​Strong demand is urgently needed. Blue Ocean Value highlights OTC hearing aid market.

In August, the U.S. Food and Drug Administration (FDA) issued a new rule for over-the-counter (OTC) hearing AIDS, announcing the creation of a new category of OTC hearing AIDS, effective October 17. With the release and implementation of the new regulations, many of the world's traditional prescription hearing aid manufacturers and consumer electronics manufacturers are actively positioning themselves in the OTC hearing aid space. The development of this emerging market has the potential to drive down the price of hearing aids, benefiting a large number of people with hearing loss, particularly those with mild to moderate hearing loss. Meanwhile, Chinese hearing aid companies and consumer electronics manufacturers are expected to usher in better development opportunities.

Low global H.I.V. penetration and high prices are major contributors.

Hearing loss is a major public health problem worldwide. In March 2021, the World Hearing Report released by the World Health Organization (WHO) showed that hearing loss currently affects more than 1.5 billion people around the world, of which 430 million people have moderate or above hearing loss. Nearly 2.5 billion people are expected to have some degree of hearing loss by 2050, and at least 700 million of them will need hearing rehabilitation services.

Hearing aids are one of the effective aids for improving hearing loss. Globally, however, hearing aid penetration is currently low. Globally, only 17 percent of people who could benefit from hearing aids actually use them, according to U.N. World Report on Hearing. Among them, Britain and France have rates of H.I.V. infection of more than 40 percent, the United States about 27 percent and our country only about 5 percent..The global penetration rate of hearing AIDS is low, and there are three main reasons for this: the awareness of the need for hearing AIDS among hearing patients is still low, that is, many patients are not aware of their hearing loss, do not fully understand hearing AIDS, or are unwilling to accept hearing interventions. Channels and services need to be improved, i.e. many patients lack easy access to hearing aid products and corresponding services. Hearing aids are expensive and many patients cannot afford them.

Compared to other diseases, otological diseases such as hearing loss do not receive enough attention in many countries and regions..A lack of appropriate professionals and services prevents patients from having adequate understanding and attention to these diseases..At the same time, the prevalence of H.I.V. is also influenced by the fact that the main population of H.I.V. sufferers are older people, the general belief that hearing loss is a natural phenomenon, and the low level of awareness of hearing loss and other diseases..In addition, for a long time, patients with ear conditions such as hearing loss were often classified as disabled, and many patients were resistant to the use of hearing aids.

The prevalence of H.I.V. is also not ideal in the United States, where there is a strong awareness of user demand and a more developed product pipeline. In the final analysis, the high cost was the main reason for not extending the reach of hearing AIDS.

In the United States, the purchase of conventional prescription hearing AIDS requires a prescription and fitting by a doctor (an audiologist). This rigorous regulatory approach does help ensure that patients can use hearing aids safely and effectively, but it also means that the market for hearing aids is somewhat closed.

Phonak of Switzerland, Odicon of Denmark, Reisenda of Denmark, Starke of the United States and WS Audiology of Denmark and other companies around the world currently hold the vast majority of the hearing aid market share. Gross profit margins are at high levels, which is largely responsible for the high price of hearing aids.

New regulations on over-the-counter hearing aids to better meet the needs of people with mild to moderate hearing loss can be used as a reference in China.

To address these concerns, the FDA created the new OTC hearing aids for people with mild to moderate hearing loss. Such products require FDA medical device approval before marketing. However, when purchasing an OTC hearing aid, patients do not have to be prescribed by a doctor or go through a complicated fitting process. They can be selected directly and purchased through online or offline channels.

At the same time, the distribution channels for hearing aids, which were initially controlled by a small number of hearing aid giants, have been loosened to a certain extent, which has greatly increased the enthusiasm of new enterprises entering the hearing aid field..For example, many consumer electronics brands have entered the hearing aid market: a hearing aid product from Jabra, a well-known brand of headphones, was approved by the FDA in February;;In September, consumer electronics giant SONY announced a partnership with WS Audiology, a world-renowned hearing aid company based in Denmark, to jointly develop OTC hearing aids, with plans to market them in the United States. Predictably, the release and implementation of the new OTC hearing aid regulations in the United States will be conducive to the promotion of orderly competition in the industry and the promotion of lower prices for hearing aid products.

The new U.S. FDA regulations on over-the-counter hearing aids are a good reference point for China.

Consistent with the situation in the global hearing aid market, the five largest hearing aid companies in the world, such as Switzerland's Phonak, have also essentially monopolized the market in our country, which has resulted in the same high prices for hearing aids in this country, "he said. Hearing aids can cost from a few thousand to tens of thousands of yuan, depending on the product's performance.

Currently, the domestic hearing aid purchase channel is mainly divided into online and offline channels..Online refers to purchases through e-commerce platforms, while offline mainly refers to receiving fitting services and purchasing related products at hearing aid fitting stores or hospitals..The e-commerce sales model for medical device products in China has been continuously promoted in recent years, which has led to the sale of a large number of entry-level hearing aid products at lower prices. While these entry-level products may not necessarily meet the treatment needs of patients, it is enough to show that there is a huge unmet need for hearing loss interventions in China.

Some people in the medical hearing industry said that the FDA's OTC new rules will not only help to promote the technological innovation of hearing aid products, but also is expected to promote the establishment of a new channel service model for those who are not willing to go to the hospital or hearing aid fitting store to provide a new purchase channel. For example, patients can conduct hearing tests through their smartphones, purchase hearing aids directly based on the test results, and adjust their hearing aids based on their hearing status, it said. For the domestic market, where there is a shortage of professional audiologists, the OTC hearing aid sales model may drive more hearing-impaired patients to receive hearing aids.

Industry insiders also say that the FDA's new rules for OTC hearing aids have made everyone realize that the current conventional hearing aids do not well meet the needs of people with mild to moderate hearing loss, and that this emerging market of OTC hearing aids is expected to be valued and developed. At the same time, the regulatory requirements are relatively stringent and the safety and efficacy of OTC hearing aids are better regulated, which is a good reference for the formulation of hearing aid product requirements and the standardization of market order in China. For example, the regulation makes it clear that OTC hearing aids are only available to people older than 18, ensuring that the risk is minimized for those younger than 18. In addition, the regulation reduces the safety risk of product use by limiting the maximum output sound pressure.

Emerging market potential needs to be tapped.

Opportunities and challenges co-exist

In recent years, the size of the hearing aid market in our country has grown rapidly. The report "In-depth research and Future trend Prediction of China's hearing aid Industry Development from 2019 to 2025" released by Industry Research Network shows that the size of China's hearing aid market has grown from 2.84 billion yuan in 2015 to 5.51 billion yuan in 2019, with an average annual compound growth rate of about 18.02%. By 2025, the market is expected to reach 8.07 billion yuan, it said. The advent of over-the-counter hearing aids is likely to further drive the rapid development of the hearing aid industry in China, an area that is expected to become the new blue ocean market.

For a long time, the nation's hearing aid market was dominated by foreign giants. Due to the late start of local traditional hearing aid manufacturers, enterprises are generally small in size and their core technology R&D capabilities are not strong enough to make good breakthroughs.Once hearing aid circuitry starts to involve consumer electronics, however, the picture can be a lot more rosy.

Domestic brands have made rapid progress in the consumer audio market in recent years. For example, TWS (True Wireless stereo) headsets have developed rapidly since their introduction, and domestic brands have played a key role in this field: in terms of brands, Xiaomi, Huawei, OPPO, Wanmo and Rambler are all well-known brands in the field of TWS headsets. In the OEM segment, Goertek and Luxun Precision are OEM plants for a number of internationally renowned electronics brands, including Apple. In the chip sector, where technology barriers are high, domestic manufacturers such as Hengxuan Technology, Torch Power and JellyTech are actively grabbing market share. The intervention of domestic forces has greatly reduced the price of TWS headphones and stimulated huge market demand.

It is important to note that the intense competition in the market has prompted these consumer electronics brands to look for opportunities in the medical and health sectors, and the advent of the new U.S. OTC hearing aid regulations is certainly a good development opportunity for these brands. In fact, as early as 2018, domestic audio brand Wanmo launched an auxiliary listening headset. It should be noted that there are significant differences between assistive hearing headsets and OTC hearing aids: First, OTC hearing aids are classified as medical devices, while assistive hearing headsets are classified as 3C headset products. Second, the users of assistive earphones are mainly normal hearing people with mild hearing loss, while OTC hearing aids are mainly used by people with mild to moderate hearing loss,'the report said. Finally, the gain of the two earphone amplifiers is also different due to the difference in the applicable population. Overall, the gain of assistive headphones is in the range of 15dB, and the gain of OTC hearing aids can reach about 25dB.

However, there are technical similarities between assistive headphones and OTC hearing aids in that both use a segmented compression amplification modulation algorithm. It can not only adjust the volume according to the different frequency bands, but also according to the different loudness of the sound, the subtle sound can be amplified, and the loudness of the larger sound can be suppressed, so that the hearing loss can hear the sound, and can protect their hearing. Therefore, it is not very difficult to improve assistive headset products and convert them into OTC hearing aids. Developers should choose an appropriate production schedule at the beginning of product design to meet the relevant OTC hearing AIDS standards.

Currently, there are a number of well-known consumer electronics brands in the hearing AIDS field around the world. Consumers are familiar with and trust these brands and can no longer rely too much on professionals, which is more convenient in product selection and conducive to earlier hearing intervention. At the same time, consumer electronics brands are rapidly iterating their products, which is conducive to rapidly lowering the price of high-performance hearing aids and making them more accessible to patients. In addition, consumer electronics brands have channel advantages that favor rapid market expansion.

At the same time, some in the industry say the growth of the over-the-counter hearing aid market will pose a big challenge for professional audiologists and audiologists. How to give consumers access to better hearing care services may be the key issue they need to address in the future.

It must be admitted, however, that traditional hearing aid companies still have a huge advantage. Traditional hearing aid manufacturers not only have years of clinical experience, but also have experience in the development of prescription hearing aids with more sophisticated sound processing performance and are more familiar with the medical services in the field of hearing health. At the same time, although the consumer audio brand has a good basis for the design and research of consumer electronic products, due to the high threshold of the hearing aid and auxiliary products industry and the need for medical qualifications, the risk of consumer audio brands rushing into this field is greater, and they need to have solid preparation.

For traditional hearing aid companies, with the implementation of the new FDA OTC hearing aid regulations, companies should actively embrace the market changes and accelerate the layout of the OTC hearing aid space. In this way, traditional hearing aid companies can not only compete with consumer electronics manufacturers to gain a foothold in this emerging market, but also help solidify their dominance in the specialty prescription hearing aid market. In addition, traditional hearing aid companies can collaborate with consumer electronics brands to jointly develop OTC hearing aid products, thus achieving a win-win situation.