The Walking Dead…..(Big 6/4 manufacturers)

@Steve12 said:

For examply, do you believe your cell phone costs $2,000 to manufacture?

No, but they are hugely more complex than a hearing aid. And over the counter (not on a contract) you can buy one outright for £500-1000 here. That’s a whole factor of pricing below what current hearing aids cost.

In addition this post wasn’t explicitly about ‘the hardware’, it was about how the competitive/technical advantage of the ‘big 6/4’ is being eroded by AI leaping over the proprietary secrets and development process which used to take loads of engineering time and physical effort. Thereby exposing the fact that the relatively simple construction of the devices (and the mass production of chips) allows a more ‘cheap and dirty’ type of build - moving the market away from being an exclusive supply at Western Healthcare prices.

i am able to buy small electret mike boards with AGC amplifiers (MAX 9814) on Amazon for about $3 - $5 each. Bluetooth transmitters and earsets are cheap. So the base hardware costs should be under $100 for both ears. To this one must add the AI chip and intelelctual property for regulation, and the fitting/cleaning/maintence costs. My conclusion: All in all, the current prices we pay are way too high!!

@Steve999 said:

this one must add the AI chip and intelelctual property for regulation, and the fitting/cleaning/maintence costs

Which make up, indeed, the bulk of the costs…

You cannot judge whether a purchase is decently priced by its raw materials.
Take a patented new medicine. The chemical may cost pennies to make, yet you may pay hundreds of dollars for the drug. In that case, what you really pay for is the evidence that that chemical is a safe and effective treatment for disorder X, evidence that people have spent billions of dollars to acquire (with risk of late-stage, total failure).
HAs are sold as a bundle of hardware combined with the expertise of audiologists, with (generally) generous return policies, repeat visits and follow-up.

@RobHooft said:

Take a patented new medicine. The chemical may cost pennies to make, yet you may pay hundreds of dollars for the drug. In that case, what you really pay for is the evidence that that chemical is a safe and effective treatment for disorder X, evidence that people have spent billions of dollars to acquire (with risk of late-stage, total failure).

I have a good friend who is a industrial programmer. Most of his career he has worked around pharmaceuticals. On many occasions he has described the huge money and waste due to all this huge money. Pharmaceuticals are making money thousands of time over costs and it’s been going on a long time. Anyone who doesn’t believe this is naive. Hearing aids are not this bad but the manufacturers do have a monopoly on the system. They do protect their interests and money. They are being undermined by other sources as OTC and cheap foreign hearing devices. This is my opinion and sticking to it as are many others on this forum.

Thanks for your kind advice. Will have to spend some time in the DIY section.

Much appreciated.

@Raudrive said:

Pharmaceuticals are making money thousands of time over costs

Return of investment in the Pharma industry is not in the “thousands”… but yes, profit margins around 14% are generous. Note that beyond the “huge sums” involved, there are also huge risks (as I mentioned, unexpected late-stage failures in trials that cost billions). Remember also that patents live, in practice, only around ten years or so, beyond which the invention becomes essentially a "gift to humanity ". But, yes, the industry is known for splendid innovation but also a set of dirty tricks (they very rarely cheat, but are very good at dancing around the rules). There is a reason Pharma is so tightly regulated (and some say, not even enough)- different discussion.

My point was simply that the cost of an item cannot be properly judged from the value of its components, whether it is a (fairly simple) chemical, something composed of mundane electronics or something “ethereal” like a song, a book, a business plan or an invention.

What best protects us poor customers from being ripped off here is competition (and no tariffs, please).

I agree on the importance of competition, but in the medical field, it’s difficult for the consumer to exploit competition. A number of providers share their expertise on this forum, but I don’t live near them. Around here … how do I know if a provider is competent? How do I know if I this doc or hospital or drug is better than that one? For HAs, I’ve thrown up my hands and decided to use price as the decider, so I’m a Costco customer. I’ve stayed a Costco customer because the people I’ve dealt with have helped me hear better., but I don’t know how far from optimal my hearing is. I just don’t want to expend the energy to try out other audis, especially since I’m likely to stay a Costco customer.

Practices, too, have a problem in deciding how to price their services. Suppose they exist on a $5,000 markup. How can they know what the effect of a $3,000 markup or unbundling services would be except by testing? And such a test could be disastrous.

So, what would you say to an audiologist who was considering opening up their own clinic in the next 6-12 months?

@danka said:

India produced some of the world cheapest drugs in the world. They have been warned by the big pharma companies not to export/sell outside India.

These are two different things here- yes, China and India have great industrial process chemists, and most of the generics that are prescribed to us come from these countries. There have also been some cases where India has infringed on patent law, arguing it is too poor to pay for these drugs, making the patent owners unhappy. Different discussion. What is happening today in pharmaceutical innovation is a major paradigm shift: China, which traditionally relied on nonproven “TCM” has now launched a plethora of standard (western-style, evidence-based medicine) clinical trials, totally unprecedented. Nobody doubts that they can bring down R&D costs and come up with marvelous things also in this area.

The question is: will something similar also happen for HAs? As discussed in this forum, things are a bit different here. Yes, there is R&D, innovation, and mass production of sophisticated electronics, all areas where China excels in, but medicines go (almost) straight from the prescriber to the patient (who just picks them up from a pharmacy); for HAs that step is far more drawn out, complicated and costly. Because of this marketing quirk I worry that there is little incentive for an investor to become the next Chinese Phonak. Also, newcomers must gain trust regarding longevity, follow-up, warranties and repairs before they become a brand. On the other hand, the “big five” have very healthy profit margins, and may still be a target.

Open your mind to the possibility of offering ‘directly sourced’ products. Don’t get me wrong they’re 80% of the way to fully featured product available today, but at 5-10% of your mainstream suppliers, they have to be a consideration: especially for those clients who are economically excluded by the current offering.

Potentially use them as a ‘step-up’ to full established manufacturer product for clients ‘dipping their toe in the water’.

Too big to fail? Many dominant companies have failed. Kodak, Polaroid, Sears, Weyerhaeuser, Kmart, Schlitz etc. Yes, research and development comprise a large portion of costs to hearing aid makers. And as um_bongo started out, AI will make reverse engineering faster and cheaper. The accelerating drive to vertically integrate is a response to the incoming storm.

@portage said:

Too big to fail?

In my opinion, the concept of too big to fail is completely different from the scenario being discussed here. Too big to fail companies have collapsed through sheer debt, mismanagement as well as saturation of market - i.e. too many companies supplying the same product.

What is being discussed here is the likelihood of whether a no name hearing aid manufacturer would disrupt the market so much so that prices drop dramatically or the current dominant companies fall out of favour being replaced by another company. As I said, only two instances like that come to mind and that is blackberry and Apple and now the current issue with the European car manufacturers vs China.

I don’t know all the companies that you mentioned, but in some cases their demise had nothing to do with being replaced by another company etc. Times had changed, market saturation was a factor and excessive debt piles has brought more than one of these monliths down.

Getting back to the original point that the OP was making, I think it will be quite some decades before the monopoly effect of the big four/six are disrupted. That is just my opinion based on what I have seen of monopoly effects of just about every market sector you can think of from IT Technology to grain.

@Roberto said:

Getting back to the original point that the OP was making, I think it will be quite some decades before the monopoly effect of the big four/six are disrupted. That is just my opinion based on what I have seen of monopoly effects of just about every market sector you can think of from IT Technology to grain.

All of those rely on a consumer information deficit. If the client potentially has 'perfect knowledge and perfect access’ does the market become more or less elastic (Price/Demand) ?

I honestly think this kind of erosion (although in the foothills now) is in the short-medium term and will happen in a parabolic function once there’s momentum away from the status quo.

It is quite possible. I am hardly an expert in the field of big business. My pessimism comes from the fact that in virtually every sector of business that you can think of, all I see is small mom and pop stores and other small businesses either going out of business or making so little money that they can’t make ends meet, whilst the big billion dollar corporations just get richer and bigger every year. We have nearly reached a point where in almost every industry be it baby food, grain supplies, email providers - you name it - we have essentially less than 6 companies who control the market in their particular market sector.

Here is something for interest. Fujitsu, which is million dollar or billion dollar sized company used to make laptops and computers. After several decades of making laptops etc, they pulled out of the sector completely because despite the size of the company and budget, they could not dislodge the big four companies that make laptops - HP, Lenovo, Asus and Dell. When Fujitsu pulled out, their market share was something like 1.2%

I hope that more competition arises with hearing aid manufacturers, but I am not really optimistic because over the last 50 years or more, I have just seen huge billion dollar companies swallowing up their competition. Hell even Warner Bros is about to be taken over by Paramount and Warner Bros is not a mickey mouse outfit. Anyway, that is just me being pessimistic.