Why do hearing aids cost so much? Part 4

It's the question we're asked most frequently at health fairs and public presentations...why do tiny devices that provide real benefit to hearing loss sufferers cost so much?!  We've already discussed three reasons in previous posts:

• Research and Development 
• Bundled Pricing
• Market Penetration

In our final post addressing this issue, we'll discuss another component that impacts the pricing of hearing aids...federal regulation.

Hearing instruments are medical devices that must meet federal standards for distribution.  Dr. Bettie Borton details the impact of federal regulations on hearing aid pricing:

Hearing aids are medically regulated devices. As such, the manufacturers who produce these devices are subject to regulation by many organizations, including the FDA, FTC, and FCC. Like many other products in the U. S. marketplace, having to meet regulation specifications by governmental agencies seldom lowers costs, and almost assuredly raises them.

Regardless of where you stand on the political spectrum, federal regulations are meant to protect consumers from predatory and unsafe business practices.  Federal regulations help ensure gas mileage standards for automobiles, safe food distribution, proper medical dispensing, and more.  However, businesses usually pass the cost of complying with these standards onto the consumer.  The National Economic Research Association released a report in August detailing how federal regulations impact the cost of goods:

• U.S. manufacturers today are subject to an estimated 2,183 unique regulations promulgated between 1981 and April 2012. 

• Since 1998, growth in the cost of major regulations (defined as those costing more than $100 million) has far exceeded manufacturing sector growth and overall economic growth. In that span, the cumulative inflation-adjusted cost of compliance for major manufacturing-related regulations grew by an annualized rate of 7.6%. Over this same period, annual growth in the physical volume of manufacturing sector output averaged a mere 0.4% while U.S. inflation-adjusted GDP growth averaged 2.2% a year. 

•  In 2012 alone, major regulations could reduce the total value of shipments from the manufacturing sector by up to $500 billion in constant 2010 dollars. This is a loss in shipment value equal to 85% of the 2010 pre-tax profits of the entire manufacturing sector.

Hearing aid pricing is impacted by federal regulations.  While the scope of the Federal Government's regulatory role will continue to be debated, some guidelines are necessary to ensure safety standard compliance and consumer protection.  The cost for compliance is one more component hearing aid manufacturers must account for as they calculate the price point for the products they offer.

To read Dr. Borton's blog, click here.
To read the NERA's report, click here.


Image provided courtesy of freedigitalphotos.net