David Green is enabling developing countries to produce, distribute, and service high-quality, affordable health care products. Having already directed the successful production and distribution of two products–intraocular lenses and surgical sutures, David is now launching an effort to manufacture and distribute top-of-the-line, cost effective, cosmetically acceptable, and locally maintainable hearing aids.
The New Idea
Motivated by what he terms "compassionate capitalism," David plans to use profit and production capacity to bring hearing to hearing-impaired people in developing countries. There are numerous innovative aspects of David's idea. First, he will manufacture state-of-the-art hearing aids that normally sell for more than $1,000 and sell them for $40-$100, depending on the market. Second, he will develop a delivery model that results in a high degree of service and accessibility for patients. Hearing aids will be delivered within two hours in fixed urban distribution centers and via "ear camps" conducted separately from or in conjunction with "eye camps" in rural areas. Third, he is designing his project to be self-sustaining and to use market forces in a positive fashion. David plans to utilize "global cross-subsidization," whereby the higher income from sales in wealthier countries will subsidize the price for hearing aids in poorer countries. He will also implement multi-tiered pricing within a given country market to take advantage of regional variations in ability to pay. To prevent hearing aids from being passed from a lower price market to a higher price market, he will create devices with software that can function only in certain regions and under particular conditions.
A serial entrepreneur, David has already successfully launched similar systems for the production and distribution of intraocular lenses and surgical sutures. His long-term vision is to spread his proven and self-sustaining model of compassionate capitalism to other global healthcare challenges, such as AIDS treatment.
The World Health Organization estimates that at least 120 million people in the world have a disabling degree of hearing impairment. Other experts reckon that 7 percent of the world's population–over 400 million people–have hearing loss. In developing countries, at least half of all hearing impairment could be prevented or reversed through improved availability of appropriate hearing aids. However, the cost of hearing aids is prohibitively high for the great majority of the hearing impaired who are poor.
Even though the greatest burden of disabling hearing impairment is found in developing countries, the coverage in this group is much less than in the developed countries of Europe and North America. There are presently 5.4 million hearing aids sold each year worldwide and only a very small percentage is sold to the global south where more than 70 percent of the global population lives. The annual need for hearing aids is estimated to be approximately fifty to seventy million units per year.
In developing countries, three primary problems stand in the way of getting hearing aids to those who need them. First, the price is too high for most potential users. Hearing aid companies are oriented towards developed country markets where they realize up to 1000 percent profit margin. Second, the low-priced product specifications available in developing countries have resulted in poor quality hearing aids and low client satisfaction. Third, there are no service delivery models for hearing aids in developing countries that are cost-effective and financially self-sustaining.
Lack of access to hearing aids reflects the more general difficulties plaguing the distribution of high-quality medical technologies to developing countries where a large percentage of the population is poor and does not have health insurance. Government infrastructure is often inadequate to provide high-quality, high-volume health care. Increasingly, international and local organizations, dependent on donations for operating costs, are finding it difficult to obtain financing to maintain operations or expand service delivery. Skeptical of market-based approaches, these organizations tend to focus on prevention rather than on cures.
David's strategy for providing and distributing affordable hearing aids is similar to his previous work in developing models for producing and delivering intraocular lenses and sutures: develop targets for price and accessibility, research the feasibility of achieving these targets, secure the assistance of experts in the field, and then launch operations. Showing a masterful ability to engage others, David has drawn on several talented experts to assist his current efforts. Consultants and advisors include Sunil Chojar, former head of Research and Development at Siemans, the largest hearing aid company in the world, and Erik Brodersen, an audiologist from Denmark with extensive experience in dispensing hearing aids in developing countries.
After exploring options to work with a pre-existing hearing aid company, David determined that it would be desirable to purchase the hearing aid components and manufacture the finished product independently, thereby controlling the technology, production, and pricing. After conducting an initial feasibility study, David has determined that it will be possible to produce a digitally programmable analog hearing aid for roughly $40, including the costs of components, labor, and overhead.
David clearly recognizes that for the project to succeed, he will need to do more than manufacture an affordable hearing aid; he will also need to set up an effective distribution and customer support system.
He plans to design this system along lines similar to successful models in eye care delivery where a fixed base is established in a location with a high population density (in order to support volumes necessary for achieving financial sustainability). From this stationary site, outreach will be conducted via "hearing camps" to reach and deliver hearing aids to populations living in rural areas or poor neighborhoods in large urban areas. David will provide each distribution site with equipment, start-up inventory and operating expenses for a defined period of time, assistance in developing accounting procedures, business planning and management expertise, and assistance in developing a multi-tiered pricing system that makes hearing aids affordable to all economic strata. Standardized policies, procedures, and job descriptions will be developed and applied at each distribution site.
David will develop a service delivery model and clinical protocol that covers the following: reception, registration, testing of hearing, clinical assessment, standards about when to refer and to whom (for more serious pathologies), selection of correct hearing device according to the needs of the patient, mold making and fitting, programming of the hearing aids, patient education, counseling, and follow-up. David will emphasize the quality of the client experience as he endeavors to design a model that makes possible the dispensing of hearing aids within a two-hour time period. Staff will be trained to have a strong customer service mindset. The model will allow for both appointments and walk-ins. All products will be covered by a warranty. Defective or damaged hearing aids will be replaced immediately with a new hearing aid so that there is no waiting for repairs. David plans to train Hearing Aid Technicians to work at each site.
David's model emphasizes sustainability through profitability. Although he will raise approximately $1 million in start-up costs to design the hearing aid, develop a manufacturing process, establish the business model, training courses, and service delivery, establish two manufacturing sites and five service delivery sites, and secure initial inventory for ten thousand hearing aids, he intends for the project to be financially sustainable at the local level. As he notes, treatment of hearing impairment, like eye care, is perhaps one of the few public health interventions that can be self-financing from user fees, yet still oriented to serving the poor. Many are in need, providing the possibility for a high-volume service delivery model which is necessary to lower per unit production and service costs; the model is procedure-oriented, device-centered (they buy an object) and curative (people are willing to pay for cure but not prevention); the costs are known upfront and do not vary from one client to the next; and costs can be lowered to approximately the average monthly family income (which has been found to be affordable for sight-restoring cataract surgery).
Expanding this model to have a global reach, David came up with the concept of "global cross-subsidization," that uses multi-tiered pricing not just within regional markets, but globally. A protective firewall to prevent the products from being passed from a lower price market to a higher price market will be achieved by creating hearing aids that can be programmed only with specific versions of software.
Working closely with the Impact Foundation (which seeks to prevent and cure avoidable disability), David intends to develop a "distributed risk and reward model," whereby Impact and its partners support product development and establishment of manufacturing, but each manufacturing site owns its own assets. The manufacturing sites would have the rights to sell products via nonprofit and commercial distribution channels in their respective geographic market areas. This model, then, allows sharing of both risk and reward among all involved by creating legal ownership of assets within countries and offering the possibility for each partner to benefit from their efforts in a meaningful way.
David plans to focus his efforts exclusively on this hearing aid project for the next two to three years. Thereafter, he will establish similar technology transfers in other health care areas. He has already established a nonprofit organization that will focus on spreading the gospel of compassionate capitalism.
After earning both bachelor's and master's degrees in public health, David went to work for the SEVA Foundation, an institution that has played a leading role in initiating efforts to reduce avoidable blindness around the world. With SEVA, he developed blindness prevention programs recognized for their excellence in service delivery, quality of surgery, financial self-sufficiency, and capacity to reach the disadvantaged.
He began to hone his idea of compassionate capitalism while working with a partner organization, the Aravind Eye Hospital in Madurai, India. In the early 1990s, Aravind had been attempting to negotiate with western manufacturers to obtain intraocular lenses, which greatly improved post-cataract surgery vision over the use of glasses. They were unsuccessful. David suggested to Aravind and SEVA staff that they establish a manufacturing facility to produce these lenses themselves. Despite stiff resistance from skeptics who did not believe that an Indian civil society organization would be able to produce such a sophisticated product, David convinced the hospital and SEVA to allow him to try. He raised the necessary funding, cultivated technology partners to help him design a manufacturing process that did not infringe on patents, and developed a sustainable business plan. In 1992, Aurolab began production and is now one of the largest manufacturers of intraocular lenses in the world, with sales in eighty-six countries. The average selling price of Aurolab's lenses is currently $8 compared to $150 in the U.S. Aurolab lenses have CE Mark Certification, and have thus fulfilled the regulatory requirements of the European Union countries.
In 1996, recognizing that another limiting factor for health care was the availability of sterile surgical sutures (only 10 percent of wound closure products went to developing countries,) David directed the necessary technology transfer and established a manufacturing facility at Aurolab to produce ophthalmic suture products. The facility is currently at full production capacity and production has been expanded to produce suture products for all medical specialties. Aurolab has reduced the selling price from $200 per box of a dozen to $40.
In 1997, David conceptualized and led the development of SutraTec, a for-profit subsidiary of SEVA. SutraTec's dual mission is to provide Aurolab-produced sutures at prices that are affordable in developing countries and to sell suture products commercially whereby 100 percent of the profit reverts to SEVA for its development work. SutraTec's products are cleared for marketing by the United States Food and Drug Administration and have European CE Mark Certification.
In early 2000, David turned his attention to hearing aids, another product ripe for compassionate capitalism.