SWC June 2009 Newsletter

Gina Francioli is a Manager Investor & Corporate Relations for Sonova Holding AG. The following is an interview with her concerning hearing aid technology.

Pearl: 1) How is a Sonova hearing aid different from other hearing aid companies on the market?

Gina: In 2008/09 we have become the number one hearing system manufacturer according to sales. This underscores that we offer the best-performing products, as end customers and also audiologists seem to like our products very much. I could name different unique features of our products, but in the end it all comes down to how much audiologists and end customers like our products. One advantage compared to our peers is the fact that we offer the most comprehensive product portfolio in our industry, covering all price and performance classes.

Pearl: 2) Is Sonova attempting anything different with technology to attract the baby boomers coming of age and entering the world of hearing loss and hearing aids?

Gina: Audéo YES from Phonak is a hearing system that is especially targeted at baby boomers. It is very stylish, small and has all wireless functions (like connection to Bluetooth-enabled devices such as mobile phones, MP3 players, laptops etc.). Especially for these people, state of the art technology is very important. As they still know how “natural hearing” feels, they are also very demanding what regards the audiological performance of their hearing system.

Pearl: 3) There are many of us who found analog hearing aids much more advantageous than digital. Why digital over analog?

Gina: Digital technology has two main advantages versus analog technology.
1. You have more computing power with digital than with analog technology. This is an important prerequisite for more effective noise cancellation and also for automatic functions (like the hearing instrument automatically adapts to the respective hearing environment).
2. You have more frequency bands with digital than with analog technology. This is important in order to be able to better fit the hearing instrument to the individual preferences of the end customers.

Pearl: 4) Do you believe we will ever see a time when the consumer will be allowed to program their own aid? If not, why? If yes, when?

Gina: Already today this is possible, but only for people with very moderate hearing loss. This will most likely become more popular in the future, but only for people with moderate hearing loss. We don’t think that it will become standard for people with severe hearing loss, as the fitting process is very complex in these cases.

Pearl: 5a) What is the average cost of a Sonova BTE hearing aid that includes telecoils, dual directional microphones and volume control that can be operated by the consumer?

Gina: As manufacturer, we don’t define retail prices for our products. All of our products include telecoil, dual directional microphones and volume control (except micro BTEs and CICs, they don’t have volume controls).

Pearl: 5b) What is a ballpark figure cost to make the high-technology hearing aid described in question 5a?

Gina: Manufacturing costs are roughly the same for all product classes, but the service element for a first class product is of course much higher than that for an economy class product. To highlight that the profit does not only go to the manufacturers but also to the retailers: The mark-up from wholesale to retail can be up to 5 times. I.e. if Phonak sells a hearing instrument for e.g. 400 USD to a retailer, he could sell it for up to 2000 USD to the end customer.

Pearl: 6) What does Sonova as a company believe the problems are that make 1 out of every 3 hearing aid wearers put the hearing aid in their night table, never to be worn again?

Gina: We think the biggest problem is that people with hearing loss wait too long until they buy a hearing system. When they finally have one, their brain has already forgotten “how to listen” and it is very strange for them to have again all this acoustical information. It takes a lot of time until they get used to it again. Another problem is that some people have wrong expectations. They think that with a hearing instrument they are able to hear again like when they were 15. But this is unfortunately not possible.

Pearl: 7) Are audiologists truly qualified to keep themselves updated and on top of the new technology that changes yearly?

Gina: Yes, they are. They get a special education and are experts in this field. And we as a manufacturer offer them training for the new products.

Pearl: 8) Why aren't costs for hearing aids posted in an audiologist’s office for the consumer to shop wisely for hearing aids and get the best possible price?

Gina: As a manufacturer, we are not really the right ones to answer this question. One of the major “problems” is that retailers make bundles. They sell the hearing instruments together with the fitting-service; so as an end customer you don’t really know how much you pay for the hearing instrument and how much for the service. This procedure is under discussion in some countries, also in the US. There are some Internet services that post the prices of different hearing systems.

Pearl: 9) Do you believe that the hearing loss population has a right to know what the profit margins are on the hearing aids we buy?

Gina: Publicly listed manufacturers (like we are) and retailers (like, for example, Amplifon) have to disclose the overall profit margins for their business. You can get them from their annual reports.

Pearl: 10) Since we as consumers need to visit an audiologist or hearing aid specialist for the cost of a hearing aid, do you believe that we should have access to prices upfront without having to pay for a visit to the audiologist?

Gina: This is not something we as a manufacturer can decide on. This has to be done by the whole hearing-instrument industry. But as mentioned in Question 8, there are some Web pages where you have access to prices.

Pearl: 11) How has Sonova been affected by the recession?

Gina: It had an impact insofar as the global hearing instrument market growth was around 2% in units in 2008. It was between 4-7% in other years. Sonova grew above the market also in 2008/09. What we note is that the demand for economy and business-class hearing systems is clearly higher than for first-class hearing systems. So we see a limited down-trading effect these days, which might reverse, when the economy is picking up again.

Pearl: 12) Why do you think insurance companies are not willing to pay for the full cost of a hearing aid (and in most cases no reimbursement), yet cochlear implants are fully covered?

Gina: This is actually different in every country. And I think insurance companies can better answer this question.

Pearl: 13) Is there anything you would like to add about Sonova or any other concern for the person who wears hearing aids?

Gina: We are always happy when end users share their experience with the hearing professionals and give honest feedback on what needs to be improved. We are focusing consistently on the improvement of our products to offer better audiological performance and to better address the needs of audiologists and end customers.