Merger Update: Cochlear Limited / Oticon Medical

HEARING IMPLANTS DEAL COULD MEAN WORSE OUTCOMES FOR PATIENTS

CMA provisionally finds hearing implants merger could substantially reduce competition, potentially leading to worse outcomes for patients and higher costs for the NHS

The Competition and Markets Authority (CMA) has provisionally found a merger between two of the biggest players in the UK's hearing implant sector could lead to worse outcomes for the patients who rely on these life-changing hearing implants and higher prices for the NHS.

The proposed merger of Cochlear Limited (Cochlear) and Oticon Medical, the hearing implants division of Demant A/S (Demant), was referred for an in-depth Phase 2 investigation, led by an independent inquiry group, in December 2022. Following this, the CMA's provisional view is that the merger would likely lead to a substantial reduction in competition for certain hearing loss products - specifically bone conductive solution (BCS) products, which are implants that bypass the damaged parts of the ear, converting sounds into vibrations that are sent directly to the inner ear.      

Competition between firms supplying BCS products is critical in driving innovation and Cochlear and Oticon Medical are the only two suppliers of 'Passive' BCS products in the UK. The proposed merger would leave just a single supplier of these products. Cochlear is by far the largest of only two existing suppliers of a newer type of 'Active' BCS implant in the UK. Oticon Medical has a rival Active BCS product in development. Together, the merged businesses would dominate the supply of BCS products in the UK, with a share well above 90 per cent.

This could lead to patients who need hearing implants losing out, with less choice, reduced quality, or less innovation, as well as the NHS, the main buyer of BCS products in the UK, in due course, potentially paying higher prices. The CMA also looked at the impact on the supply of other hearing implants (Cochlear Implants) at an earlier phase of investigation but found no competition concerns in that sector.

Today's provisional findings followed the consideration of a wide range of evidence, including concerns raised by clinics, who prescribe these products to patients, and other market participants. During the next stage of its investigation, the CMA will consider potential remedies for its concerns, including whether halting Cochlear's purchase of Oticon Medical or preventing the sale of the BCS part of that business is likely to be an effective way to address the competition issues.

Chair of the CMA's independent inquiry group, Kip Meek said:

"We're concerned that this deal could seriously reduce competition with patients having fewer suppliers to choose from, potentially losing out from less innovation and lower product quality going forward, as well as in the long term potentially costing the NHS and taxpayers more money.

"Any remedies offered by the parties that could effectively address our competition concerns and any other adverse effects of the proposed deal will be considered."

Any submissions to the CMA on practicable remedies to address the provisionally identified substantial lessening of competition (SLC) need to be received by 4 May. Views on our provisional findings are also welcome and must be received by 11 May. All responses will be considered ahead of the CMA issuing its final report, which is due by 5 June 2023.

For more information, visit the Cochlear/Oticon Medical merger inquiry page.

Notes to Editors:

1.         All media enquiries should be directed to the CMA press office by email on [email protected], or by phone on 020 3738 6460.

2.         Cochlear (Cochlear Limited) manufactures and supplies hearing devices used by healthcare professionals to treat a range of types of hearing loss, with a particular focus on cochlear implants (CI) and BCS (together, hearing implants).

3.         Demant (Demant A/S) develops, manufactures, and supplies hearing implants (both CI and BCS) through Oticon Medical. Demant also supplies hearing aids, operates clinics providing hearing care solutions, and supplies hearing diagnostic products and audio solutions for enterprise, gaming, and air traffic control.

4.        BCS products are used in the treatment of conductive, mixed, and single-sided hearing loss. They bypass damaged parts of the ear by using a sound processor that converts sounds into vibrations that are sent directly to the inner ear. There are two types of BCS products: Passive and Active. They differ in the way they connect the transducer (that translates sounds into vibrations transmitted through the bone) to the sound processor.