The Hearing Company - GlobalGiving



A Social Enterprise to Make Quality Hearing Aids Affordable and Accessible

The Challenge of Hearing Impairment: The World Health Organization estimates that 250 million hearing impaired people could benefit from using a hearing aid and that the global annual need for hearing aids is 32 million. Hearing aid sales worldwide in 2002 were only 6 million units. Of these, only 12% were sold to the developing world, home to 70% of the global population. In the US, there are 28 million Americans with a hearing loss. However, only 23% of this population owns a hearing instrument, and seven million cannot afford to purchase them.

The cost of hearing aids is prohibitively high for the vast majority of the hearing impaired, who are poor. In 2003, the average cost of a hearing aid in developed country markets was US $1,700. In developing countries, quality hearing aids sell for $500-2000. Hearing aid companies are oriented toward the markets of developed countries, where they realize a high profit margin. The current specifications of "low-priced" hearing aids available in developing countries have resulted in poor quality and low client satisfaction. The developing countries lack cost-effective, financially self-sustaining service delivery models that yield affordable hearing aids and services for the hearing impaired.

In the US, few insurance companies cover hearing aids. Hard of hearing children may qualify for Medicaid, but services usually don’t cover the cost of better quality instruments. The high price to perceived value ratio prevents most who know they need a hearing aid from getting one—most typically wait 7 years before getting one. In most countries, approximately 10% of the population is hearing impaired and in need of hearing aids. Historically penetration rates have not changed by more than 1-2%. Thus over time, the untapped hearing aid market is projected to grow as fast as the hearing impaired population grows which is ~8-10% per year. .

The need for appropriate and affordable hearing aids in developing countries is largely ignored by the hearing aid industry. Most manufacturers have neglected developing country markets since they have not appreciated the size of the potential market and have preferred to stay with a low-volume, high cost approach.

Project Impact has developed the Affordable Hearing Project (AHAP) to address this extreme market failure in the hearing industry. The mission of the Affordable Hearing Aid Project is to alleviate the burden of hearing loss in as large a population as possible by providing quality hearing aids via ethical dispensing at a significantly lower price than currently exists in both developing and developed countries; and to do this in a financially self sustaining fashion, based on earned income from sales of hearing aids.

AHAP will implement a business strategy that relies on high volume sales with low profit margins. The enterprise will implement with distribution partners a multi-tiered pricing system under which the higher revenue realized from hearing aid sales to wealthier patients will be used to cross-subsidize the sale of hearing aids to poorer patients. AHAP’s goal is to dramatically change the pricing structure of the hearing aid industry enabling millions of people to gain access to hearing aids. The average retail price for digital hearing aids in 2003 was $2000; for digitally programmable it was $1250. Average retail prices for digitally programmable analog were $600-800. AHAP’s pricing will range from $60-170 for the digitally programmable and $100-250 for the digital. Those who cannot afford these prices will receive hearing aids for free.

Progress to Date: Project Impact has raised $3.1 million to accomplish the following: A fully equipped hearing AID R&D lab has been established in NJ. A digitally programmable analog two-channel, two memory hearing aid has been developed. This product normally retails for $1500 and wholesales for over $800. Production became operational in January 2003 at Aurolab, a non-profit manufacturer, under contract to Project Impact at its plant in south India. Initial costs of goods are $60. Development has been completed on a fully digital 4-channel 4-memory line of hearing aids that covers the full range of hearing loss, including people with severe hearing loss. Projected per unit manufacturing cost is $90. The AHAP Impact1 hearing aid has the longest battery life of any known hearing aid on the market today. The hearing aid accommodates both rechargeable non-rechargeable batteries. A solar re-charging unit has been designed and manufactured that charges re-chargeable batteries for hearing aids. Per unit manufacturing cost is $3; four re-chargeable batteries brings the package cost to $5. The AHAP Hearing Aid had US FDA marketing clearance and CE Mark Certification for European sales. A clinical trial at University of Washington is completed with excellent results and high client satisfaction. Approximately 10,000 hearing aids have been manufactured and distributed. Over $400,000 in revenue has been realized to date. Project Impact has established a wholly owned Indian commercial company, ActivEar to distribute AHAP in India. ActivEar handles all AHAP import and exports in India and relates to Aurolab, our contract-manufacturing site. The first non profit distribution site has been established in S. India and is 60% financially sustainable in it’s first year.

History: Project Impact, Inc. (project-) is a Berkeley, CA based not-for-profit organization in operation since 2000. Project Impact is dedicated to making medical technology and health care services sustainable, affordable, and accessible to all, particularly to the poorer two thirds of humanity living mostly in developing countries. Project Impact is rooted in the earlier work of its founder and Executive Director, David Green. David is an Ashoka fellow and is recognized by Schwab Foundation as a leading social entrepreneur. He is also a MacArthur Fellow. His most significant work is the development of an economic paradigm for making health care products and services available and affordable to the poor. This paradigm of ‘compassionate capitalism’ utilizes production capacity and surplus revenue to serve all economic strata, rich and poor alike, in a way that is both financially self-sustaining and affordable to all members of society.

Project Impact started the Affordable Hearing Aid Project, AHAP, in 2000, in partnership with Impact Foundation UK. The vision for developing an affordable, high-quality hearing aid came from Lady Jean Wilson and the late Sir John Wilson, who are well known for their leadership in galvanizing many individuals and organizations around the world to alleviate disabilities. Sir John passed away in November 1999 and Lady Jean Wilson continues to actively advise this project. The Wilson’s founded the Impact network of organizations, of which Project Impact is a member. With the expertise of Sunil Chojar, former head of R&D of both Siemens and Starkey, Project Impact has developed the ability to produce quality digital hearing aids.

AHAP’s Business Strategy: Current efforts to ameliorate hearing impairment in both developing and developed countries represent an extreme market failure. Pricing is too high for most and health insurance does not cover hearing aids in most markets except the few European countries that have socialized medicine. AHAP’s strategy is to grow the hearing aid market by offering a high-quality low-priced product to the untapped price-sensitive market through novel and existing sales channels.

US Channels: Most potential customers in the US are retired people on fixed incomes who do not have health insurance that covers hearing instruments. Discretionary income is first spent on life maintaining pharmaceuticals well ahead of hearing aids, especially when the average cost to equip both ears with hearing instrument is $3,800- $5,000. AHAP will address these phenomena by pricing it’s hearing aids and related fitting services to be approximately $600 for a binaural fitting($90 for the actual hearing aid) via the Lions and other non profit channels such as the US Veterans Administration and academic audiology programs at wholesale prices that will be 50 to 70% less than current pricing.

Non-profit Distribution Channels via the Lions: Project Impact has a strong relationship with Lions Club International Foundation (LCIF), which is the largest international service club organization in the world with a global membership of 1.4 million. Lions are a major partner for distribution worldwide and have announced AHAP as a major funding priority. Our hearing aid is being offered as a membership benefit to the 1.4 million Lions worldwide. Approximately 4500 hearing aids have been sold to Lions programs to date, and demand is projected to be 10,000+ in the coming year for Lions generated sales. LCIF has a staff of four who are animating distribution via the Lions network worldwide.

Social Franchising: Project Impact will create hearing aid distribution with its non-profit partners via social franchising of the clinical and economic model. Project Impact will provide the following services to partners, where partners maintain local ownership: training technicians for dispensing; setting up and training for mold making; start up and initial operating expenses financing; business planning and systems development; research to set pricing; supply of equipment and initial hearing aid inventory; continued upgrading of staff skills; ongoing monitoring of quality and adherence to social mission; and ongoing supply of new products. In addition to Lions, discussions are underway with the following distribution partners: PDA in Thailand, Grameen Bank in Bangladesh, Al Noor Foundation in the Middle East, Mobility Aide and Appliances research and Development Centre in Nigeria, AAPPE in Brazil, and The China Disabled People’s Federation in China.

Manufacturing At Aurolab: Components for the hearing aid are sourced through suppliers who have given AHAP a million part price. Aurolab, an Indian non-profit contract manufacturer, produces the hearing aid. Approximately 10,000 have been produced to date. In 1992, David Green directed the establishment of Aurolab (India), the first non-profit manufacturing facility in a developing country to produce affordable intraocular lenses (IOLs), suture, pharmaceuticals and eyeglasses. Aurolab is one of the largest manufacturers of IOLs in the world, with sales of 600,000+ units per year to 86 countries. David also directed the establishment of suture (wound closure product) manufacturing at Aurolab.

R&D and Product Service Center: In 2001, Project Impact established a hearing aid technology research and development lab in Lebanon, New Jersey. The New Jersey lab has three full time hearing aid engineers, all of whom have considerable experience in product development for hearing aids. Sunil Chojar is responsible for developing our state-of-the art hearing aids. Earlier he served as Director of Research and Development at Siemens, the largest hearing aid company in the world (1993 to 1999), and as Director of Research and Development at Starkey (1986 to 1993), a major hearing aid manufacturer. The other two members of our R&D team include Marcel Ruiz, former Production Manager for Siemens at their Houston Texas facility, and Arun Desai, formerly of Siemens R&D. Four technicians will be hired in the first year to augment the present team for product support and R&D functions.

As AHAP begins production and assembly of ITE and CIC hearing aids, the New Jersey lab will also serve as a service center, handling customer/product service that will fulfill the following technical and customer support functions: assembly and service of in-the-ear and behind the-ear hearing aids; custom mold and shell making; maintenance, distribution and servicing/training for programming software; quality assurance for India manufacturing and & US facility; ongoing software and hearing aid improvements based on field results; R&D for new hearing aids; maintaining inventory of finished hearing aids and drop shipments; new products implementation for Aurolab; and management of supply chain and purchasing of components.

Sales: AHAP will hire staff to animate non-profit sales. Project Impact has a broad association with many consultants in the field of audiology, business development and legal and regulatory affairs that can be tapped.

Donors and Partners to the Affordable Hearing Aid Project up to 2003

|AHAP donations 2001-2003 | |

| | |

|AHAP donations on PI books | |

|SEVA |$1,803.80 |

|786 Foundation (Mary LaMar, Mike Price) |$220,000.00 |

|World Bank |$100,000.00 |

|Social Profit Network |$490,000.00 |

|Lions Club International Foundation |$600,000.00 |

|Acumen |$400,000.00 |

|Impact UK |$98,467.23 |

|Schwab Foundation |$911.35 |

|Tom Wilmore |$4,000.00 |

|Rick Mashon/Kids Care |$250,000.00 |

|Leapfrog |$10,000.00 |

|Peninsula Community Foundation |$60,000.00 |

|Tom Wilmore |$1,500.00 |

|INNW |$20,000.00 |

|Leadership Grant (INNW) |$10,000.00 |

|Total |$2,266,682.38 |

| | |

|Impact UK grants for AHAP not on PI books* |

|Component grant |$389,636.77 |

|Tech development | 100,000.00 |

|Manufacturing equipment and set up | 140,000.00 |

|Total | 629,636.77 |

| | |

|Other AHAP grants not on PI books | |

|Ashoka (fellowship for 3 yrs.) | 165,000.00 |

| | |

|Grand total all Grants | 3,061,319.15 |

*during FY 2003 Impact UK donated approximately $400,104 for purchase of hearing aid components and $140,000 for manufacturing equipment and training some of which did not flow through Project Impact books, but went directly from Impact UK to the vendors. Impact UK also gave an initial grant of $100,000 for AHAP not reflected on Project Impact books.

AHAP is a collaborative effort of a network of international non-profit organizations, U.S. electronics manufacturers, and academic institutions. Among other duties, Project Impact coordinates the network. Several members of the network previously collaborated on successful projects to manufacture medical devices for distribution to programs serving the poor and on projects to provide eye care surgical services that have restored the sight of hundreds of thousands of individuals in Asia, Africa, and the Middle East. The hallmark of each of these projects is that they are affordable to the poor and financially self-sustaining from user fees.

The collective role of the non-profit organizations within the network is to establish hearing aid assembly and dispensing outlets in the numerous countries in which these organizations are active. Non-profit organizations in the network and their respective resources and roles are:

Impact Foundation, UK --Established in 1985, the Foundation’s mission is to prevent and cure avoidable disability. Impact Foundation and its sister organizations in 11 countries work closely with other agencies and organizations of and for disabled people and has a formal affiliation with WHO, UNICEF and the United Nations Development Program. Impact Foundation supports AHAP through financial grants, administrative assistance, and intellectual capital. Impact Foundation and Project Impact have collaborated on AHAP since its inception in 1998.

Lions Club International Foundation (LCIF) -- LCIF is the grant-making arm of Lions Clubs International. Its mission is to support the efforts of Lions clubs worldwide in serving their local communities and the world community as they carry out essential humanitarian service projects. LCIF is funding two of its members to carry out projects to distribute hearing aids provided by AHAP. The lead partners in the pilot projects are the Northwest Lions Foundation for Sight and Hearing in the U.S. and Lions of South India. The projects are designed to develop and implement financially self-sustaining models for the delivery of affordable hearing aids to all economic strata, with an emphasis on serving the poor.

Aurolab, India -- Aurolab is the initial site for manufacturing the hearing aids. Established as a non-profit trust, Aurolab has manufactured medical devices since 1992. With an organizational mandate to maximize product availability and affordability to the poor, it is a natural partner for AHAP. In a previous collaboration with several AHAP partners, Aurolab developed low-priced, high quality, sight restoring intraocular lenses and surgical sutures for developing country markets.

Ashoka Innovators for the Public - Ashoka's mission is to develop the profession of social entrepreneurship around the world. Ashoka is a global non-profit organization that identifies and invests in social entrepreneurs through stipends and professional services that allow "Ashoka Fellows" to focus fulltime on their ideas for leading social change in education and youth development, health care, environment, human rights, access to technology and economic development. David Green, the Executive Director of Project Impact, is an Ashoka fellow.

Al Noor Foundation, Egypt, Saudi Arabia – Established in 1989, the mission of the Foundation is to develop sight restoration and blindness prevention programs in Africa, the Middle East and Asia. In addition to the funding it has already provided to the project, Al Noor will establish training programs for hearing aid technicians to dispense hearing aids and cost-effective, self-sustaining service delivery sites for prescribing and fitting hearing aids. Al Noor is associated with a group of 15 eye and ear hospitals located throughout the Middle East, which will also distribute our hearing aid.

Acumen Fund - Acumen Fund is a new, independent organization underwritten by the Rockefeller and Cisco Foundations and individual philanthropists. The organization is pioneering a portfolio approach to global social investing that is setting a new standard for the management and distribution of philanthropic capital. Acumen’s first portfolio supports innovations that leverage technologies to radically lower the costs and barriers to healthcare for poor people in developing countries. This portfolio is focused specifically on health technologies in South Asia and Africa. AHAP is the first initiative to be supported by the Acumen Fund. The Fund supports quality investments through rigorous due diligence as well as through the development of assessment and reporting tools.

World Bank - The World Bank supports the Affordable Hearing Aid Project with a grant from its Development Marketplace program. The Development Marketplace aims to identify and nurture the most innovative ideas in the development community. In a competition open to all, including NGOs, businesses, academia, and foundations, the Development Marketplace awards start-up funds to ideas that test new approaches to fight poverty and bring people and institutions together with the greatest promise of moving from concept to results. In 2002, the Development Marketplace had a very competitive selection process. Of the initial 2400 submissions from over 122 countries, less than 10% reached the finalist round. In the final round, 29 projects were selected to receive grants.

Social Profit Network: SPN has supported the Affordable hearing Aid Project with unrestricted grants of $600,000, pro bono legal support and business advise. They are a small silicon vally based venture philanthropy grop to at supports six high profile social enterises, of which Project Impact is noe. The grolup was founded and is run by Robert Levenson.

786 Foundation: 786 is a private family foundation that has supported many of the technology transfer initiatives of David Green, including the first intraocular lens manufacturing unit, suture, hearing aid, and more recently, the foldable hydrophobic IOL project of Project Impact.

Population and Community Development Association (PDA) – PDA will be Project Impact’s partnering organization for sales throughout Thailand. Founded in 1974, PDA is one of Thailand's most well-established and diverse non-government organizations. Operating from Bangkok, 16 regional development centers and branch offices in rural Thailand, PDA's programs are based on the belief that local people are best suited to shape and sustain their own development. PDA has pioneered grassroots growth marked by extensive villager involvement not only as beneficiaries but also as planners, managers and leaders. Globally recognized social entrepreneur, Schwab Fellow, Thai Senator, and Ambassador to UN AIDS. Mechai Viravaidya runs PDA.

The law firm of Fried, Frank, Harris, Shriver & Jacobson represents Project Impact in a broad range of matters on a pro bono basis. Founded at the turn of the twentieth century, Fried Frank has about 550 attorneys at offices in London, Los Angeles, New York City, Paris, and Washington. The firm’s wide-ranging pro bono program helps deserving individuals and not-for-profit organizations both nationally and locally and has been recognized through numerous awards over the years. The firm’s contribution of services was arranged by Ashoka and the International Senior Lawyers Project. AHAP has benefited greatly by having access to the firm’s top-flight attorneys, especially as we move from the product development phase to the manufacturing and distribution phases.

Project Impact India and Lions of S. India Collaboration to make Hearing Affordable and Available

First Distribution Site: Project Impact established the first multi-tiered pricing distribution model for hearing aids in Madurai India in mid 2003. This unit is approaching financial sustainability. This site has a multi-tiered pricing model similar to the successful eye care delivery models implemented in eye care. Project Impact India is incorporated as a Trust under Indian law and has a staff of 15.

ActivEar Indian Subsidiary: Project Impact has established a wholly owned Indian commercial company. ActivEar India Limited is a sales organization designed to distribute hearing aid products throughout India via both non-profit and commercial channels. Through ActivEar, our products have been well received by audiologists in major Indian metropolitan centers. ActivEar handles all AHAP import and export in India and relates to Aurolab, our contract-manufacturing site. This entity has a staff of seven.

Distribution S. India

• Staff: 13, including audiologists, ENT, technicians, outreach

• Building site operational

• Services: Fixed site and hearing camps

• In operation since January 2003

• Strong partnership with local Lions

Lions India Start-up Costs

Results To Date, Year One:

• Over 500 people served with hearing aids and fitting services

• Program is 60% financially self-sustaining and expects to be fully self sustaining by end of 2005.

• In conjunction with Lions, conducted over 33 screening camps to identify people with hearing loss and fit them with hearing aids

Annex 1: Competitive Strategies for India

Current Market: The Indian hearing aid market is under developed by almost all available metrics. Indian industry analysts estimate the current Indian market between Rs. 20 and 30 crore (4-6Million USD) annually. While the US Market is at least 500 times larger in dollar value, most experts agree that the Indian market is growing much faster—some say as fast as 100% per year. In terms of unit sales, approximations of annual volume range from about 145,000 to 200,000 units.

In a market once dominated by inexpensive analog body worn hearing aids, newer technologies are now emerging and gaining popularity. The approximate breakdown of sales is as follows:

|Body Worn |40% |

|Behind the Ear (BTE) |40% |

|In The Ear (ITE) |10% |

|Completely in the Canal (CIC) |10% |

Body worn aids are typically not programmable, are not fitted with customized molds, and are far less expensive than other form factors. They are more common among children, rural populations, and lower middle class customers. BTE instruments are more common among older, urban, middle class customers. ITE and CIC sales are exclusive to urban markets where they are sold in all age groups that can afford them. ITE and CIC are also more popular among image-conscious teenagers, who resist more visible technologies.

Market Potential

As in the American market, the Indian market unit size is projected to grow through increases in: number of hearing impaired people; percentage of upgrade/ replacement purchases; and penetration rates (i.e. % of hearing impaired people who purchase hearing aids).

According to Widex India market research, 9 out of 10 of India’s 100+ million hearing impaired individuals do not yet own a hearing aid. The Indian market penetration is therefore around 10%, less than half that of the United States. The untapped Indian market is therefore 9-10 times larger than the current annual market, giving ample room for growth. Project Impact research suggests that the Widex data may overestimate current hearing aid ownership.

Major barriers to market penetration in India include all of those present in the United States (listed above), but there is some indication to suggest that the barriers are more exaggerated in India. As in the US, one of the primary barriers is purchase price. There is a stigma of abnormality or low intelligence associated with hearing impairment, and this may be compounded by resentment by the parents/family of the hearing impaired. American problems of lack of education and awareness, absence of screening, and customer misinformation are all prevalent in India as well.

Competition: Many of the major hearing aid manufacturers are sold in India, including Elkon, Oticon, GN Resound, Widex, Unitron and Phonak. Their respective market shares, based on a preliminary assessment, are summarized in the table below:

| |CroreRs. |Million USD |% Total |

|Siemens |15 |$3.3 |54% |

|Dynavox |5 |$1.1 |18% |

|Widex |2 |$0.4 |7% |

|Phonak |2 |$0.4 |7% |

|Alps |2 |$0.4 |7% |

|Others |2 |$0.4 |7% |

|Total |28 |$6.0 |100% |

As in the United States, five manufacturers dominate the market, but Siemens’ dominance is even more pronounced in India, at over 50% of the dollar value.

Given that most Indian customers have less purchasing power than their American counterparts, vendors pay special attention to capturing sales from price sensitive customers. This accounts for the popularity of very low cost non-programmable body worn hearing aids, which can have prices around Rs. 500 (around $10-11). Low price, however, does not correspond with good value. Non-programmable devices are uncomfortable to wear, usually do not have a customized mold (necessary for moderate to sever hearing loss in order to avoid sound feedback) and overall provide a poor quality listening result.. Customers who can afford programmable technology usually opt for it.

Distribution: The Indian market suffers from an absence of formal distribution channels. The “every man for himself” nature of distribution is further complicated by the lack of regulations or enforcement to govern distribution. The only known guideline is the manufacturers maximum retail price (MRP) which is printed on hearing aid packaging and theoretically legally binding, but not enforced.

In the absence of buying groups, India has developed two layers of customers: intermediaries and end-user practitioners. These dispensers, including even trained ENT doctors and audiologists, often do not have appropriate technical backgrounds for properly fitting programmable hearing aids. In cases where programming of the hearing aid is required, many dispensers lack the necessary equipment to diagnose a patient’s hearing loss or correctly program the instrument. Nevertheless, there is substantial financial incentive for the vendor to sell these higher margin programmable devices, and incorrect or unnecessary prescriptions are common. Dispenser background, capability, and trustworthiness varies from region to region within particular states. Data on the extent of the problem is understandably difficult to collect.

The MRP for all hearing aids are substantially lower than their American counterparts. The table below summarizes the lowest published price found for BTE hearing aids of different brands and different technologies as well as their approximate wholesale prices as determined from interviews with practicing Indian dispensers.

| | |Approx USD Wholesale |Approx USD Retail |

|GN Resound | | |

| |Programmable |$176 |$282 |

| |Digital |$338 |$609 |

|Oticon via ALPS | | |

| |Conventional |$72 |$109 |

| |Programmable |$202 |$324 |

| |Digital |$260 |$467 |

|SIEMENS | | |

| |Conventional |$130 |$195 |

| |Programmable |$178 |$285 |

| |Digital |$356 |$641 |

|Widex | | |

| |Programmable |$163 |$261 |

| |Digital |$181 |$326 |

While printed Maximum Retail Prices (MRP) in India are supposed to be lower than the US, some dealers have been known to charge well over MRP when they think they can get away with it. Anecdotal evidence suggests sales in some metropolitan areas at Rs. 2 lakh (over $4300) or more per hearing aid. The profiteering nature of the current industry highlights the need for a more ethical approach to hearing aid sales.

Pricing:

The main appeal of AHAP hearing aids in India will come from their unmatched value in the market. In the case of the programmable analog BTE, we are aiming for a price of Rs. 4500 ($98) for wholesale sales to pre-existing dealers and around Rs. 5500 ($120) for sales to end user practitioners. Project Impact will print an MRP of approximately Rs. 8100 ($176) on the product packaging and include this MRP in advertising. Publication of the price should discourage scalping of the MRP by educating potential customers on how much they should expect to pay.

Under this pricing paradigm, programmable analog will fall in the same price range with a number of conventional analog instruments, yet it will offer the superior experience of a dual channel, dual memory, programmable device. At Rs. 8100, it will also be sold at less than two thirds of the price of the next least expensive programmable aid which cannot offer many of the AHAP features.

Creation of National Network of Ethical Practitioners: Project Impact will help curb profiteering among distributors by establishing a national network of end-user practitioners including hospitals, NGO’s, and private practitioners. Project Impact will certify member dispensers for technical competence in the fitting of the AHAP hearing aid as well as a proven track record of ethical behavior. Members of the network will be able to piggy back on AHAP marketing as they will enjoy the benefit of a national toll free telephone number that will direct customers to the nearest authorized AHAP network practitioner dispensing the Project Impact hearing aid. Advertising of this ‘national network brand’ will also include information about pricing to the potential customer, so that pricing becomes transparent. Network participants will agree to join the network with the knowledge that the AHAP brand they sell will have a nationally or regionally advertised price.

Training:

Even with state-of-the-art technology, hearing aids are often not properly fitted, resulting in low customer satisfaction and poor market uptake. Presently, all end user practitioners are trained in a two-day workshop in how to dispense the AHAP programmable hearing aid using the AHAP software. This training program will continue for all users as we expand the market, to insure proper fitting methodology.

Fast turn-around for accurate molds and shells: In addition to state-of the art technology and accurate fitting methodology, hearing aids also require accurate and comfortable fitting molds for BTE’s and shells for ITE’s. Presently in India a very high percentage of hearing aids are fitted with no customized mold or shell, resulting in low customer satisfaction, especially for moderate to severe hearing loss patients who need higher powered instruments that, without a mold, result in the characteristic whistling of audio feedback. Project Impact India will provide a mold and shell making service with national reach with a three-day turn-around time, which is considerably faster than the usual 2-week turn around. Additionally, we will establish mold and shell making facilities in major metropolitan areas, once the volume reaches a certain level to justify the approximately $25,000 start-up costs for a mold/shell lab.

Technology:

The AHAP hearing aid, with a wholesale price of Rs. 4500 is superior to the Oticon Swift, which is another programmable product, selling at a wholesale price of approximately Rs. 14,000. The AHAP hearing aid is two-channel, two memory as compared to the Swift with one channel and only one memory. The sound quality of the AHAP is better than the Swift in anecdotal testing with customers. In addition to the digitally programmable BTE and ITE products Project Impact will sell in India, fully digital products will be added by the third quarter of 2005. This will make possible a very high powered hearing aid for the very severe hearing impaired as well as 4 channel digital hearing aids that will have a manufacturing cost of approximately $20 to $30 more than the present product range. These digital units will have directional microphones and provide a high end product at an affordable price for the Indian market.

Manufacturing cost reduction:

Project Impact anticipates that the cost of the present programmable analog product line will reduce by approximately $10 in the coming year as we explore making the BTE case in India (instead of the US) as well as the mounting of the chip on the PC board in India rather than the US. These cost reductions will in some instances be passed on to the customer or will be used to maximize greater profitability depending on the circumstances.

Annex 2: Developing Country Market Overview

Because the market for hearing aids in developing countries is poorly developed, there is a paucity of data on the characteristics of the market. The World Health Organization estimates that at least 250 million people in the world have a disabling degree of hearing impairment. Other experts reckon that 7% of the world's population – over 400 million people – has hearing loss. Hearing loss can retard an individual's development by causing delays in language acquisition and impeding school progress. It can cause vocational and economic difficulties and lead to social isolation and stigmatization.

At least half of all hearing impairment can be prevented or reversed by improving the availability of hearing aids. However, the cost of hearing aids is prohibitively high for the vast majority of the hearing impaired, who are poor. In 2003, the average cost of a hearing aid in developed country markets was US $1,600. Hearing aid sales worldwide in 2000 were estimated to be 6 million units. However, only 12% were sold to the developing world, which is home to 70% of the global population. WHO estimates that the annual need for hearing aids in developing countries is at least 32 million units.

Pricing is not affordable for most potential users in developing countries, because hearing aid companies are oriented toward the markets of developed countries, where they realize a high profit margin. The current specifications of "low-priced" hearing aids available in developing countries have resulted in poor quality and low client satisfaction. The developing countries lack cost-effective, financially self-sustaining service delivery models that yield affordable hearing aids and services for the hearing impaired.

Because of the increase in world population and lengthening life expectancy, the number of persons with disabling hearing impairments is expected to substantially increase in the future. In spite of the pressing needs in the developing world, the supply of hearing aids falls far short of the demand. Of the hearing aids that do go to developing nations, most are far too expensive for the average consumer, typically costing from US$ 200 to over US$ 500. The cost of a hearing aid may represent several months’ salary or more in the developing world. Further, there is a major shortage of services in developing countries to fit hearing aids correctly and very few trained personnel to help in that process.

The majority of hearing impaired persons in developing countries reside in the rural areas. They are poor and have little awareness or information concerning available rehabilitation services and assistive devices. Although hearing loss is generally associated with ageing, people in the developing world are more susceptible to this problem at a young age. Middle-ear infection, from which many children suffer, can cause long-term hearing loss if not treated. Meningitis, common in West Africa, and other infections will also impair hearing. Ototoxic drugs (drugs that damage hearing, such as certain antibiotics) are a problem in some areas and noise-induced hearing loss is increasing in many developing countries. Hearing problems can also be inherited. Most sectors of developing country populations do not have access to preventive interventions or treatment for these conditions, and are therefore likely to have hearing loss. Childhood onset hearing impairment frequently results in lifelong disability not only in terms of hearing but also in terms of speech development and education.

Even though the largest burden of disabling hearing impairment is found in developing countries, the numbers of hearing impaired that receive hearing aids and related services in this group is 15 times less than in the developed countries of Europe and over 20 times less than in North America. The non-profit sector is usually the mechanism for delivering health services to the poor. However, there are very few organizations devoted to ameliorating hearing impairment in developing countries. Distribution of hearing aids takes place primarily via ENT physicians who are clinically oriented and do not take a public health approach to addressing the problem within a population.

The need for appropriate and affordable hearing aids in developing countries is largely ignored by the hearing aid industry. Most manufacturers have neglected developing country markets since they have not appreciated the size of the potential market and have preferred to stay with a low-volume, high cost approach. In contrast, AHAP implements a business strategy that relies on high volume sales with low profit margins: a multi-tiered pricing system under which the higher revenue realized from hearing aid sales to wealthier patients is used to cross-subsidize the sale of hearing aids to poorer patients.

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download