids and PSAPs, the broader audio industry has the chance to benefit. The groups can add light augmentations to their products and begin marketing as ‘audio enhancing’ products.
The first Bose Hearing Aid received FDA-approval in October 2018. The devices are intended to amplify sounds for individuals with mild to moderate hearing impairment.
Big Tech
Progress by Google and Apple confirm the accelerated convergence of consumer audio devices and traditional hearing aids.
Already, Apple’s AirPods, coupled with the Live Listen feature, can be used to assist hearing. This is done by leveraging the iPhone’s microphones as directionals to amplify sounds and relaying to wireless earbuds. In fact, this capability was available as early as 2012. Now, innovation in wireless and latency over blue-tooth — in complement with better power management — make this possible.
In August 2018, Google announced it is working with Danish hearing aid manufacturer GN Hearing to create a new hearing aid spec for Android smartphones called ASHA (Audio Streaming for Hearing Aids). Google has published the new protocol specifications online for any hearing aid manufacturer to build native hearing aid support for Android.
As we’ve seen with other audio-drive hardware, it’s possible that the physical form-factors become commoditized over time, leaving the customer-facing software channels and control modules retaining more value.
Upstarts
Most ventures are following the digital-native playbook and going direct-to-consumer. This theoretically allows new co’s to eliminate audiologist markups and to pass on savings to customers. In order to compensate for the in-person audiogram and fine tuning, these ventures offer free, online hearing exams and remote tuning through mobile.
Modern hearing devices with an audiologist on call.
Lively pairs the latest hearing technology with 2 years of professional, personalized care-all for 1/2 the average…www.listenlively.com
Award-Winning Hearing Aids and Expert Support in 3 Easy Steps | Audicus
By selling online we offer the most advanced technology and 5-star customer service but for 70% less. Prices start at…www.audicus.com
Resonance Medical - Intelligent Hearing Aids |
We come from a variety of academic fields, but our common thread is our passion for music, sound, and the senses as…resonancemed.com
Upgrade your ears with Eargo, the award-winning hearing aid of the future.
Hear life to the fullest with one of TIME Magazine's Best Inventions of 2018. Eargo hearing aids are virtually…eargo.com
Affordable Hearing Aids Online | MDHearingAid
Discover the best prices for quality hearing aids online at MDHearingAid. Low cost, doctor designed, FDA-registered…www.mdhearingaid.com
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The Kiosk Model
The jump from in-person audiograms and tuning to a self-serve mobile experience might be a difficult transition for an older generation. Instead, an intermediary offering might become valuable. This paper published by Dr. Monique Boymans suggests that audiologists are able to drive better tuning services than self-serve tools today, with a 67% preference towards the traditional solution.
Akin to the Dr. Scholl’s kiosks that become popular circa 2013, we might see pharmacies and drugstores offer audiogram booths or hearing aid tuning centers.
For CVS and Walgreens, where millions of Americans already go for their pharmacy-related needs, a hearing aid kiosk could be of significant strategic value.
It’s unlikely that Walgreens or CVS will be able to build the in-store infrastructure and miniature tuning centers themselves. There might be an opportunity to build free audiogram kiosks and begin partnering with early-stage companies to distribute new audio hardware through these channels.
The “Send in the Cavalry” Model
In any process of creative destruction, we see a response from those being disrupted — If the process of disrupting an industry is successful, it means that either 1. The innovative model was far better than the existing or 2. The response from incumbents was incorrect or too slow.
See Curb in response to Uber.
See Marriott’s ‘Homes and Villas’ in response to Airbnb.
See Lief, which helps traditional universities respond to the remote ISA movement
Similarly, is there a way to arm audiologists with a tool to fight back? Could you give audiologists a plug and play solution that allows them to provide remote screening and tuning for their patients? Instead of stealing market share, might you offer existing players a new way to generate ancillary revenue?
Critical Middleware
Tuning and fitting processes are imperfect today. There’s an opportunity to pivot conference-focused speech enhancement technology to the hearing assistance market.
Yobe Inc. | Crunchbase
Yobe is a developer of software for the enhanced processing of communications signals.www.crunchbase.com
AI Powered Speech Enhancement | 2hz
Mute Background Noise. Uninterrupted Voice. HD Voice and Loud voice enhacments with our 2Hz Tehcnology are now…2hz.ai
2hz was recently featured in the #1 spot on ProductHunt. Their technology automatically recovers lost sound packets during network transfers, mutes background noise, and turns low bitrate audio to high-definition audio.
Insurance
(more a note than RFS)
Although most private insurers don’t cover hearing aids, this may change if prices fall significantly- allowing insurers to check the box on the cost-benefit for the preventative health value provided to a patient.
Interesting research was published by Johns Hopkins in 2013 suggested a relationship between hearing loss and cognitive decline. The study showed that older adults with hearing loss developed a significant impairment in their cognitive abilities 3.2 years sooner than those with normal hearing.
“Our results show that hearing loss should not be considered an inconsequential part of aging, because it may come with some serious long-term consequences to healthy brain functioning,” said Frank Lin, M.D. PhD at Johns Hopkins
This is an exciting field and I expect we’ll continue to see new innovations at the technological and business model layers.
This list isn’t meant to be exhaustive. As always, I plan to add additional thoughts as they come.
Thanks for reading!
I’m always open to chat, learn, and collaborate. Feel free to reach me — 2amritsingh2@gmail.com