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New entrants could disrupt hearing aid market after FDA paves way for OTC sales

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As the Food and Drug Administration paves the way for over-the-counter hearing aid sales, a mix of new entrants, including startups, big tech companies, and retailers like Best Buy, are expected to shake up the industry and possibly reduce sales. costs to consumers, according to industry members and experts.

Patients could see over-the-counter hearing aids hit shelves as early as October after the FDA released a final rule create a category of non-prescription devices for adults with mild to moderate hearing loss.

One of the goals of the legislation is to lower prices by allowing consumer electronics companies to enter a space dominated by a handful of hearing aid manufacturers, including resound, Sonovaand William Dismantlinganalysts with cowen wrote in a research note on Tuesday.

Some companies have already started offering over-the-counter hearing aids after Congress passed a law in 2017 requiring the FDA to create the device category. Bose, known for its audio equipment, obtained FDA clearance in 2018 for the first over-the-counter hearing aid. But earlier this year, the company stopped doing hearing aids, cutting its healthcare division. It has entered into a partnership with the South African company Lexi Hearing to sell a direct-to-consumer “powered by Bose” hearing aid.

Lexi takes technology developed by Bose and adds remote assistance, rewards and a team of audiologists to help people adjust their hearing aids to their needs. It also has its own direct-to-consumer device. Once the final rule takes effect Oct. 16, the company plans to begin selling products in the over-the-counter hearing aid category, said Lexi COO Seline Van der Wat.

Based in San Jose ear currently selling some of its devices direct to consumers, and Best Buy plans to sell hearing aids in its stores this fall.

Established hearing aid companies also plan to offer their own versions. Even after pushing back on some aspects of the FDA rule, Starkey, one of the “big five” hearing aid manufacturers, plans to offer a hearing aid over the counter while sticking with its network of audiologists.

“Starkey believes that better hearing is best served by the hearing care professional and will be offering an OTC product through their vendors in the future,” CEO Brandon Sawalich said in an emailed statement. “We support increased access for those who want ttake their first step towards better hearing.

There is also an opportunity for technology companies to enter the market. Last year the The Wall Street Journal reported that Apple Inc. was investigating the potential of its AirPods headphones to use as a health device

The FDA expects the shift to over-the-counter sales will help reduce the cost of hearing aids by making it easier to price hearing aids and leaving new entrants in a market dominated by the “Big Five.” Still, it may take time for prices to come down and to see which companies stay in the market.

“The reality is, this space isn’t easy,” said Blake Caldwell, founder of online hearing aid marketplace Soundly, which sells prescription and over-the-counter devices.

“Any business that starts will have to be serious. There is both a serious technological aspect. And then education, service, helping consumers find their way to better hearing is not a simple proposition,” he said. “The underlying challenge is that no one has the same hearing loss. It’s not just gravity… You all have different shapes and sizes of hearing loss.

Caldwell said he expects the FDA’s decision to reduce the costs of hearing aids, which currently sell for between $4,000 and $5,000 a pair.

“I’ve been excited about this development in hearing health since I first heard about it a few years ago,” Caldwell said. “I think it will definitely work as planned; this will lower the prices.

“Huge” for patients

Part of the reason hearing aids are expensive for consumers is because patients need to see a doctor or hearing specialist, said Brian Deese, director of the National Economic Council at the White House.

“That not only limited who could enter the market and get distribution. But bundling hearing aids with reviews has also reduced competition by making it harder for consumers to shop around to find the best deal, which has eroded competitive pressure to charge less,” Deese said during a Tuesday briefing.

According to the final rule, the FDA expects the changes to generate a benefit of about $62 million per year for consumers, or more than $2,800 per pair of devices.

It may take time to realize some of the expected benefits. Companies that already have 510(k)-approved hearing aids have 240 days to comply with the new rules. New devices that must submit a 510(k) have 60 days.

The rule also prevails over any state requirement that would restrict business activity or reduce the effectiveness of the devices.

For patients, “it’s huge,” Frank Lin said, professor and director of the Cochlear Center for Hearing and Public Health at Johns Hopkins University.

“Really, the only option right now is to go to an audiologist or a hearing clinic and spend a few thousand dollars,” he said. “This model is very appropriate for some people who need this level of care. I know many other patients who are already quite tech-savvy and just want to buy a device that might help them hear a little better.

This is particularly important because many patients who could benefit from hearing aids do not currently wear one, and hearing loss is a risk factor for dementia, Lin added.

As for the difference between prescription and over-the-counter hearing aids, there is one, but overall, “they work really well,” Caldwell of Soundly said.

For example, when he wore Bose’s over-the-counter hearing aids, Caldwell said he had to go through the process of customizing them to suit his hearing. They also lacked some of the high-end features that some of the high-end hearing aids had, such as background noise cancellation from loud cicadas outside or the ability to stream music through the devices.

“I would expect that over time more sophisticated features would move into the over-the-counter market,” Caldwell said. “The question is, how much can you expect someone to pay for something they make themselves, and how much can you expect to pay for premium features?”

Caldwell estimates that prices for over-the-counter devices won’t change much in the near term and will likely stay around $600-900 a pair.

“I think you’ll probably see these premium products drop quite significantly over the next few years,” he said.

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