WHY DO HEARING AIDS COST SO MUCH

WHY DO HEARING AIDS COST SO MUCHPhoto by JD Mason

Originally Posted On: https://www.blueangelshearing.com/blogs/news/why-do-hearing-aids-cost-so-much

 

Ask anybody who had a stake in a retail business what their greatest fear was. Chances are likely they will tell you it was competition opening up or paying for overhead. So what’s the answer? Well, the correct answer is because the big suppliers manipulate hearing aid prices.

Now of course we are not saying this is deliberate price manipulation. For if it were the case, then that would be a contravention of Section 9(a) (2) of the Securities Exchange Act of 1934 in the United States.  Therefore, it is likely something else that is keeping hearing aid cost high. And that something else is the law of supply and demand.

How the Law of Supply and Demand Makes Hearing Aids Expensive

The Law of Supply and Demand suggests the following market forces operate freely in retail, no matter what wholesalers and manufacturers may say.

1… Price conscious consumers will demand less of an expensive product. But purchase more of it when the price falls.

3… However, they will be willing to pay more for an essential item that is in short supply.

2… Price will stabilize at the price point where supply and demand balance out, all other things being equal.

These are the hidden market forces behind the cost of hearing aids. Cheap is not a word bandied about in that market place. Instead, the emphasis is on technology which the chain stores want us to believe is expensive. That’s actually a fallacy, but has successfully convinced 99% of consumers that affordable hearing aids are inferior.

Indelible Proof of Price Manipulation – De Beers Antitrust Litigation

The De Beers Company had succeeded in capturing 90% of the rough diamond market in the United States by the time the 21st Century dawned. Controlling the supply chain and limiting stocks meant they could artificially nudge prices up to the gross, unfair disadvantage of consumers.

This, in a nutshell is why you are highly unlikely to find hearing aids under $200 in any hearing aid store in the United States, and for that matter anywhere else in the world. Instead, you’re likely to hear retailers offering ‘best value hearing aids’ for $1,000’s each. And that’s the questionable reason why hearing aids do cost so much.

On May 21, 2012 the U.S. Supreme Court shut down the artificial manipulation of diamond prices in the United States.  It ordered De Beers Corporation to refund $425 million to purchasers of diamonds and diamond jewelry. This included putting $130 million back in consumer wallets.

Why Do Hearing Aids Cost So Much Despite the Supreme Court Decision?

Price manipulation became illegal under the Sherman Antitrust Act of 1890, but within certain limitations.

1… There must be anti-competitive agreements in place

2… Unilateral conduct must ‘monopolize’ the market place

The United States Supreme Court summarized the intention of the Act as follows:

The purpose of the [Sherman] Act is not to protect businesses from the working of the market; it is to protect the public from the failure of the market. The law directs itself not against conduct which is competitive, even severely so, but against conduct which unfairly tends to destroy competition itself: (Spectrum Sports, Inc. v. McQuillan 506 U.S. 447 (1993)

So Why Do We See Evidence of Hearing Aid Price Control?

That Supreme Court judgement leaves the door open to anything that does not unfairly tend to destroy competition. Increasing hearing aid costs would tend to have the opposite effect so it’s outside the range of that precedent.

In fact, this was the main factor behind Blue Angels Hearing entering the market with hearing aids under $200 a pair including accessories and shipping. We aim to protect the public from the failure of the market in the spirit of the Sherman Act.

Five large hearing aid manufacturers control over 95% of hearing aid sales in the United States. They keep their hearing aids expensive by limiting the number of retail outlets they allow to sell them. This strategy throttles the supply side of the equation and artificially keeps prices high.

Blue Angels Hearing aims to disrupt this de-facto price manipulation, whereby commercial networks keep hearing aid prices high without actually breaking the law. We are content to continue supplying the best value hearing aids available anywhere as far as we know.

The average high street store in a U.S. shopping mall is lucky to sell a dozen hearing aid pairs a month, for a gross profit on paper that looks really great. However, when you factor in their rental, employee and administrative overheads they may barely scrape by some months out of season.

Blue Angels Hearing sells hundreds of hearing aids per month. We don’t have landlord and employee costs to pay, and our administration costs are negligible.

Our competition keeps predicting our business model will fail, but ten years later we are still in business. Please click on this link if you would like to purchase a digital, behind the ear hearing aid pair for less than $200, and smile each time you stroll past a regular hearing aid store.

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