New FDA hearing aid ruling may impact Cochlear

In a move that could rattle the share price of Cochlear (ASX:COH) for a while, key US health regulators have cleared the way for hearing aids to be sold over the counter (through drug stores and other chains) from the middle of October.

The US Food and Drug Administration (FDA) on Tuesday adopted a final rule to create a new category of over-the-counter hearing aids that can be sold directly to millions of Americans.

An estimated 30 million plus Americans need hearing assistance at some level, according to industry groups.

The change isn’t sudden, it has been talked about for a year or more and in 2017, the US Congress passed legislation requiring the FDA to create a category of over-the-counter hearing aids, but it was not fully implemented.

Cochlear shares closed at $218.31 on Tuesday. The company reports its 2021-22 results on Friday and analysts will no doubt be asking for its view on the new US laws.

(Watch for poorly informed investors and others who will hear or read of the FDA change and panic and sell Cochlear shares without hearing from the company.)

Cochlear’s products are more advanced and are for people with severe hearing impairment. They are very different and far more complex than the products that will be sold in the US in stores and other outlets from October.

But the danger is that many people on the borderline will opt for the new products without medical checks to see if they are suitable which could drain some potential customers for Cochlear’s products.

There will be a period of uncertainty as the new market settles down; legal cases look certain to flourish as new devices are sold, perhaps poorly engineered or wrongly marketed.

The FDA said the rules should cut the costs of hearing aids for people with perceived mild to moderate hearing impairment. The aids will be available directly from stores or online without a medical exam, prescription or fitting adjustment by an audiologist.

The rule follows a directive in President Biden’s broad competition executive order signed in June 2021, which had told the Health and Human Services Department to “promote the wide availability of low-cost hearing aids,” among many other directives aimed at a wide variety of industries.

The new category applies to hearing aids for adults aged 18 or over with mild hearing loss. The final rules lower the maximum sound output to reduce the risk to hearing from over-amplification of sound, revise the insertion depth limit in the ear canal, require all over-the-counter hearing aids have a user-adjustable volume control and performance specifications and device design requirements.

Manufacturers of hearing aids sold prior to the effective date of the final rule have 240 days after its publication to comply, according to the FDA.

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