HJ REPORT

ACTION ON CAPITOL HILL Congressional advocates for hearing healthcare observed May as Better Hearing and Speech Month by introducing legislation that would provide a federal income tax credit of up to $500 per ear for the purchase of hearing aids for persons age 55 or over and for dependent children. Sen. Norm Coleman (R-MN) is sponsoring the bill in the U.S. Senate, while Rep. Carolyn McCarthy (D-NY) and Rep. Vern Ehlers (R-MI), a hearing aid wearer, introduced HR 2329 in the House. These bills are the same as measures introduced in the 109th Congress in 2005. That legislation gained wide bipartisan support, attracting 112 co-sponsors in the House and 17 in the Senate, but it never came to a vote. With a new Congress having taking office in January, supporters of the Hearing Aid Assistance Tax Credit had to introduce new bills. Introduction of HR 2329 coincided with the May 16 Hearing on the Hill sponsored by the Hearing Industries Association (HIA). Employees of HIA member companies spent the day visiting the Washington, DC, offices of their elected representatives urging them to co-sponsor the bills. Also taking part in Hearing on the Hill were representatives of professional and consumer organizations that support the tax credit. These include the Hearing Loss Association of America (formerly SHHH), the A.G. Bell Association for the Deaf and Hard of Hearing, the American Academy of Audiology (AAA), the American Speech-Language-Hearing Association, and the International Hearing Society. Medicare coverage for hearing aids sought Other measures related to hearing care have also come before Congress this spring. One is HR 1912, introduced by Rep. Gus Bilirakis (R-FL) on April 18, which would provide Medicare coverage for hearing aids and auditory rehabilitation services for seniors. Congressional observers see the bill, called the Medicare Hearing Enhancement and Auditory Rehabilitation (HEAR) Act, as having virtually no prospect of passage. It has no co-sponsors and would add substantially to Medicare costs at a time when Congress is looking to curb spending. Also, Medicare has explicitly precluded coverage of hearing aids since its establishment in the 1960s. Direct access to audiologists Also introduced was HR 1665, the Medicare Hearing Health Care Enhancement Act of 2007, which would permit Medicare beneficiaries to go directly to an audiologist for hearing and balance diagnostic tests. Currently, Medicare covers audiologic care only if the patient is referred by a physician. Mike Ross (D-AR) sponsored the House bill, and Sen. Tim Johnson (D-SD) was expected to introduce a companion bill in the Senate. The initiative, which has been before previous sessions of Congress, is a top legislative priority of AAA and the Academy of Doctors of Audiology. INTRICON PURCHASES COMPONENT MAKER IntriCon, a designer, manufacturer, and distributor of components for hearing aids as well as for other medical and electronic products, has purchased another component maker, Tibbetts Industries, Inc., of Camden, ME, for $4.5 million in cash. IntriCon, a publicly owned corporation based in Arden Hills, MN, was formerly known as Resistance Technology, Inc. (RTI). Traded on the Amex, it reported $7 million in sales last year. Tibbetts, which was founded in 1945, is one of the older companies in the hearing industry. Previously privately owned, it specializes in the development and manufacture of hearing aid receivers, microphones, and magnetic telecoils, and also makes transducers for other markets. Mark S. Gorder, president and CEO of IntriCon, said, “Our acquisition of Tibbetts will give IntriCon access to key components that go into ear-worn communication devices.” He added that the purchase would enable IntriCon to manufacture receivers and microphones faster and less expensively. According to the announcement of the transaction, the Tibbetts management will continue in their current roles and the company will remain in Camden. Donald Sweet, president of Tibbetts, said, “Our well-established record of providing the highest quality standards in hearing aids and medical devices, along with our extensive development experience, will further strengthen IntriCon's strategic focus.” SEBOTEK CHARGES PATENT INFRINGEMENT SeboTek Hearing Systems, LLC, announced during the 2007 AAA Convention that it had filed suit on April 17 against several hearing aid companies alleging patent infringement. The suit, brought by the Tulsa-based company in U.S. District Court for the Northern District of Oklahoma, contends that Oticon, Phonak, Interton, and their European parent companies, and Vivatone have infringed on patents held by SeboTek protecting the speaker-in-the-canal designs and technology used in its PAC™ (post-auricular canal) hearing aids. Asked to respond to SeboTek's claims, Olaf Trittel, director of legal affairs for Phonak AG, in Switzerland, said the company was confident that its current products and those under development do not infringe on any of SeboTek's patents. Spokespersons for Oticon and Vivatone declined to comment on the legal issue, and HJ did not reach representatives of the other companies named before this issue went to press. Jim Feeley, president of SeboTek, and Mike Feeley, his brother and executive vice-president, said in an interview with The Hearing Journal that as hearing aid dispensers they had seen that the traditional custom hearing aid fitting process was holding back growth in the hearing aid market. Therefore, they looked for a way to eliminate custom earmolds yet still give patients well-fitting, cosmetically appealing, feedback-resistant instruments that could be fitted instantly. They said they tried various approaches before coming up with the PAC hearing aid, which they described as “a unique new concept.” To protect their invention, the Feeleys purchased a 1997 patent held by Siemens, which they said covered an element of their design, and applied for several other patents, which were issued in 2005 and 2006. The abstract of the original patent (#5,606,621) describes what is essentially a speaker-in-the-canal device that combines elements of a BTE and a CIC in order to increase gain, control feedback, and protect the wearer from being disturbed by the occlusion effect. Since SeboTek launched its first PAC product in 2003, the Feeleys claim that other companies have used technology patented by them to make their own speaker-in-the-ear products. The lawsuit seeks damages and an injunction against the manufacture of instruments that infringe the patents in question. Mike Feeley told HJ, “We did not take this step lightly,” and added that he and his brother were hopeful of reaching a settlement with the defendants. However, Jim Feeley added, “we feel very confident in our position and are prepared to do what we need to do.” NEW NETWORKS WITH MANUFACTURING PARTNERS Two growing trends in the hearing healthcare industry are the formation of national and regional networks of hearing healthcare practices and the establishment of relationships between many of these networks and individual hearing aid manufacturers seeking to lock in distribution. Recently, two more networks have emerged—Audigy Group (www.audigygroup. com) and HearingMed (www.hearingmed.com)—each with a manufacturing partner. Audigy Group Actually, Brandon Dawson, the managing director of Audigy Group, founded it in October 2004. However, the Vancouver, WA-based company kept a low profile at first. Now, after reporting 400% growth in revenues in 2006 and a 25% pre-tax profit margin, Dawson said, Audigy Group is ready to tell its story—and it began doing so with a conspicuous presence at the recent AAA Convention. In an interview, Dawson said he is applying lessons he learned at Sonus, which he founded in 1993 and ran until other investors took control and eventually sold it to Amplifon. Audigy, he said, will be “what I originally wanted Sonus to be.” At last report, he said the group had 88 practitioner-owners (with another 20 or so in the pipeline), making it “the largest national member-owned organization in the industry.” Eventually, Audigy Group expects to have 250 members, who will own 45% of the company, with the remainder held by the leadership team. Dawson said that Audigy Group is interested in attracting the elite practices in each market, businesses that are already successful but whose owners want to take them to the next level. He said that before accepting a new member-owner, Audigy carefully examines every aspect of the practice to be sure it is a good fit with the group. He added that of 1790 owners Audigy has interviewed, it has invited only 130 to join. Those who do join are offered a variety of services and benefits designed to make their practices more successful, including access to a private-label line of hearing aids made for it by Sonic Innovations, its strategic partner. Dawson and Jeff Geigel, vice-president for North American operations at Sonic Innovations, emphasized that, unlike partnerships in which manufacturers own all or part of a dispensing network or otherwise have financial influence, their partnership is based on Sonic's ability to provide Audigy with the specific products and services it wants. The company has also recently launched Audigy University, a business and technology school intended to teach the skills needed to run a successful practice. Eric Hecker, AuD, is director of the school. HearingMed Mark Moore, the president and CEO of HearingMed, has been a hearing instrument specialist for 21 years, and owns McDonald Hearing Aid Centers, a four-office practice in the Sacramento area. During that time, he conceived of and implemented various business development approaches and patient benefit programs. Now, through the practitioner network he has started, he is making methods that have proven effective in his practice available to hearing professionals across the country. HearingMed, which is based in Granite Bay, CA, is still very new and at last report had only a dozen members. However, Moore believes that its emphasis on offering “hearing solutions, not just hearing instruments” will prove attractive to practitioners. He sees as likely recruits independent owners with a solid business, though not necessarily the largest in their market, who are looking for a unique competitive edge. While HearingMed offers various business-oriented programs, including a 90-day marketing campaign, Moore thinks the network will be especially appealing to audiologists and hearing instruments specialists looking to offer value-added benefits to patients not available elsewhere. Specifically, HearingMed offices provide clients with a free screening for ototoxic combinations of medications. Moore noted that since many older people are taking several prescription medicines, there is a good chance that hearing loss may be a side effect. Moreover, he reported, using the screening tool in his own practice has alerted more than 30 patients that they were taking a potentially “lethal cocktail” of medications. Other free patient benefits that Moore has initiated are a free course in hearing aid maintenance available to any hearing aid wearer, not just his clientele, and a card that gives patients a discount on drugs at 50,000 pharmacies in the U.S. HearingMed is also offering private-label hearing aids made for it by GN ReSound, its newly announced partner. Asked why his company decided to team up with a fledgling group, Chuck Lentz, vice-president of national accounts, said that HearingMed offers some value-added propositions for users that he hadn't seen before. Lentz added, “This partnership is part of our commitment to help independent practitioners enhance the hearing health of their patients.” Like Audigy, HearingMed was prominent at the AAA Convention in Denver.

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