The US Federal Trade Commission (FTC) filed a complaint against the nation’s three largest dental suppliers—Benco, Henry Schein, and Patterson—on February 12.1 The FTC alleges that these companies violated US antitrust laws by refusing to provide discounts to buying groups represented by individual dentists. These three companies control 85% of dental product sales and services nationally. The dental practices that ideally might have benefited comprised solo and small group practices.
The complaint alleges the “big three” entered into an agreement refusing to provide discounts to buying groups representing smaller dental practices. Additionally, the complaint alleges a further violation by Benco in its attempt to enjoin Burkhart Dental Supply, the nation’s fourth largest dental supplier, into the conspiracy. This separate “invitation to collude” represents an added complaint against Benco.
The FTC contends that Benco, Henry Schein, and Patterson unreasonably restrained price competition, distorted prices, and undermined the ability of independent dentists to obtain lower prices and discounts for dental supplies. The competitive bidding process was allegedly eliminated or reduced for these buying groups. The administrative trial is scheduled to begin on October 16, 2018.
Henry Schein responded, “The Company believes that the allegations as described in the (FTC’s) press release are meritless and intends to defend itself vigorously. The Company does not anticipate that this matter will have a material adverse effect on our financial condition or results of operations.”2
Uneven Playing Field
Larger sized corporate dentistry enjoys the benefit of a superior economy of scale versus smaller, independent dental practices. A prominent aspect is large scale purchasing power for dental supplies. Relationships between dental suppliers and corporate dentistry abound.3-5
To counter this specific marketplace advantage, smaller practices have cooperatively entered into buying clubs. Some are sponsored by state dental societies and others by independent associations of dentist collectives.
“Dental service organizations have a competitive advantage by buying supplies in bulk. [The California Dental Association’s] new subsidiary, TDSC, has grouped the purchasing power of its member dentists to receive those same cost savings. This has reduced costs by 30% to 45% on most items general dentists order regularly. Ordering through the TDSC Marketplace has definitely helped my bottom line,”6 said Jonathan Ford, DMD, a dentist in California with a smaller group practice.
“The big supply companies will have to alter their model of business at some point. Amazon is out there and already has a small dental supply business. It is just a matter of time before they make a splash and really enter the dental supply arena via partnership or purchasing of a company,”6 Ford said.
References
- Federal Trade Commission. FTC Sues Products Distributors for Alleged Conspiracy Not to Provide Discounts to a Consumer Segment. Feb 12, 2018; https://www.ftc.gov/news-events/press-releases/2018/02/ftc-sues-dental-products-distributors-alleged-conspiracy-not
- Henry Schein, Inc. Henry Schein Denies FTC Anti-Trust Allegation. Feb 13, 2018; https://www.prnewswire.com/news-releases/henry-schein-denies-ftc-anti-trust-allegations-300597813.html
- Pacific Dental Services. Strategic Partners. 2017; http://www.pacificdentalservices.com/about/strategic-partners/
- Association of Dental Support Organizations. Current Members- Industry Partners. http://theadso.org/membership/current-members/
- Apex360 Editors. Heartland Dental Selects Patterson Dental as Distributor Partner. Oct 18, 2016; http://www.dentistryiq.com/articles/apex360/2016/10/heartland-dental-selects-patterson-dental-as-distribution-partner.html
- DeStafano AW. Midyear Report: The Top Dental Industry Trends of 2017 and Predictions from the Apex360 Editorial Advisory Board. Aug 29, 2017; http://www.dentistryiq.com/articles/apex360/2017/08/midyear-report-the-top-dental-industry-trends-of-2017-and-predictions-from-the-apex360-editorial-advisory-board.html
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Dr. Davis practices general dentistry in Santa Fe, NM. He assists as an expert witness in dental fraud and malpractice legal cases. He currently chairs the Sante Fe District Dental Society Peer-Review Committee and serves as a state dental association member to its house of delegates. He extensively writes and lectures on related matters. He may be reached at mwdavisdds@comcast.net or smilesofsantefe.com.
