ANALYSIS: Advanced Bionics Will Be Harmed By Costco Selling Phonak Hearing Aids

ANALYSIS: Advanced Bionics Will Be Harmed By Costco Selling Phonak Hearing Aids

As we broke the news yesterday that Sonova’s (symbol: SOON:VX) Phonak division will be selling premium hearing aids for $1349 at Costco “big box” stores in North America, a price that is about what dealers pay, it not only will badly damage sales of Phonak and Unitron hearing aids to independent hearing aid providers, but also to audiology clinics. However, in a case of “The Dog That Didn’t Bark” it’s also going to hurt Sonova’s Advanced Bionics division, which is only now just recovering from their devastating November 2010 implant recall, their fifth in a decade.

What analysts in Zurich (and Sydney and Copenhagen) need to bear in mind when looking at the potential sales dollar volume that Costco will provide is that not only will many independent dispensers and audiologists stop dispensing Phonak and Unitron hearing aids — Which are sold at a much higher price — but that virtually all of AB’s 200+ US CI  also dispense Phonak hearing aids, which in the age of ObamaCare, are barely keeping their speech & hearing programs afloat (and in some cases, the entire hospital outpatient clinic afloat) by selling hearing aids as their sole profit center, barely breaking even if not losing money on the rest of the departmental services. These speech and hearing programs not only sell hearing aids, but also the CI audiologists &/or surgeons also recommend which of the three brands to implant. Given that the list price for a HiRes 90k surgical kit and two processor kit is $31k, with typical centers paying a discounted price of $24k, it doesn’t take too many lost AB implant sales, which will be hidden, to more than offset any gains in low-margin volume Phonak hearing aid sales to Costco, hence “The Dog That Didn’t Bark” applies to our analysis of lost Sonova profits.

► The winners: Cochlear (symbol: COH:AU), privately held Med-El, and Wm Demant (symbol: WDH:DC), which purchased French CI maker Neurelec last year, and is already busily designing an all-new 16-electrode implant with fully independent bipolar current sources similar to the HiRes 90k, to be sold under the Oticon label, including in the large US market.

► Oh, And By The Way, watch for market leader Cochlear to make a bid for GN ReSound, from which they already license & are in production with ReSound’s 2.45 gHz wireless & Bluetooth technology, even though last week the Dusseldorf Appeals Court threw out GN’s $1.5 billion lawsuit against the German Cartel Office for improperly nixing the 2006 sale of ReSound to Sonova; and Cochlear’s aborted attempt to buy Siemens’ hearing aid division in 2009. However, we also wonder if  Cochlear’s board had considered ReSound’s Costco sales as having a potential negative impact on their CI400 cash cow, and hence decided to not touch the Danish hearing aid manufacturer~

Comment problems: Read before posting It’s been brought to our attention from several of our readers that they were having their comments rejected by the Akismet plug-in for WordPress as spam. This is unacceptable to us; and we are soliciting suggestions for a replacement. Unfortunately, we have to use something to screen for spam, as we were receiving over 100 spam comments per day at its’ peak. In the interim, to save retyping, we recommend selecting & copying all of your text to the clipboard: If your comment is accidentally rejected, simply paste it into an e-mail message, put “Rejected Comment” in the subject line, and send it to us at Dan@Snip.Net and we’ll manually post it for you~


← CONFIRMED: Phonak says it will distribute hearing aids through Costco BREAKING NEWS: Costco to sell Phonak premium hearing aids for $1349 →

About the author

Dan Schwartz

Electrical Engineer, via Georgia Tech


  1. Abram
    March 10, 2014 at 10:46 pm

    Great post Dan. Thanks!

  2. Jeffrey
    March 12, 2014 at 5:36 pm

    Admittedly, my comment is a bit tangential to the overall theme of your comments, but I find myself being curious with regard to your comment suggesting that clinics are struggling more because were are “in the age of Obamacare”. I feel that you’re mistaken in your suggestion that the Affordable Care Act has done anything one way or the other in terms of how speech and hearing stay afloat. Maybe I missed something, but are there now hundreds or thousands of documented cases where hearing and speech-language services were previously being covered or reimbursed but now are not? Are there even a handful of cases? Can you share some reliable data about if or how the ACA has impacted reimbursement for speech and hearing services. I know it’s an N of only 1, but as far as I know, my particular clinic has experienced no notable changes that could be associated with the advent of the ACA.

    • Dan Schwartz
      March 12, 2014 at 7:20 pm

      Overall cost pressure from ObamaCare shifting people into Medicaid; and reductions in Medicare reimbursement as they stole $700 billion from the trust fund, counting the “savings” twice.

      • Jeffrey
        March 14, 2014 at 11:32 am

        Yes, talking points from echo chambers are all good and well, and a pivot is a nice evasion move, but that response doesn’t really answer the question I asked, now does it?

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