OTC Hearing Aid PRIA

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Food and Drug Administration

Medical Devices; Ear, Nose, and Throat
Devices; Establishing Over-the-Counter Hearing
Aids and Aligning Other Regulations; Proposed
Rule
Docket No. FDA-2021-N-0555

Preliminary Regulatory Impact Analysis
Initial Regulatory Flexibility Analysis
Unfunded Mandates Reform Act Analysis

Economics Staff
Office of Economics and Analysis
Office of Policy, Legislation, and International Affairs
Office of the Commissioner

Table of Contents
I. Introduction and Summary .............................................................................................. 3
A. Introduction ................................................................................................................ 3
B. Summary of Costs and Benefits ................................................................................. 4
II. Preliminary Economic Analysis of Impacts ................................................................... 5
A. Background ................................................................................................................ 5
B. Market Failure Requiring Federal Regulatory Action ............................................... 7
C. Purpose of the Proposed Rule .................................................................................... 8
D. Baseline Conditions ................................................................................................... 8
E. Benefits of the Proposed Rule .................................................................................... 8
F. Costs of the Proposed Rule ....................................................................................... 20
G. Distributional Effects ............................................................................................... 25
H. International Effects ................................................................................................. 27
I. Uncertainty and Sensitivity Analysis ........................................................................ 27
J. Analysis of Regulatory Alternatives to the Proposed Rule ....................................... 29
III. Initial Small Entity Analysis ....................................................................................... 30
A. Description and Number of Affected Small Entities ............................................... 31
B. Description of the Potential Impacts of the Rule on Small Entities ......................... 32
C. Alternatives to Minimize the Burden on Small Entities .......................................... 32
IV. References................................................................................................................... 33

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I. Introduction and Summary
A. Introduction

We have examined the impacts of the proposed rule under Executive Order
12866, Executive Order 13563, the Regulatory Flexibility Act (5 U.S.C. 601-612), and
the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). Executive Orders 12866
and 13563 direct us to assess all costs and benefits of available regulatory alternatives
and, when regulation is necessary, to select regulatory approaches that maximize net
benefits (including potential economic, environmental, public health and safety, and other
advantages; distributive impacts; and equity). This proposed rule is an economically
significant regulatory action as defined by Executive Order 12866.
The Regulatory Flexibility Act requires us to analyze regulatory options that
would minimize any significant impact of a rule on small entities. Because the estimated
one-time costs of this rule are small, we propose to certify that the proposed rule will not
have a significant economic impact on a substantial number of small entities.
The Unfunded Mandates Reform Act of 1995 (section 202(a)) requires us to
prepare a written statement, which includes an assessment of anticipated costs and
benefits, before proposing “any rule that includes any Federal mandate that may result in
the expenditure by State, local, and tribal governments, in the aggregate, or by the private
sector, of $100,000,000 or more (adjusted annually for inflation) in any one year.” The
current threshold after adjustment for inflation is $158 million, using the most current
(2020) Implicit Price Deflator for the Gross Domestic Product. This proposed rule would
not result in an expenditure in any year that meets or exceeds this amount.

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B. Summary of Costs and Benefits

This proposed rule if finalized would generate potential benefits in the form of
cost savings for consumers with perceived mild to moderate hearing loss who wish to buy
lower cost hearing aids not bundled with professional services and not requiring
professional advice, fitting, adjustment, or maintenance but who are currently unable to
buy such products online because of state regulations or because they do not shop online.
We estimate consumer benefits of between $6 M (million) and $147 M per year based on
fifth and ninety-fifth percentile Monte Carlo results with a mean of $63 M per year.
Because this is an annual benefit, the annualized benefits are the same at 3 percent and 7
percent discount rates.
The proposed rule if finalized would also generate costs for hearing aid
manufacturers for changing labeling of existing hearing aids as well as for reading the
rule and revising internal standard operating procedures (SOPs) in response to the rule.
We estimate one year costs of between $5 M and $15 M based on fifth and ninety-fifth
percentile Monte Carlo results with a mean of $10 M, which corresponds to an
annualized cost of between $1 M and $2 M with a mean of $1 M per year at both 3
percent and 7 percent discount rates.
Combining benefits and costs, we estimate annualized net benefits of between $5
M and $145 M per year based on the fifth and ninety-fifth Monte Carlo percentile results
with a mean of $62 M per year at both 3 percent and 7 percent discount rate.

Table 1: Summary of Benefits, Costs and Distributional Effects of Proposed Rule
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Category

Benefits

Annualized
Monetized
$millions/year
Annualized
Quantified
Qualitative

Costs

Transfers

Effects

Annualized
Monetized
$millions/year
Annualized
Quantified
Qualitative

Primary
Estimate

Low
Estimate

High
Estimate

$63
$63

$6
$6

$147
$147

Potential increase in hearing
aid and hearing technology use
leading to associated health
benefits, potential fostering of
innovation in hearing aid
technology.
$1
$1
$2
$1
$1
$2

Year
Dollars
2020
2020

Period
Covered
10 years
10 years

Notes

7%
3%

2020
2020

7%
3%

10 years
10 years

7%
3%

Potential loss of consumer
utility from inability to buy
existing hearing aids under
existing conditions

Federal
Annualized
Monetized
$millions/year
From/ To
From:
Other
Annualized
Monetized
$millions/year
From/To
From:
State, Local or Tribal Government:
Small Business:
Wages:
Growth:

Units
Discount
Rate
7%
3%

7%
3%
To:

7%
3%

To:

II. Preliminary Economic Analysis of Impacts
A. Background

The current regulatory approach to hearing aids is based on the notion consumers
generally require professional evaluation before they are sold hearing aids. Federal
regulations allow, and all states currently have, state requirements governing the
qualifications of those dispensing hearing aids, including in some cases bans or
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restrictions on online sales. For these and other reasons, most hearing aids are currently
sold through brick and mortar specialty retail outlets. Purchasing hearing aids through
specialty retail outlets may increase the price of hearing aids by bundling the devices with
professional services thus complicating comparison shopping and price competition,
which are further complicated by the fact most specialty retail outlets carry only a limited
selection of brands and models with many outlets carrying only one. When consumers are
unable to easily cross-compare devices with different features (e.g., acoustic
performance, battery life, mobile operating system compatibility), it may impair the
discovery function of determining what features they would like out of their device.
Complications relating to comparison shopping may thus decrease consumers’
satisfaction with their hearing aids. Current regulations may also play a role in terms of
concentration in the hearing aid industry in which six larger manufacturers produced
about 98 percent of hearing aids in 2013, Ref. [1]. Increased industry concentration may
be associated with increased opportunities for non-competitive pricing.
Hearing aids sold online are not subject to these effects and are currently available
in most states. Generally similar sound amplification products known as personal sound
amplification products (PSAPs) are also not subject to this effect and are also currently
available in all states both online and in brick and mortar general retail outlets. PSAPs are
intended to amplify sound in specific listening environments for non-hearing impaired
consumers and are not intended to aid a person with or compensate for impaired hearing.
Although PSAPs share many characteristics with hearing aids, they are not classified as
hearing aids for regulatory purposes and are marketed differently from hearing aids.

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While there is an online market for hearing aids that are not bundled with
professional services, online sales are restricted in some states, and not all consumers are
able or willing to purchase hearing aids online. Enabling the sale of hearing aids without
bundled services in brick and mortar retail outlets will result in a new relatively low cost
option to buy for FDA-approved hearing aids. Thus, the size of the market for FDAapproved hearing aids, and the overall number of individuals who will benefit from
access to hearing loss technology, will likely increase at least to some extent as a result of
the rule.

B. Market Failure Requiring Federal Regulatory Action

Our regulations allowing the preempted state regulations may be viewed as part
of the overall government response to an ostensible market failure we addressed
previously and have now reassessed. We have tentatively determined hearing aid
technology has improved sufficiently that some hearing aids can now be made safe and
effective without professional evaluation or involvement. Therefore, we propose to define
and establish requirements for a category of hearing aids that can be sold over the counter
(OTC), and such requirements will preempt certain state regulations, such as those
requiring that hearing aids be sold by licensed hearing aid dispensers.
To the extent current regulations facilitate concentration in the hearing aid
industry by setting up conditions of sale amenable to any given state licensed hearing aid
dispenser tending to dispense only a small number of brands, and in some cases only one
brand, this rule may also address the market failure of “market power,” OMB Circular
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A-4 defines “market power” as occurring when firms “reduce output below what would
be offered in a competitive industry in order to obtain higher prices.” We do not have
information suggesting the large manufacturers dominating the hearing aid industry
exhibit market power defined in this way or fail to price their products competitively;
however, such market power is always a concern in any highly concentrated industry.

C. Purpose of the Proposed Rule

The proposed rule would define and establish requirements for a new regulatory
category for OTC hearing aids, including new labeling requirements for OTC hearing
aids, and make corresponding changes to the existing regulatory framework, including
defining hearing aids not meeting the proposed OTC requirements as prescription
medical devices, and amending the existing labeling requirements which would apply to
prescription hearing aids.
D. Baseline Conditions

Costs and benefits must be assessed relative to a baseline. In this analysis we use
the existing state of affairs under the current regulatory regime as the baseline.

E. Benefits of the Proposed Rule

This rule would define and establish requirements for a new regulatory category,
OTC hearing aids, and change the regulatory status of existing hearing aids not currently
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prescription medical devices and not meeting the proposed requirements for OTC hearing
aids to prescription medical devices. Defining a new category for regulatory purposes
does not automatically or necessarily generate social benefits but does create the potential
for benefits or costs to occur.
One potential benefit of this rule is that some consumers with mild to moderate
hearing loss who buy hearing aids through brick and mortar specialty retail outlets under
the baseline scenario may be able to obtain their hearing aids more cheaply and thus
experience cost savings for two reasons: 1) the product will be available without the
bundling with professional services generally included with hearing aids bought through
brick and mortar specialty retail outlets from state licensed distributors, 2) the actual
device hardware and software may become cheaper particularly over time due to a
potential increase in price competition and reduction in barriers to entry, which may spur
product innovation and development. These cost savings may involve out of pocket
expenditures for consumers who buy their own hearing aids, reductions in insurance
premiums for all members of insurance plans that cover hearing aids, or potential
reductions in taxes for all taxpayers given the reductions in Medicaid costs. For
consumers obtaining hearing aids through insurance plans that cover hearing aids, the
cost savings will accrue to those consumers, other consumers in those insurance plans,
and those insurance companies through reduced costs for hearing aids. For consumers
buying hearing aids not in insurance plans that cover hearing aids, the cost savings will
accurse to the consumers buying the hearing aids. For consumers obtaining hearing aids
through Medicaid, where that option is available, the cost savings will accrue to
taxpayers funding the Medicaid program.

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Another potential benefit of this rule is we anticipate that the introduction of
OTC hearing aids will expand access for consumers who have mild to moderate hearing
loss yet do not currently use hearing aids and would not have begun using hearing aids
under the current rules. OTC hearing aids will likely be less expensive than those sold as
a bundle with professional services and will be sold in brick and mortar stores. It is likely
that there are consumers who prefer to purchase hearing aids in brick and mortar stores,
or who don’t have access to the online market, but whose budgets do not allow them to
afford the current bundled product even though they may place a high value the benefits
hearing aids would provide. These consumers also may not buy PSAPs because they are
not labeled as hearing aids and do not meet FDA regulations, because PSAPs are
intended to amplify environmental sound for non-hearing impaired consumers. The
number of these consumers who currently lack hearing aids who will obtain them OTC
will depend on the elasticity of demand relating to the price differential between models
currently sold in specialty retail bundled with professional services and the probably
although not necessarily cheaper models with less advance technical features sold
unbundled with professional services of the sort current available online. We do not have
information on the relevant elasticity and therefore cannot estimate the number of
consumers who would benefit from expanded access. We request comments on potential
changes in hearing aid use, hearing technology in general use, and the health benefits
from increased use of hearing technology that may result from relatively low-cost OTC
hearing aids becoming available in general retail stores. An increase in the uptake of
hearing aids specifically resulting from the availability of OTC hearing aids, if it were to
occur, would generate various benefits including the potentially important but difficult-

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to-monetize benefit of inclusion of those with hearing loss into family, social, economic,
civic, and religious life, and the reduction of stigma around hearing aid use (such that
hearing aids would become more akin to eyeglasses). More serious health consequences
including dementia and ER visits may be associated with hearing loss, albeit perhaps not
typically at the level of mild to moderate hearing loss relevant to this rule, although one’s
response to mild or moderate hearing loss may have implications for one’s response to
later and more advanced hearing loss.
Some consumers whose current hearing aids do not meet the proposed technical
requirements for OTC hearing aids and who choose to switch to OTC devices may lose
some features of their existing hearing aids and thus experience negative benefits albeit
reduced by a countervailing reduction in cost. For this reason, we cannot infer a net
increase in consumer welfare relative to the baseline from consumers switching to OTC
hearing aids because these consumers would not have the choice of maintaining their
current hearing aids under current conditions. However, we can infer that if these
consumers experience a net loss in welfare, any net loss must be smaller than the net loss
that would result from continuing to use their current devices as prescription medical
devices because otherwise they would not switch to the OTC devices.
Other benefits may ensue from the ability of consumers to easily compare OTC
devices with different features (e.g., acoustic performance, battery life, mobile operating
system compatibility). These benefits may include improvement in the discovery function
of determining what features consumers would like out of their devices. Facilitating
comparison shopping of hearing aids by offering an OTC option may thus increase
consumers’ satisfaction with their hearing aids in the long term.

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The rule reduces the barriers to entry for producers into the brick and mortar retail
segment of the hearing aid market. In addition to these potential new entrants, it is
possible that expansions in market size resulting from hearing aids being available in
brick and mortar general retail outlets (and corresponding marketing efforts) will create
new incentives for firms to engage in technological innovation that enhances product
quality or reduces the costs of production. Innovation in product features of hearing aids
could increase the array of products offered to consumers and improve consumer welfare
if the quality of the devices improves relative to prices. This innovation may take the
form of entirely new entrants, but it also may incentivize existing PSAP providers to
improve their technology to meet FDA standards and/or incentivize existing online
providers to reach additional customers in brick-and-mortar stores—any of which could
increase consumers’ options and ability to access devices of sufficient quality to meet
FDA standards for addressing mild-to-moderate hearing impairment. We request
comments on the innovation in hearing aid technology that could result from a larger
consumer base of potential hearing aid users.

1.

Consumer Cost Savings and Benefits to New Users

The closest existing analog to the proposed OTC hearing aids are relatively lowcost hearing aids sold online bundled with minimal or no professional services. However,
some states currently do not allow or heavily restrict online sales of hearing aids. The
main source of potential negative costs or cost savings for this proposed rule is that, if

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finalized, the sort of relatively inexpensive hearing aid currently sold online in most
states will become available in all states and also in brick and mortar general retail outlets
rather than online only. This may result in some people who currently buy hearing aids
through specialty retail bunded with professional services or would have bought such
hearing aids even in the absence of this rule, to switch to OTC hearing aids. It may also
result in some people who do not currently buy hearing aids and would not have begun
buying hearing aids in the absence of this rule to begin buying OTC hearing aids. We
tentatively suppose the share of the market of such devices will be along the lines of
similar products sold online, after correcting for the unavailability or restricted status of
online sales in some states, the potential inability or unwillingness of some consumers to
buy such devices online, and other features that may distinguish online products and OTC
devices sold in brick and mortar stores, such as potentially increased product visibility,
opportunities for impulse buying, etc. However, we have insufficient information to
determine the degree to which that market share will be generated by current users
switching to OTC hearing aids or new users taking up OTC hearing aids. Because of the
uncertainty associated with predicting the uptake of hearing aids and valuing benefits for
new users we discuss both possibilities separately then consider a mix of the two.
In 2008, the last year for which we were able to find data, about 4.7 percent of
hearing aid sales involved relatively low-cost models bundled with little or no
professional services purchased online. Ref. [2]. The data are old and such products may
represent a greater share of the hearing aid market today. Our benefit estimates, based
ultimately on the market share of such products, will be low to the extent this percentage
has increased since 2008. We request information relating to the current percentage of

13

hearing aids sales involving such products. However, the total upon which this
percentage is based includes hearing aid sales in three states that do not currently allow
online sales and may not have allowed online sales in 2008: Florida, New York, and
West Virginia. If we use the general populations of the states involved to correct for this
effect, then the percentage of hearing aids sold online in states allowing such sales would
be about 5.4 percent. If we apply a similar correction for the ten states that place nontrivial restrictions on online sales (California, Illinois, Kansas, Massachusetts, Missouri,
Nevada, New Hampshire, Oregon, Texas, and Washington), then the percentage of
hearing aids sold online in states that allow such sales with no or only trivial restrictions
would be about 9.0 percent. However, the effects of regulatory restrictions that stop short
of a ban are unclear and may vary from operating similarly to a ban to having little or no
effect on online sales. If we use a uniform distribution and treat these regulations as
approximating a ban at one endpoint and having no effect at the other endpoint, the mean
of the estimated percentage of hearing aids sales composed of relatively low-cost models
purchased online would be about 7.2 percent. This increase in the percentage of hearing
aid sales composed of relatively low-cost models not bundled with professional services
due to effective circumvention of state laws restricting such products sold online is one
element of the potential benefits generated by this rule.
Another element of the potential benefits generated by this rule is that the
relatively low-cost hearing aids currently sold online may become available in brick and
mortar general retail outlets and hence to consumers who choose not to shop online. A
nationally representative survey of adults from 2016 showed about 79 percent of
Americans made an online purchase of any type. Ref. [3]. The data are a few years old

14

and do not relate specifically to hearing aids or the population buying hearing aids for
mild to moderate hearing loss. We request information providing better estimates of the
degree to which the relevant population would find buying a hearing aid online
acceptable but buying a similar product in a brick and mortar store acceptable. If we use
the population that shopped online to correct for this effect, then the effective market
share going to lower cost hearing aids of the sort currently sold online would increase
further to about 9.1 percent. These adjustments, in total, represent an increase of 4.4
percentage points over the current rate of 4.7 percent.
Based on survey data from 2015, about 3.2 percent of the adult (18 years or older)
population of the US owned a hearing aid. This implies about 9.6 million adults owned
hearing aids. However, about 3 percent of those who reported owning hearing aids
reported not using them. This implies about 9.3 million adults reported both owning and
using hearing aids in 2015. About 60 percent of hearing aid owners in 2009 reported
having mild or moderate hearing loss of the sort relevant to OTC hearing aids. This
suggests about 5.8 million consumers currently own and use hearing aids to address mild
to moderate hearing loss. In the 2015 survey data, about 74 percent of respondents
reporting hearing loss reported hearing loss in both ears (bilateral hearing loss). This
suggests about 4.3 million consumers with mild to moderate hearing loss who own and
use hearing aids own two hearing aids each and 1.5 million consumers with mild to
moderate hearing loss who own and use hearing aids own one hearing aid each. This
suggests there are about 10 million hearing aids currently being used to treat mild to
moderate hearing loss in the US.

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One hearing aid provider suggested the average lifespan of current hearing aids is
about 4 to 6 years, which we represented using a uniform distribution running from 4 to 6
years with a mean of 5 years. Ref. [4]. This implies about 2 million existing hearing aids
need to be replaced each year. In that case a shift of 4.4 percentage points toward
relatively low-cost OTC hearing aids sold in stores or online would represent about
88,210 hearing aids.
The cheapest hearing aid we found online at the time we wrote this analysis , was
$399 or $411 in 2020 dollars. The average cost of an economy-level hearing aid bundled
with professional services purchased from a specialty retail outlet in 2014 was $1,657 or
$1,849 in 2020 dollars. Ref. [5]. Given our assumption that OTC hearing aids are likely
to be similar to relatively lower cost models current sold online, consumers most likely to
switch to OTC hearing aids from hearing aids bought in specialty retail outlets are
probably currently using economy-level hearing aids. If this price difference is similar to
the future price difference between OTC hearing aids and economy-level hearing aids
currently sold through special retail outlets, these data and assumptions suggest possible
cost savings on the order of $1,438 per unit, which would amount to a total cost savings
of about $127 million per year. The savings would be higher if prices of OTC hearing
aids are pushed lower than comparable models currently sold online, perhaps due to the
absence of restrictions on online sales in some states.
However, we do not know how much of this cost savings would represent a net
increase in welfare for consumers because consumers moving from relatively higher-cost
products sold in specialty retail outlets to relatively lower-cost products sold OTC would
give up bundled professional services and may give up some product features as well and

16

hence may experience negative non-monetary benefits. For some consumers who choose
to switch to OTC hearing aids, the net value of the cost savings may be only slightly
higher than the associated decrease in non-monetary benefits from the loss of
professional services and product features. Indeed, some consumers may elect to pay for
professional services even though they choose to buy OTC hearing aids thus negating a
major element of the potential cost saving. For other consumers the net value of the cost
savings may be much higher than any associated decrease in non-monetary benefits
because they do not value the foregone professional services or product features.
Similarly, some consumers who switch from products sold in specialty retail bundled
with professional services may only value those services when they first decide to buy
hearing aids, perhaps to confirm a need for hearing aids or the level of hearing loss, and
later do not value professional services related to adjusting or using particular devices,
keeping abreast of technological developments, or monitoring changes in their own
hearing. To reflect this uncertainty, we use a uniform distribution running from 0 to
represent a very small increase in welfare from the cost savings to the full value of the
cost savings. The mean of that distribution is about $63 million per year.
Another possibility is that the market share of OTC hearing aids may involve only
or significant numbers of new users who would not have bought hearing aids otherwise.
For new users the associated benefit would be the net gain or utility from taking
up hearing aids. Assuming the amount consumers would be willing to pay for hearing
aids is based on their subjective assessment of the potential benefits to be gained from
using hearing aids, including the positive utility from beneficial health effects and the
negative utility or disutility from negative effects like inconvenience, stigma effects, and

17

so on, we can infer the perceived net utility gains for consumers who will not buy a
currently available economy-level hearing aid bundled with professional services
purchased from a specialty retail outlet for $1,848, but who would buy an OTC hearing
aid at an estimated cost of $411, would be between $411 and $1,848, which under a
uniform probability distribution gives a mean of $1,130. Assuming consumers have
realistic expectations regarding product life and plan on replacing the device in 4 to 6
years with a mean of 5 years, the estimate of annual perceived net benefits including
health benefits for new users of hearing aids would be between $0 and $288 with a mean
of $144. If we apply this figure to the estimated number of new hearing aids required to
generate the anticipated market share going to these devices we calculated in the context
of potential cost savings for existing users, we obtain estimated annual benefits of
between $0 and $27 M per year with a mean of $14 M per year. This is substantially
below the estimate we obtained when we assumed generating the anticipated market
share would involve only existing users switching to OTC devices. If the relevant market
were generated by some combination of existing users switching to OTC hearing aids and
new users, the mean estimate of benefits would lie in a range between $14 M per year
and $63 M per year with a mean of those means of about $39 M per year.
However, there are alternative methods of valuing the health benefits of hearing
aids for new users in particular that provide significantly different results and, in
particular, the potential for much higher estimates of net benefits. See the appendix for
one such approach. To the extent these methods are meant to be based on the subjective
value of the benefits of hearing aids by prospective new users, they are difficult to
reconcile with observed market behavior. However, there may be ways the reconcile the

18

estimates using independent estimates of the disutility associated with hearing aids, both
in terms of stigma effects and practical issues related to use and maintenance, and
considering that perceived health benefits from the uptake of OTC hearing aids would be
incremental from any benefits currently available through other hearing technology such
as PSAPs, although some consumers may not be familiar with PSAPs and may not
consider them potential substitutes for hearing aids.
However, it should be noted the uptake of hearing aids is a complex issue and the
effect of the introduction of OTC hearing aids on the overall use of hearing aids is
unclear. In the US, as in other countries, the prevalence of hearing aid use is significantly
lower than the prevalence of hearing loss. One study from 2012 estimated an overall
utilization rate for hearing aids of about 14 percent. A study from 2011 found a strong
relationship between hearing aid use and the severity of hearing loss, with 3 percent of
those with a mild loss, 40 percent of those with a moderate loss, and 77 percent of those
with a severe loss regularly wearing hearing aids. In that study, the severity of hearing
loss, college education, and leisure noise exposure were positively associated with
hearing aid use, but race / ethnicity, age, sex, and income were not significantly
associated with the use of a hearing aid. A study from 2014 found utilization rates of 4
percent of those with mild hearing loss and 23 percent for those with moderate to severe
hearing loss. Another study from 2014 found individuals with the highest income were
more likely to use hearing aids than individual with the lowest income; however, that
study did not adjust for education. A study from 1998 found an overall utilization rate of
15 percent and a utilization rate of 33 percent for participants who reported significant
communication problem and handicaps. Factors associated with hearing aid use in that

19

study were severity of hearing loss, age, education, performance on word recognition
tests, and self-reported hearing loss. Some potential reasons for low usage rates may be
that some consumers with mild to moderate hearing loss don’t realize they have
measurable hearing loss, don’t believe hearing aids would be beneficial for them, or don’t
believe the benefits would be worth the costs.
Because of the uncertainties associated with estimating uptake of hearing aids due
solely to changes in price and availability, given concomitant changes in bundling with
professional services as well as potential changes in product characteristics, we have
based our benefits estimate on the assumption the primary factor in generating the
estimated market share will be existing users of hearing aids switching to OTC devices in
markets where they are currently unavailable. We request information relating to that
assumption relative to the significance of new users and also to the most appropriate
methods for valuing net benefits of hearing aids to new users.

F. Costs of the Proposed Rule

Defining a new category for regulatory purposes does not generate social costs;
no one will be required to develop or offer for sale OTC hearing aids and no one will be
required to buy them. However, changing the status of existing hearing aids to
prescription medical devices may generate social costs relative to the baseline.
For manufacturers of hearing aids currently on the market, the least costly way to
comply with the rule depends on whether the existing hearing aid meets the proposed
technical specifications, performance limits, and design requirements for OTC hearing
20

aids. If so, the least costly option is likely to revise the product labeling to make it
consistent with the proposed OTC hearing aid labeling requirements and sell the device
as an OTC hearing aid under the proposed conditions for sale. If the device does not meet
the proposed technical specifications, performance limits, and design requirements for
OTC hearing aids the least costly option is likely to accept the definition of the device as
a prescription medical device, revise the product labeling to make it consistent with the
proposed prescription hearing aid labeling requirements, and comply with state
regulations relating to prescription medical devices. We tentatively assume hearing aids
currently sold online are the most likely to be consistent with OTC technical
specifications, performance limits, and design requirements and require only a labeling
change while hearing aids currently sold through specialty retail outlets will more likely
convert to prescription medical devices. In either case manufacturers would also need to
read and understand the rule and revise internal SOPs in response to the rule.
We do not expect changing the regulatory status of some hearing aids currently on
the market to generate costs for consumers. Based on current practices relating to the
sales of hearing aids, we do not expect consumers whose current hearing aids do not meet
the technical requirements for OTC hearing aids who wish to continue using those
devices as prescription medical devices will see additional costs. We anticipate they will
be able to follow current procedures for obtaining their hearing aids and do not anticipate
increases in product prices due to additional state regulations and restrictions on
prescription medical devices. We request information on potential consumer costs
associated with existing devices becoming classified as prescription medical devices.

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1. Relabeling

The rule will require all current hearing aids to be relabeled according to either
the proposed OTC or prescription hearing aid labeling requirements. About 105 firms
manufacture air conduction hearing aids of the type that may be affected by this rule.
Casual online research indicates one large manufacturer is currently offering 15 models
each of which would require new labeling. Smaller manufacturers may offer fewer
models. If we estimate the number of products per manufacturer using a uniform
distribution running from 1 to 15 with a mean of 8, we get a mean estimate of 840
products requiring relabeling. Based on a compliance date 240 days after publication of a
final rule based on this proposed rule (an effective date of 60 days after publication plus a
compliance period of 180 days after the effective date), our 2015 labeling cost model
suggests a one-time mean cost estimate for relabeling of about $6 M. Ref. [6] We based
our estimate of label change costs on the mean costs for a major label change plus the
mean cost of an insert label change plus the cost for lost label inventory. We used the cost
estimates for a major label changed based on the description of a major label change in
the model documentation. For printing process for the major label change and insert, we
used a weighted average of the different printing methods listed based on the overall
distribution of labels produced using the different methods in the model documentation.
We estimated inventory loss using the model tab on inventory costs suggesting no loss of
package inventory and ten percent loss of existing insert inventory.

2. Reading and Understanding the Rule

22

Any new regulation must be read and understood by those affected by that
regulation. Using the same labor times and classifications we have used in previous
analyses, we assume this may require 5 hours of time for one each of the following three
types of personnel: executive, lawyer, and marketing manager. The time estimate is based
on an average reading speed of 200 to 250 words per minute and document length of
approximately 32,000 words for a reading time of approximately 2.5 hours, plus a
comparable time to consider material. Using recent BLS wage rates and doubling for
employee benefits and overhead, we estimate this one-time cost at about $0.3 M. Ref. [7]

3. Revising Guidelines or Standard Operating Procedures

In addition to the activity required by this rule, manufacturers would need to
revise internal guidelines or standard operating procedures (SOPs) to reflect those
requirements. Using the same labor times and classifications we have used in previous
analyses, we assume this may require 10 to 25 hours of time for one executive, 40 to 100
hours for one marketing manager, and 80 to 150 hours for one technical writer. These
time estimates are based on estimates we used for the cost of revising standard operating
procedures for an unrelated issue involving direct-to-consumer prescription drug
advertisements, which were accepted without public comment in the analysis of that
proposed rule and increased at the high end by 25 percent during the analysis of the
corresponding final rule stage. These costs are meant to be rough estimates. We do not
have sufficient information to fine tune the cost of revising guidelines or SOPs in

23

particular cases. We request information on the cost of revising guidelines or SOPs in this
instance. Using recent BLS wage rates, we estimate this one-time cost at $4 M. Ref. [7]

4. Costs Associated with State Regulation of Prescription Medical
Devices

Currently, states regulate the personnel who may distribute hearing aids. We have
no reason to suppose states will impose more onerous restrictions on hearing aids that
will be prescription medical devices than currently. However, it is possible changes in
state regulation of prescription hearing aids as well as potentially increased variation in
state regulation of prescription hearing aids may increase the cost of hearing aids that
convert to prescription medical devices. Although this rule would not cause the state
actions that would generate these costs, it would generate the potential for such costs to
occur.

5. Summary
We used Monte Carlo analysis to estimate annualized net costs of between $1
million and $2 million per year based on the fifth and ninety-fifth Monte Carlo percentile
results with a mean of $1 million per year at both a discount rate of 3 percent and 7
percent.

Table 2 – Summary of Costs, Monte Carlo Run Means and Percentiles, Millions

24

Costs in First Year Only
Label Changes
Revise SOPs
Read Rule
Total Costs
Total Cost Year 1
Total Cost Year 2 and After
Annualized Costs
Annualized Cost Over 10 years Infinity at 3 %
Annualized Cost Over 10 years Infinity at 7 %

Mean

5%
95%
Percentile Percentile

$6
$4
$0.1

$1
$3
$0.1

$12
$5
$0.2

$10
$0

$5
$0

$15
$0

$1
$1

$1
$1

$2
$2

G. Distributional Effects

The primary actors likely to gain from this rule are brick and mortar general retail
outlets that may begin selling OTC hearing aids, manufacturers who may supply OTC
hearing aids to retail markets but may not have a network of affiliated specialty retail
outlets, including new entrants to the hearing aid industry as well as current producers of
PSAPs and online hearing aids, and consumers with mild or moderate hearing loss who
currently use hearing aids or would have begun using hearing aids even in the absence of
this rule but do not value the professional services typically bundled with hearing aids
when purchased through specialty retail outlets or the features of hearing aids sold
through specialty retail outlets in states that currently disallow or restrict online sales of
hearing aids or in any state in the case of consumers who simply choose to not purchase
such products online but would purchase the same sort of product in brick and mortar
stores. Consumers most likely to fit into this category are lower income consumers who
25

live in rural areas remote from specialty hearing aid retailers and general retailers selling
related PSAPs, consumer with poor internet connectivity, and less educated consumers
who have difficulty with online shopping where it is available. Thus, this proposed rule,
if promulgated, would benefit communities that would conventionally be classified as
disadvantaged, vulnerable, or marginalized communities. We request information related
to potential hearing aid users who find accessing specialty hearing aid retailers difficult,
who cannot or will not shop for hearing aids online but will buy comparable products in
general retail, who do not consider other forms of hearing technology such as PSAPS
sold in general retail close substitutes for hearing aids.

The primary actors likely to lose from this rule are hearing health care
professionals and specialists who currently dispense hearing aids through specialty retail
outlets in states that currently disallow or restrict online sales of hearing aids who may
lose some of their current customers to the OTC hearing aid market in the same way they
may have previously lost customers to online sales and PSAPs, and established hearing
aid manufacturers that may lose some of their consumers to new entrants selling OTC
devices in states that currently disallow or restrict online sales of hearing aids. Thus, this
proposed rule, if promulgated, would not inappropriately burden communities that would
conventionally be classified as disadvantaged, vulnerable, or marginalized communities.
A possible exception would be that some people in communities that might
conventionally be classified as disadvantaged, vulnerable, or marginalized who prefer
buying hearing aids bundled with professional services sold in specialty retail may be
made worse off when OTC products are introduced as competing products, for example,

26

if they live in a remote small town and work with an audiologist who is currently able
(but just barely) to stay in business and who finds it advantageous after the introduction
of OTC hearing aids to move to a larger urban area. We do not have sufficient
information to predict the severity of these distributive effects and request comments on
the potential distributive impacts of this rule.

H. International Effects

Many hearing aid manufacturers, including five of the six large companies that
currently dominate the world-wide market for hearing aids, are based outside the US.
These firms would accrue the relatively modest cost associated with relabeling existing
hearing aids and may face increased competition from entrants into the OTC haring aid
market.

I. Uncertainty and Sensitivity Analysis

The primary source of uncertainty for both benefits and costs is the number of
consumers switching to OTC hearing aids. We assumed modest changes in behavior
based on current consumption patterns relating to online hearing aid sales, the general
shopping patterns relating to online versus brick and mortar outlets, as well as the general
availability of PSAPs. However, it is possible OTC hearing aids may be or become
substantially more attractive to consumers than hearing aids currently offered online and
PSAPs, either because they vary in some relevant way such as product characteristics or
cost or in the case of hearing aids sold online because simply appearing in brick and
27

mortar general retail outlets makes them dramatically more visible or acceptable to
consumers than comparable models sold online. If more consumers convert to OTC
hearing aids than anticipated, more consumers will obtain the potential cost savings and
fewer consumers will need to arrange additional visits to licensed providers and
potentially pay more for hearing aids that convert to prescription medical devices.
An important source of uncertainty for cost savings is the eventual price of OTC
hearing aids. Sound amplification technology can range in price from under one hundred
dollars for some PSAPs to relatively low-cost hearing aids available online for several
hundred dollars to relatively expensive hearing aids with many advanced features sold
through specialty retail outlets for a few thousand dollars. We assume OTC hearing aids
at least initially may have similar costs and features to hearing aids currently available
online. However, if they are much simpler devices and priced even lower, perhaps more
similar to PSAPs, the potential cost savings for consumers who choose to use them would
be greater than anticipated, although of course the change in product capabilities and
characteristics and thus the potential decline in utility from switching to OTC hearing
aids from current hearing aids may also be greater than anticipated.
Another important source of uncertainty for costs is the percentage of consumers
with mild to moderate hearing loss who own and use hearing aids who would need to
make additional visits to licensed providers if they wish to obtain prescriptions for
hearing aids that convert to prescription medical devices. We assumed those aged 70 and
over would have no additional cost but those under age 70 would have a 0 to 100 percent
probability of needing to make an additional visit to a licensed provider to obtain a
prescription. If most of these consumers can obtain prescriptions for hearing aids without

28

scheduling additional visits to licensed providers, the costs associated with existing
devices converting to prescription medical devices would be lower than anticipated.
With respect to the discussion of potential new users, the main sources of
uncertainty are the numbers of new users and the value of the hearing aids to new users.
As with existing users, if OTC hearing aids represent a bigger departure from the current
situation, including online hearing aids and PSAPs, then the number of new users may be
higher than estimated.

J. Analysis of Regulatory Alternatives to the Proposed Rule

1. Extend Compliance Date

Another alternative would be to extend the compliance date by delaying the
effective date or extending the compliance period. Extending the compliance date of any
rule requiring products to be relabeled or repackaged reduces costs by allowing firms
additional time to dispose of existing labeling and package inventory. In this case the
labeling costs are a relatively minor component of total costs. If we extend the
compliance date from 240 days after publication to 365 days after publication, our
labeling cost model suggests we could increase the percentages of required labeling
changes coinciding with regularly scheduled labeling changes from 2 percent to about 4
percent, although it would not change the estimated 10 percent of paper inserts or 0
percent of packaging lost. This would reduce the one-time labeling costs by about $0.1
29

M. However, it would also delay consumer benefits by an additional four months, which
based on estimated annual cost savings would imply a reduction in cost savings in the
first year of about $16 M.

2. Propose Fewer or Less Restrictive Specifications and Requirements for
OTC Hearing Aids
A third alternative would be to revise the proposed specifications and
requirements for OTC hearing aids to further reduce the cost of those devices. For
example, we could look at the specifications that may generate differences in costs
relative to low cost PSAPs and revise those with the intent of encourage OTC devise
more similar to PSAPs than existing hearings aids sold online. We do not have enough
information on the likely effect on benefits and costs of revising these specifications and
requirements to allow us to evaluate these types of changes. We request information on
the potential costs and benefits of revising the proposed specifications and requirements
relating to OTC hearing aids.

III. Initial Small Entity Analysis

The Regulatory Flexibility Act requires Agencies to analyze regulatory options
that would minimize any significant impact of a rule on small entities. We believe we can
certify that the proposed rule will not have a significant economic impact on a substantial
number of small entities. The estimated annualized cost over ten years is $0.009 M per
firm, which is unlikely to represent more than three percent to five percent of the revenue
30

of an affected manufacturer. However, we note that some uncertainty exists as to these
impacts, so we have chosen to draft a compliant IRFA. We request comments relating to
the effect of this rule on small manufacturers. This analysis, as well as other sections in
this document, serves as the Initial Regulatory Flexibility Analysis, as required under the
Regulatory Flexibility Act.

A. Description and Number of Affected Small Entities

FDA Medical Device Registration data shows 105 firms manufacture air
conduction hearing aids sold in the US in 2015. Hearing aid manufacturing appears in
North American Industry Classification System (NAICS) code 334510, Electromedical
and Electrotherapeutic Apparatus Manufacturing. The Small Business Administration
definition of a small business in this NAICS code is a firm with 1,250 or fewer
employees. According to this definition, 100 hearing aid manufacturers are small
businesses.
In the PRIA, we also discussed potential distributional effects that may result
from this rule, including a potential reduction in business for specialty retailers selling
hearing aids bundled with professional services and a corresponding increase in business
for general retailers selling OTC hearing aids, any of which may be small businesses, we
do not consider these market effects following from voluntary consumer and market
behavior in response to new opportunities to correspond to the effects relevant to this
section. Doing so would imply an objective of preserving the market share of existing
firms from potential changes generated by consumer and supplier behavior, which would

31

be inconsistent with neutrality toward firms, including small firms, that may gain or lose
revenue from such changes and potential entrants.

B. Description of the Potential Impacts of the Rule on Small Entities

In the preliminary economic analysis for this proposed rule, we estimated mean
one-time costs for hearing aid manufacturers of about $10 M (fifth percentile $4 M,
ninety fifth percentile $15 M), or about $0.09 M per firm. Annualized over ten years the
mean annual cost would amount to $1 M, or about $0.009 M per firm.

C. Alternatives to Minimize the Burden on Small Entities

In the preliminary economic analysis for this proposed rule, we discussed an
alternative that would reduce expected costs for small entities.

1. Extend Compliance Date

If we extend the compliance date from 240 days to 365 days after publication of a
final rule based on this proposed rule, our labeling cost model suggests we could increase
the percentages of required labeling changes coinciding with regularly scheduled labeling
changes from 2 percent to about 4 percent, although it would not change the estimated
small amount (10 percent) of paper inserts or 0 percent of packaging lost. This would
reduce the one-time labeling costs by about $0.1 M.
32

IV. References

1.
2.
3.
4.
5.
6.
7.

"The Big Six" Hearing Aid Companies. Hearing Loss Journal 2016; Available
from: http://www.hearinglossjournal.com/the-big-six-hearing-aid-companies/.
Kochkin, S. 20Q: 25 Years of MarkeTrak - The Highlights. Audiology Online
2012; Available from: http://www.audiologyonline.com/articles/20q-25-yearsmarketrak-highlights-6616.
Smith, A. and M. Anderson. Online Shopping and E-Commerce. Pew Research
Center 2016; Available from: http://www.pewinternet.org/2016/12/19/onlineshopping-and-e-commerce/.
Columbia Hearing Center. How Long Do Hearing Aids Last? 2013; Available
from: https://columbiamohearingcenter.com/how-long-do-hearing-aids-last-andhow-to-extend-their-life/.
Blazer, D., S. Domnitz, and C. Liverman. Hearing Health Care For Adults:
Priorities for Improving Access and Affordability. 2016; Available from:
http://nap.edu/23446.
RTI International, 2014 FDA Labeling Cost Model. Final Report. 2015.
Bureau of Labor Statistics. Occupational Employment Statistics: May 2017
National Industry-Specific Occupational Employment and Wage Estimates,
NAICS 325400 – Pharmaceutical and Medical Manufacturing. Available from:
https://www.bls.gov/oes/current/naics4_325400.htm.

Appendix: Supplemental Analysis of the Potential Quality-of-Life Benefits of the
Proposed Rule
In our main analysis, we estimate a range of monetary benefits of the proposed
rule. These benefits are calculated as the net cost savings for existing hearing aid users
wishing to buy lower cost hearing aids that are not bundled with professional services,
accounting for the additional costs to users of products that convert to prescription
medical devices. In addition to these effects, it is possible lower prices for hearing aids in
states that currently restrict online hearing aid sales, combined with higher product
visibility from hearing aids appearing in general retail outlets, as well as increased
opportunity for impulse buying and buying hearing aids as gifts for other people, may
result in quality-of-life benefits for additional users of hearing aid products with
33

perceived mild-to-moderate hearing loss when compared to a baseline of no regulatory
action. There are at least two methods to value these potential benefits. In the method we
discussed in the main analysis, we valued these potential health benefits, along with all
other sources of consumer utility and disutility from hearing aids, using consumer
revealed preferences for hearing aids themselves. In this appendix, we present a second
method in which we value these benefits using methods that capture the maximum
amount of money an individual would willingly exchange for the improvement in quality
of life, taking into account the individual’s reduced ability to consume other goods. This
appendix describes a supplemental analysis of the potential quality-of-life benefits for
these individuals.
The HHS Guidelines for Regulatory Impact Analysis (2016) 1 contain an approach
to valuing morbidity reductions anticipated from regulatory actions. When high-quality
direct willingness-to-pay estimates are not available for a morbidity risk reduction,
analysts are directed to combine estimates of the Quality-Adjusted Life Year (QALY)
gains of an intervention with estimates of the monetary value per QALY.
We derive our estimates for the QALY gains from Morris et al. (2012) 2, which
reports utility gains expected from hearing aids in the context of a cost-effectiveness
analysis of screening individuals between the ages of 60 and 70 for bilateral hearing loss
of at least 35 dB HL. Their primary estimate of the utility gain from hearing aids is 0.068,
with a sensitivity analysis range of 0.035 to 0.105. These estimates are derived from a

1 U.S. Department of Health and Human Services, Guidelines for Regulatory Impact Analysis. 2016.
Available at https://aspe.hhs.gov/reports/guidelines-regulatory-impact-analysis.
2 Morris AE, Lutman ME, Cook AJ, Turner D. “An economic evaluation of screening 60- to 70-year-old
adults for hearing loss.” J Public Health (Oxf). 2013 Mar;35(1):139-46. doi: 10.1093/pubmed/fds058. Epub
2012 Sep 30. PMID: 23027734.

34

pair of studies measuring the improvement in quality of life, measured in utility. Davis et
al. (2007) 3 reports estimates derived from the Health Utilities Index (HUI) and Short
Form 6 Dimensions (SF-6D), while Barton et al. (2004) 4 reports estimates derived from
the EQ-5D, HUI, and SF-6D. Since the utility gain estimates are from individuals newly
identified as hearing impaired, and the decibel threshold of the screening corresponds
with mild hearing loss, these estimates seem reasonable to apply to this analysis.
We convert the Morris et al. (2012) estimates of the utility gain from hearing aids
to the present value of the QALY gains by assuming hearing aids last 5 years, and by
discounting the stream of annual utility gains to the year of purchase using a 3 percent
and a 7 percent discount rate. Table A1 reports the present value of the QALY gains
implied for each estimate of the utility gain and for each discount rate. This correction is
problematic if the QALY estimates are already multi-year PVs, which would further
increase the size of the already large benefit estimates, a consideration we will investigate
if we determine later the approach taken to valuing health benefits presented in this
appendix is superior to the approach we used in the benefits section.
Table A1. Present Value of QALY Gain of Hearing Aid
Estimate of Utility Gain
0.035
0.068
0.105

3%
0.160
0.311
0.481

QALY Gain

7%
0.144
0.279
0.431

The Office of the Assistant Secretary for Planning and Evaluation (ASPE) at HHS
updates the Department’s estimates of value per QALY annually, and has published
3 Davis A, Smith P, Ferguson M et al. “Acceptability, benefit and costs of early screening for hearing
disability: a study of potential screening tests and methods.” Health Technol Asses 2007;11(42): 1–294.
4 Barton G, Bankart J, Davis A et al. “Comparing utility scores before and after hearing aid provision:
results according to the EQ-5d, HU13 and SF-6D.” Appl Health Econ Health Policy 2004;3(2):103–5.

35

guidance (2021) 5 documenting the approach to updating these estimates for inflation, real
income growth, and other factors. We assume the policy would take effect in 2022, and
report monetized effects using expected real income levels for the same year. For
reductions in morbidity occurring in 2022, ASPE recommends a central estimate of the
value per QALY of $590,000 for analyses using a 3% discount rate and $980,000 for
analyses using a 7% discount rate. Table A2 reports the value per QALY under both
discount rates corresponding to a low, central, and high estimates of the Value Per
Statistical Life (VSL). All monetary estimates are reported in 2020 dollars, for reductions
in morbidity risks that begin in 2022.
Table A2. Value Per QALY in 2022 (Reported in 2020 Dollars)
Value Per QALY
Estimate
VSL
3% Discount Rate 7% Discount Rate
Low
$5,400,000
$280,000
$460,000
Central
$11,600,000
$590,000
$980,000
High
$17,600,000
$900,000
$1,500,000
Combining the estimates of the QALY gain of a hearing aid reported in Table A1
and the value per QALY estimates reported in Table A2, we monetize the value of the
QALY gains per hearing aid user. Table A3 reports these values using a 3% discount rate
and Table A4 reports these values using a 7% discount rate. All monetary estimates are
reported in 2020 dollars, for reductions in morbidity risks that occur in 2022.
Table A3. Value of the QALY Gains Per User, 3% Discount Rate
Estimate of Utility Gain

Low VSL

Central VSL

High VSL

0.035
0.068

$44,000
$86,000

$95,000
$184,000

$144,000
$280,000

5 Office of the Assistant Secretary for Planning and Evaluation (ASPE). 2021. “Appendix D: Updating
Value per Statistical Life (VSL) Estimates for Inflation and Changes in Real Income. Available at
https://aspe.hhs.gov/reports/updating-vsl-estimates.

36

0.105

$132,000

$284,000

$432,000

Table A4. Value of the QALY Gains Per User, 7% Discount Rate
Estimate of Utility Gain

Low VSL

Central VSL

High VSL

0.035
0.068
0.105

$66,000
$128,000
$197,000

$141,000
$274,000
$423,000

$215,000
$417,000
$644,000

At this time, we are not including these monetary estimates of quality-of-life
benefits associated with additional access to low-cost hearing aids because there is
substantial uncertainty regarding the number of new users of hearing aids under the
proposed rule. There is also substantial uncertainty regarding current use of PSAPs and
the percentage of new users of hearing aids who may be current users of PSAPs. Finally,
there is substantial uncertainty regarding the valuation of the potential health benefits for
new users and the incremental change in health benefits for those who change devices or,
more generally, regarding net changes in consumer utility from such devices including
health benefits. The magnitude of the monetary value of the quality-of-life improvements
per person we estimate exceeds the expected per-user cost of OTC hearing aids ($399)
under all combinations of utility-gain estimates and the estimates of the value per QALY.
This suggests that each additional hearing aid user, if the proposed rule were finalized,
would experience significant net benefits, accounting for their quality-of-life
improvements and the costs of the hearing aids.
If these estimates are multiplied by some estimate of new users without further
adjustments, the resulting benefits estimates would likely be overstated for several
reasons:
37

1. Selection among respondents to the HRQL survey. The estimates in Davis
come from individuals screened for hearing loss, who both accepted, and reported using
the hearing aids. We could not quickly identify the magnitude of the attrition from
individuals fitted for a hearing aid but discontinued use in the first three months or
otherwise left the sample. The paper acknowledges this limitation on page 113: “This
poses a question as to whether this attrition in use of aids could have caused a bias in the
findings of this study.” One perhaps somewhat underdeveloped approach to numerically
addressing this issue: adopt the Morris estimate of 66% who “Accept offer of hearing
aid” and assign zero value to the remaining 34%. Therefore, a HUI estimate of 0.068
among individuals that accept and use hearing aids could be converted to 0.068*0.66 =
0.4488 utility gain among individuals offered a hearing aid. Similar adjustments could be
made to the low and high range of the utility gain estimates.
2. Discontinued Use. The QALY estimates based on the utility scores assume
continuous use for 5 years, but we may anticipate some individuals may discontinue use.
Morris picks a primary estimate of 90% for the “Probability of using hearing aid in first 5
years,” which falls to 62% for the “Probability of using hearing aid beyond first 5 years.”
We could linearly interpolate this such that the utility gain in year 1 is 90%; year 2,
84.4%; year 3, 78.8%; year 4, 73.2%; and year 5, 67.6%. Ignoring discounting, the
QALY figure shrinks by the midpoint of 78.8% of the earlier reported estimates, slightly
higher than when discounting.
3. Choice of HRQL measure. The Morris paper favors the HUI quality of life
measures over the SF-6D measure, which is significantly lower (0.016 in the Davis
paper). If the higher HUI measures showed up as benefit estimates in the main analysis,

38

it would be pretty straightforward to adopt the lower estimates based on SF-6D as a
sensitivity analysis.
Combining issues 1 and 2 would roughly halve the QALY calculation, while
using the lower SF-6D measure (combined with 1 and 2) would generate a QALY
estimate roughly 10 percent of the unadjusted figure.
We note that the value of these quality-of-life improvements also far exceed the
estimated cost of an economy-level hearing aid bundled with professional services
purchased from a specialty retail outlet ($1,657), which generates certain issues with
respect to observed consumer behavior. If these estimates of the subjective value of
potential benefits consumers place on using hearing aids are accurate, one may
reasonably have supposed they would have already tried hearing aids at a cost that
amounts to a fraction of that value. One confounding issue is that many individuals with
mild-to-moderate hearing loss may not realize they have measurable hearing loss, as
indicated by the underlying source of our utility-gain estimates, or may not realize they
may benefit from using hearing aids. Of course, with respect to uptake specifically, in
such a situation it is unclear why a further drop in the price of hearing aids would cause
such consumers to take them up. Another possibility is that there are substantial sources
of consumer disutility associated with hearing aid use that must also be accounted for,
which are issues accounted for in our primary method of valuing these potential net
benefits for new users using observed market behavior.

39

We request comment on the following areas: (1) the appropriateness of the utility
gain estimates and subjective consumer valuation based on revealed preferences
estimates contained in this supplementary analysis and recommendations for additional
sources for these estimates; (2) estimates of the incremental increase or decrease in health
benefits from consumers who switch from existing hearing aid devices to OTC hearing
aid devices or from PSAPs to OTC hearing aid devices; (3) estimates of the number of
users expected to switch from existing hearing aid devices to OTC hearing aid devices
and from PSAPs to OTC hearing aid devices as a result of the proposed rule; (4)
estimates of the number of new users of hearing aids as a result of the proposed rule; and
(5) information on the distribution by demographic group of new users of hearing aids
and users expected to switch type of hearing aid or hearing technology as a result of the
proposed rule.

40