Defining the issue: What is the dental gray market?
By Patterson Dental
What is the gray market?
A gray market, also known as a parallel market, is an unauthorized and insecure distribution channel through which products and materials are sold. Unlike black markets, which are used to distribute stolen, defective, or counterfeit products, and which are illegal by definition, gray markets exist under a less-defined jurisdiction.
Gray markets can be used to distribute legal and legitimate products that have been recalled or expired. But gray markets may also distribute goods that have been diverted from countries in which they are approved for use into other countries in which they are not approved. In these instances, the products may not meet the industry standards or comply with government regulations in the countries where they are being sold, making them illegal.
Beyond the products themselves, gray market distribution channels may fall short of the standards and practices used by trusted, authorized sources. As a result, products that require precision and care in their distribution may be more likely to be mishandled during storage or transportation (e.g., temperature-sensitive products may not be kept within the required temperature range).
Gray markets frustrate ethical businesses, industries, and governments alike, but there's also an adverse impact on consumers. For example, some of the world's top camera manufacturers have issued notices about purchasing less-expensive gray market cameras. The companies warn consumers that gray market cameras cannot be registered and may not be compatible with local power outlets. They also warn that their warranties, technical support, and rebates do not apply to gray market products.
How does it affect the dental industry?
The $6-billion dental industry is not immune to the global gray market. Products that are not directly sourced from trusted manufacturers, or that are not fully controlled and safely handled by authorized distributors throughout the supply chain, are making their way into dental offices and patients' mouths. These products may be expired, recalled, or noncompliant with industry and government standards. They may also present patient safety and dentist liability risks.
Much work remains to address the gray market's threat to the dental industry. Combining efforts across the supply-and-demand chain-which includes manufacturers, distributors, and dental product purchasers-will help ensure that only approved products, produced by trusted manufacturers and supplied by authorized distributors, are used in patient care.
Patterson Dental is working hard to ensure the integrity of its supply chain. To increase awareness of this problem, Patterson has launched an educational campaign for oral health professionals. Go to www.dentalsupplyintegrity.com to learn more about the issues surrounding gray market dental supplies through a variety of informative resources.
What is the Dental Supply Integrity campaign?
An interview with Tim Rogan, vice president of marketing, merchandise for Patterson Dental
What is the Dental Supply Integrity initiative?
The Dental Supply Integrity initiative is an educational campaign aimed at protecting dental customers and their patients from products purchased through unauthorized channels, or the gray market. These gray market channels exist and operate under a much less-defined jurisdiction and can be used to distribute goods that can potentially pose hazards to patients. Our Dental Supply Integrity initiative is intended to raise awareness around this issue by providing resources for dental professionals to help identify these products.
What motivated Patterson Dental to launch the initiative?
Gray market products affect our entire industry, and we believe problems will continue to arise if not addressed. Education is the first step because dentists are often unaware that a problem even exists. The Internet and online purchasing have provided even more opportunities for gray market products to enter the marketplace, making it more important now than ever to raise awareness.
How is Patterson Dental in a unique position to combat gray market products?
This situation can affect our customers' reputations, as well as their patients' safety. We see it as part of our commitment to our customers to help ensure the dental supply chain's integrity and to provide tools and information that customers can use to avoid purchasing potentially unsafe or defective gray market products.
What does Patterson Dental hope to accomplish through the Dental Supply Integrity initiative?
We want dental professionals to be aware that the gray market exists and to know the red flags to look out for. While it can be difficult to differentiate gray market products from legitimate ones, there are a number of indicators to watch out for during the purchasing process, such as an unusually low cost, the expiration date, altered packaging, and the identity of the seller. Our hope is that the initiative will help reduce the amount of gray market products that are making their way into dental offices and ultimately into the mouths of patients.
Tim Rogan was promoted to vice president of marketing, merchandise for Patterson Dental in 2010 after holding the north-central region manager position. His career with Patterson began in 1993 when he worked as a territory representative in the Boston branch; he then advanced to roles that included equipment specialist, Maine branch manager, and metro New York/New Jersey branch manager.
Securing supply chains to thwart the gray market
BY Simon Hearne
The World Health Organization has estimated that more than 8% of the global drug market was counterfeit in 2010 and that this figure likely increaseD to 50% in 2014.
While this statistic relates to much more than dental products, it should confirm for those of us in the dental industry the importance of protecting the integrity of our products and supply chains.
The issue is one that is gaining attention, as evidenced by a panel discussion recently hosted by the Dental Trade Alliance, "The Dilemma and Impact of Gray Market Product Sales." I was a part of this panel, along with representatives from the American Dental Association and the Dental Industry Association of Canada. The discussion illuminated some important common themes for manufacturers and their distribution partners.
How big is the problem?
As factors such as price variances, currency fluctuations, and Internet shopping converge, the gray market is becoming a greater threat to our industry. To consider just one example, the UK's Medicines and Healthcare Regulatory Agency seized more than 12,000 pieces of illegal dental equipment in a six-month period last year. A variety of goods can be classified as gray market. What they have in common is that they are sold through unsecured supply chains, and due to this fact, they put patient safety at risk. When customers buy gray market products, they have no guarantee that the products have been shipped or stored correctly or that the labels have not been falsified to conceal expiration dates or other important safety data.
How do products move out of a secure supply chain? The FDA has cited an example of a supplier purchasing products intended for a foreign market, then importing and selling them in the United States. In addition to the risks posed by improper handling and storage, the formulation or labeling of these products may not comply with US laws. Any of these factors can compromise product efficacy and patient safety. The currency fluctuations mentioned above can motivate this practice, as it only takes a 20% to 25% price variance between countries to attract players into the gray market. The currency crashes we have seen of late, which can be in the 30% to 40% range, create very attractive incentives for gray market dealers.
How do we fight it?
Conquering this problem will take the collaboration of manufacturers, distributors, and dentists. One program that can serve as an example of an effective approach is that of Patterson Dental, which formalized a policy of supply chain integrity earlier this year. Patterson's program is designed to ensure that the products it sells are sourced directly from manufacturers-and not the gray market. The company cited both patient safety and its customers' reputations as motivations for its program. It will take similar efforts from other distributors, as well as careful monitoring by manufacturers, to continue to thwart the gray market.
At 3M ESPE Dental, our global operations require that we become intimately familiar with every market that we sell products into. We monitor for red flags, such as a sudden increase or decrease in volume from accounts that previously ordered products at a more regular pace. We also use centralized price management and careful oversight of price deviations in order not to attract gray market activity through our own international pricing strategies. With new technologies that allow us to better track and authenticate products, we can identify diversion and stop it more quickly. Finally, we make it a priority to educate our customers, as well as our authorized distributors and their employees, about the danger the gray market poses to all of us.
The discussions I have had with dentists and distributors about this issue have underscored the high priority that all of us place on patient safety. By keeping patient safety foremost in our minds and by working together to put a stop to product diversion, we can all play a part in fighting the gray market.
Simon Hearne earned an honors degree in biochemistry and molecular biology from Leeds University. He gave up his doctoral studies in molecular biology to embark on his corporate career, taking on a number of roles within the pharmaceutical industry in London, Germany, and Australia. In 2010, he relocated to Saint Paul, Minnesota, where he lives with his wife and four children, to take on the role of international vice president for 3M ESPE Dental.
The voice of the dental trade
An interview with Gary Price, president and CEO of the Dental Trade Alliance
1. Tell us about the Dental Trade Alliance's recent actions against the gray market. What motivated the Dental Trade Alliance (DTA) to host the panel discussion during the Chicago Midwinter Meeting?
The DTA's response to the gray market issue goes back to 2011 when we first established our Gray Market Task Force. The goal of this effort was to bring together our manufacturer and distributor members and foster a dialogue about what could be done to address gray market sales. Since that time, we have seen an increased number of our manufacturer members become more aggressive in addressing the problem of their products being sold outside of legitimate supply channels, with positive results.
However, we realize that the issue continues to exist in the marketplace, and so we felt it was timely and relevant to host the Future Trends Forum on the current state of the gray market to keep the issue "top-of-mind" with not only the dental industry, but also the dental profession.
2. How is the DTA in a unique position to combat gray and black market products?
As the DTA membership is comprised of both distributors and manufacturers, we are in the unique position of being able to provide a forum for our members to discuss and share their learning on the best ways to address gray market product sales.
As the voice of the dental trade, we also have the unique opportunity to partner with professional dental associations to educate their members about what constitutes "gray market" goods and the risks that they may pose to both them and their patients. There is a distinction in selling and buying black market and counterfeit products. These have criminal law implications.
3. Talk about the DTA's strategy for confronting the gray market problem.
The key to the DTA's strategy for confronting the gray market problem is education. Our educational strategy involves:
• Creating an open forum for our members to discuss and share best practices on successful ways to address gray market activities;
• Working with the ADA and other professional dental associations to educate their members about the potential risks of buying and using products from outside of legitimate supply channels and about how to better identify and differentiate between compliant and non-compliant products that are offered to them; and
• Partnering with dental professional and dental trade publications, such as Apex360, to get the message out about gray market product sales, the risks they may pose to the dental professionals, and the risks they may pose to patients.
Gary Price is the president and CEO of the Dental Trade Alliance, an association representing dental manufacturers, distributors, and laboratories; he has held the position since 2000. He is secretary of the Dental Trade Alliance Foundation that supports projects and programs to increase access to dental care. As an active liaison with many professional societies in the dental community, his most recent accomplishment is being the architect of a major public awareness campaign on oral health, which is sponsored by many professional associations and managed by the Advertising Council.
We asked two experts from the dental laboratory industry to answer the same question about the gray market.
BENNETT NAPIER, CAE, chief staff executive of the National Association of Dental Labs
STEVEN PIGLIACELLI, CDT, MDT, vice president and director of education at Marotta Dental Studio Inc.
In your professional opinion, what will be the most important measure in combatting the gray market as it affects and/or involves the dental laboratory industry?
BENNETT NAPIER, CAE:
A core public policy objective of the National Association of Dental Laboratories (NADL) is patient-contact material disclosure. The association has been successful in collaborating with the American Dental Association as well as other allied dental groups on this important issue. Currently, only nine state dental practice acts require dental laboratories to disclose the materials used in each restoration to the dentist. Both misbranded materials and gray market materials are, unfortunately, present throughout the dental supply chain.
By one definition, gray market materials are products that a dental manufacturer has sold abroad that are later reimported into the United States without the manufacturer's permission. Gray market goods are usually sold by unauthorized wholesalers. In some cases, these products may not have gone through US FDA registration for use in the domestic market.
The issue of gray market and/or misbranded materials can create both operational issues, such as loss of chair time, potential litigation for the dentist and the dental laboratory, and impact on reputation, as well as patient concerns, such as allergic reactions when an inappropriate or misbranded material is used.
One recent report involves a dental laboratory that had been misbranding its restorations and not providing the materials as requested in the prescription. In this case, high noble crowns had been prescribed for four separate dentists' practices for more than five years.
The dentists involved had found the work to be of high quality, and the dentists and their patients had been satisfied. Then a porcelain cusp fractured. It took four burs and two handpieces to section and remove the crown. This raised suspicion about whether the material was actually high noble alloy as prescribed. This suspicion prompted one of the practice's dentists to send the crown for spectrometer analysis.
The report came back showing a base metal composition with almost no precious metal content. The dentist contacted the other three dentists who were receiving crowns from the same lab. They sent additional cases for analysis, and the results came back the same. As you can imagine, the misbranding and lack of material disclosure in these cases created very difficult situations for the dentists and their patients.
Although nine states require material disclosure, currently, only six states require dental laboratories to register with their state dental boards. When dental laboratories are required to register with the state board, any bad actors would be at risk to lose their registrations, as well as the ability to do dental laboratory work for any dentist in the entire state.
Material disclosure and registration with the state board can result in increased accountability and compliance, helping to ensure that dentists receive the information they need to continue providing the highest standard of care and safety for their patients. ADA policy urges dental state boards to require dental laboratory registration.
Dentistry is largely regulated through state dental practice acts, and enforcement is more efficient if the right regulatory standards are in place. That factor is one of the key arguments that the NADL and the ADA have agreed upon to improve outcomes for dental patients.
In the meantime, since most states don't set minimum regulatory standards for dental laboratories; reliance is on federal regulations. The Lanham Act is a federal regulation that exists to help combat gray market products. Some ways to identify gray goods are: a price that is significantly different from the general market, instructions that are not provided in English, and/or a seller who says that FDA registration information is not available.
Dentists are encouraged to work with their dental laboratory partners to determine whether they employ certified dental technicians, whether they are certified dental laboratories, and/or whether they are DAMAS-certified dental laboratories. The NADL has worked to platform some of these issues at www.whatsinyourmouth.us.
STEVEN PIGLIACELLI, CDT, MDT:
A key to my lab's success has been maintaining a good relationship with my clients based on mutual respect. In a good relationship, we both have the ability to accept each other's faults and errors. While low-cost and low-quality labs have been in existence for as many years as I have been in the industry, I have never feared them or competed with them. They have always had their place. Gray market materials, machinery, and offshore discount work have not been a threat to my business. That's because a true professional relationship, quality work, and communication are rarely associated with discounted work. When price is the sole motive for a product or service, all else is usually thrown out the window.
Quite often, however, the relationship is adversarial between the lab and dentist. When things go wrong, they blame each other. There is always another lab out there that can match the price. There is always another dentist who wants the lab's cheap work. Having a good relationship and being able to communicate a problem to each other in a civil manner is therefore vital to a solid working relationship. Delivering quality work at any price may seem desirable. But being able to tell a dentist that the impression is inaccurate or the bite is wrong without fear of repercussions is as important as being able to hear that your work is unsatisfactory for the patient. Being sensitive and defensive is not a great way to work with anyone.
Using ADA-certified materials is another crucial component to maintaining a trusted relationship. Many labs have been sending work offshore, as well as buying less expensive materials from places such as China. In the last five years, products from Sheetrock, to dog food, to children's toys, to food have been found to contain lead, as well as other carcinogenic materials. It is not worth the risk to use inferior and possibly dangerous supplies, just to save a few dollars. Once the doctor finds out that inferior products have been used, the trust is gone and so is the relationship.
Just as in a good marriage, both parties need to work at building a strong relationship. Being overly sensitive, copping an attitude, being defensive, being offensive, resenting the account, hating the account, or hating your job does nothing to make work or life easier. The keys are communication, mutual respect, and a positive attitude.
The National Association of Dental Laboratories represents the interests of commercial dental laboratories. Through its affiliate, the National Board for Certification in Dental Laboratory Technology, it administers voluntary certification standards for dental technicians and dental laboratory facilities.
Bennett Napier is a certified association executive (CAE) who serves as chief staff executive for the National Association of Dental Laboratories and its affiliates, the National Board for Certification in Dental Laboratory Technology and the Foundation for Dental Laboratory Technology. He has worked with nonprofit associations in the dental field for over 18 years. He attended the Graduate School of Public Policy at the Georgia Institute of Technology and holds a master of science degree from Florida State University.
Steven Pigliacelli, CDT, MDT, is a faculty instructor in postgraduate prosthodontics at New York University. He manages Marotta Dental Studio and directs the GPR and Prosthetic Resident Rotation there, an intensive educational program that focuses on the value of the technician-dentist relationship. He has published in dental journals, and he lectures and performs hands-on demonstrations at study clubs and seminars.