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the hearing aid cartel
The key players in the market are six firms most of us haven’t heard of: WS Audiology, Amplifon, Sonova, GN, Demant, and Starkey. These firms also own a bunch of hearing aid brands, so even if you have a hearing aid that isn’t branded as one of these firms, it’s likely that it comes from one of them.
The compe ive dynamics in this field are complex, but the hearing aid cartel uses three basic mechanisms to retain their dominant market power. The first is what’s called a patent pool, which is when a bunch of firms come together to share essential patents, often with the goal of excluding others from the business. For instance, in the early 1900s, JP Morgan, had both Westinghouse and GE combine patents into a pool, which then blocked others from producing equipment for electric utilities.
In the hearing aid market, the patent pool is centered in a corporation called the Hearing Instrument Manufacturers Patent Partnership, which holds patents for much of the industry. HIMPP, according to its website, develops, manufactures and markets “over 90% of the hearing technology available to consumers worldwide.” If you want to enter the market with a new device, it’s likely you’ll infringe on one of these patents, which means you’ll have to pay licensing fees, which cost either $2.5 million or 1% in royalties annually. HIMPP also keeps an eye out on “hearing aid related patent activity by parties other than HIMPP partners,” with the goal of opposing granting of patents to non-partners. It is, in other words, a club.https://mattstoller.substack.com/p/s...e ion-insideThe second barrier is that most of the major producers of hearing aids have engaged in vertical integration. So, what is vertical integration? Vertical integration is when a firm owns an important supplier or buyer up and down the supply chain, like a retailer owning a distributor or a steelmaker owning a coal mine. Here’s Jack Donaghy on 30 Rock with perhaps a more clear explanation.
In the case of hearing aids, several of these firms actually have subsidiaries that manage the hearing part of health insurance. WS Audiology, for instance, owns TruHearing and Hearing Care Solutions, which runs health care plans and discount plans for Medicare Advantage insurers, including Humana, BC/BS, Anthem, Aetna, Cigna, etc. So if you have health insurance with, say, Aetna, and you need a hearing aid, Aetna will send you to a hearing aid manufacturer to tell you whether you need a hearing aid. Surprisingly, they often answer, “Yes, and you need an expensive one!”
