Why are hearing aid prices so high?

Posted by HearStore on Feb 14th 2016

Why are hearing aid prices so high?

If you've shopped for hearing aids recently, you've likely noticed that hearing aids can be very expensive, often retailing for $7,000 or more for a binaural set (two hearing aids). In addition, there often be a wide range of prices for the same hearing aid. There are many reasons for the current cost of hearing aids.

1) The local, low-volume distribution method

Hearing aids are most often sold from a local provider (either an Audiologist or licensed Hearing Aid Dispenser). Most of these providers operate on a low-volume, high-margin business model. In addition, many of these practices spend large amounts of money on advertising to bring in new clients. Guess who pays for the advertising? Customers, of course. A monthly profit and loss statement for a local hearing healthcare provider could look similar to this:

20 Hearing Aids Sold

2000 Average Selling Price (per hearing aid)

40,000 REVENUE

2,000 Rent

15,000 Commissions and Salary

15,000 Cost of Goods

5,000 Marketing

2,000 Additional Expenses

39,000 TOTAL EXPENSES

1,000 PROFIT

According to AARP, here is a breakdown of a typical hearing aid transaction

  • Total patient price: $4,600
  • Manufacturer costs (materials and research): $1,400
  • Retailer costs (operating costs, salaries, marketing, continuing education): $2,236
  • Service costs for the life of the hearing aids (adjustments, cleaning, repairs, batteries): $574
  • Potential pretax profit: $350

You see, hearing providers aren't necessarily greedy people inflating the costs of these devices so they can rake in excessive profits. They charge the markup they do because the distribution model requires it.

2) Manufacturer Research and Development

Hearing aids are extremely sophisticated devices. The are miniature electronics that need to operate in less than ideal conditions (sweat, earwax, etc) and must do so with very little power. Hearing aid technology has actually come a long way in the last 10 years, most notably in the hearing-in-noise category, where hearing instruments have become much more agile in their sound classification and processing capabilities. These innovations cost a significant amount of money and are ultimately passed on to consumers.

3) Manufacturer Markup (Wholesale Pricing)

It has been suggested by some that hearing aids cost as little as $100 to manufacture. While that may be the cost of parts (or even labor), that cost does not get these devices to market. These companies must employ sales staff and carry significant SG&A overhead to help maintain their market share with the independent practitioners. The sales representatives for the hearing aid manufacturers rack up huge travel and entertainment expenses as they wine, dine and cajole hearing professionals. Free trips to far-away destinations and other rewards are not unheard of.

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