Cochlear Bionic Ear 1. Issues Should they increase or decrease the price? Should they invest in marketing their implant better? Should they use the extra capacity to launch a children model or a cheaper second one? 2. Background Company In 1979, Nucleus Limited, a local company specializing in cardiac pacemakers and diagnostics ultrasound imaging equipment was chosen to commercialize an implanting hearing devices into the cochlea, or inner ear, invented by the University of Melbourne, Australia. By September 1982, they were ready to perform the first implant, which proved to be a huge success. The following year, Nucleus Cochlear Pty Limited set up in Sydney to handle the new innovations research and development, manufacturing, and sales.
The first US implant took place in 1983. Real momentum began two years later when the US Food and Drug Administration (FDA) gave its approval. Only when this had been granted would US health insurers provide coverage for the product and the surgical procedure necessary to implant it. In 1989, Cochlear produced and began clinical tests on the worlds first inner ear implant for children. Cochlear introduced the European market in 1986, and set up an office, Cochlear AG in Basel, Switzerland, in 1987. The FDAs opinion was regularly adopted by the European medical authorities, which didnt have regulatory bodies such as the FDA for medical devices.
By 1989, when the national health systems in certain countries began to reimburse patients in full or on a quota basis, the companys European position strengthened, which led to worldwide growth from 1988 to 1989 despite the decrease in US unit sales. In an attempt to open up the Japanese market, a four-man operation called Nihon Cochlear was establish in Tokyo in 1988. On this market the FDA was not valid and a governmental import license, which Cochlear was waiting for had to be obtained. The company reached financial breakeven for the first time in 1986. Unit sales in the US increased from 409 in 1987 to 596 the following year, although they decreased to 553 in 1989. Market There were two categories of deaf people, about equal in size: postlingually deaf (due to illness, accident,), and prelingually deaf (deaf at birth).
The hearing impaired market was comprised of the profoundly deaf and the severely deaf. Severely deaf people could be helped, to a greater or lesser extent, by a hearing aid, which amplified sound, at a cost of $1,000. Unsatisfied people could represent a potential market. Generally, hearing aids were useless for the profoundly deaf people. Researches showed that the market size in developed countries was estimated at 500,000 profoundly deaf adults worldwide, and another 500,000 severely deaf adults. One piece of research showed that over 40% of potential users were against the idea of having wires in their head, were afraid of doctors and hospitals, or saw the procedure as far too risky to justify. Cochlear therefore estimated that only about 10% of the profoundly deaf, or about 50,000 patients worldwide, were possible implant candidates.
Apart from this backlog, the data suggested that another 3,000 new cases occurred each year worldwide. Cochlear assumed that about 10% of deaf people were able to fund the implant themselves. Widely dispersed, there were deaf people in all age categories, although 25% of the profoundly deaf were over 65 years of age. The decision-making process for an ear implant could be complex, as there were many actors and influences well beyond just the end user. These included doctors, regulatory authorities, families, insurance companies, deaf associations, and the media. The characteristics of patients and doctors differed in the US, Europe, and Japan.
American patients tended to be litigation prone and self-directed in their decisions. American specialists characteristically offered patients options rather than dictating what had to be done. European deaf patients were more influenced by the surgeon, were not as litigation minded, and the quality of life was more pivotal in their decision making than were professional prospects. They were somewhat swayed by the look of the device, although less so than Americans. Since the main motive for Japanese patients was to cure the problem, they tended to do as their doctors told them.
Of the 7,000 American ENT (ear-nose-throat) specialists, 200 fitted Cochlear devices in the implant centers, of which 100 did so at least once a year. Of the 2,500 European ENT specialists, 40 regularly implanted and fitted the device. After six years of lobbying by Cochlear, the UKs Department of Health and Social Security decided in 1990 to fund 100 units per year for three years. With Sweden beginning in 1983 and Norway in 1986, Scandinavia sponsored about 20 units per year. Private or government insurance covered most Americans, with 60 private health insurers providing coverage for about 75% of those insured; the government welfare programs insured the rest.
These reimbursement schemes invariably fell a few thousand dollars short of the average $30,000 necessary for the product and procedure. It was then either to the patient to find the money, or for the hospital to agree to carry the shortfall, which was the 50% of the time the case. Workers disability insurance covered relevant cases in Switzerland. Germany, which accounted for 60% of all European units sold, was the only country whose medical insurance system provided 100% coverage to anyone who needed the implant. In the remaining European countries, implants were funded by research and charity institutions, and were decided on a case-by-case basis.
Five competitors characterized the market: 3M, Symbion, Minimed, Hochmair, and Hortmann. 3M, which initially dominated the market but, once Cochlear entered, gradually lost market share and faded from the scene late in 1989. Symbion had managed to produce an unit which, while using a much lower level of implant technology, nonetheless achieved the same hearing performance, and at the same price, as Cochlears device. It had some competitive disadvantage due to esthetic and infection problems; however, it was considered as a flexible product because any kind of stimulation could be used whereas the Cochlear device only allowed radio wave transmission. Minimeds device had only 16 channels.
Its performance could potentially be as good as Cochlears due to its capacity to better represent certain non-speech sounds, even with its problems in micro-chip technology, which disable it to receive FDA approval. There were rumors that the problem would soon de solved. Neither Hochmairs nor Hortmann were considered serious opponents given their lag in the important categories of clinical benefit, effectiveness, and safety. 3. SWOT Strengths The Cochlear hearing system is the most technologically advanced in the world (only one to have a 22-channel electrode, which enabled more sounds to be heard and could be fine-tuned for a particular pitch and loudness by the surgeon, thereby catering to the individual hearing needs of each patients) Failure rate is only 1% Got rid of 3M, their biggest competitor Market leader, own 90% of the market in the US and 60% in Europe The first implant design, which contained much more capacity then it really needed, enabled the patients hearing ability to be improved at some future date without having to undergo further surgery, by updating and modifying the speech processor Can be focus on speech processor development only Spreaded suppliers dependence (the components used were very specialized and tended to come from single-goods suppliers worldwide) A constant stock was kept to eliminate delays in the event of problems in the suppliers market and in order to get bulk prices Cochlear was the only one with Food and Drug Administration (FDA) approval Benefit from the image of their 3,500 satisfied patients worldwide Organization, size and professionalism Clinical benefit and effectiveness Safety Benefit from their brand name and logo Cochlear trained doctors to troubleshoot eventual problems relating to the use of patients unit Five years of guarantee, but expected to last a lifetime Have well trained salespeople, whom are supported by a team of clinical experts who advised, counseled, and handled any problems that arose, using clinical support centers Offices also maintained a technical service team, reimbursement specialists, and 2-3 marketing people to organize conferences, handle PR and prepare brochures Generally, when new updates were discovered, Cochlear benefited from free advertising due to media attention Worldwide awareness among ENT surgeon was 70-80% Good communication channels, supports..
Worldwide non-usage rate is 1% Weaknesses Despite the fact that they are the best on the market …