To get a feel for what’s at stake in the U.S. trade debate, run your tongue over your molars.
Implants, crowns and bridges made in places like China and Mexico compose as much as 40 percent of the $8.5 billion U.S. market for dental restorations. They sell for a fraction of U.S. prices and boost profits for group practices and the private-equity backed networks that now employ about 18 percent of American dentists. The voracious market for discount choppers, along with industry consolidation and technology advancements, has contributed during the past decade to the closing of about half of U.S. dental labs.
“Every time I had to tell someone, ‘I can’t afford to have you around any longer,’ it’s difficult,” said Doug Kilborn, whose Jackson, Michigan, lab once saw a steady stream of 75 orders a week and kept seven employees busy.
Kilborn can’t even afford himself anymore; last year he began working part-time at a hardware store. His single worker, who handles about 20 weekly orders, will soon buy the lab.
“That’s the face of American manufacturing nowadays,” Kilborn said.
President Donald Trump has threatened to erect barriers against foreign goods, disrupting an intricate economic network and creating winners and losers from Topeka to Tijuana. Politicians talk of trade in terms of cars, steel and technology. But the intimate question of whether Americans will chew with U.S.-made teeth instead of low-cost foreign ones is just one little-considered consequence of measures that could touch every corner of the nation’s $17 trillion economy.
Restorations, classified as medical devices by the U.S. Food and Drug Administration, have been manufactured overseas for decades along with prosthetic hips, plastic heart valves and defibrillators. Overall, imports account for 30 percent of the U.S. medical-device market, and reached nearly $44 billion in 2016, according to BMI Research, a division of the Fitch Group.
Countries like Vietnam, Mexico and the Philippines all have a piece of the U.S. restoration market, according to research firm iData Research, offering cheap labor and benefiting from advancements in technology.
The demand for foreign teeth has been driven, in part, by consolidation. About 40 percent of dentists now work in group practices or so-called dental support organizations. Private-equity companies invest in the organizations, purchasing practices and centralizing back-office duties like payroll and marketing. They often pay bonuses to dentists that give them incentives to buy cheaper restorations — and their size earns them influence in negotiating prices.
Aspen Dental Management Inc., which has about 600 offices, is controlled by New York-based private-equity firm American Securities. In 2015, Gryphon Investors in San Fransisco formed Smile Brands Group Inc., now with 350 offices, with two longtime dental executives. At least 25 private-equity firms significantly invested in dental organizations in the decade ending in 2015, according to the McGuireWoods law firm. The private equity firms declined to comment.
Investors like the businesses because they’re low risk and recoup acquisition prices quickly, said Kevin Cain, an assistant management professor at Augusta University in Georgia.
“Private equity is what’s fueling the industry right now,” he said. “They have scale.”
Plants in places like China, the leading exporter of dental restorations to the U.S., may operate 24 hours a day, employ hundreds of workers and churn out thousands of fake teeth daily. Meanwhile U.S labs dwindle, along with the technicians they employ. In 2008, there were about 12,250; today there are about 7,200.
Many began in garages or basements, sometimes with a single technician cobbling together fake teeth from porcelain, zirconia or polyurethane. Now, crowns that cost hundreds in the U.S. can be bought overseas for about $25. The workmanship is as good or better, according to companies, dentists and consultants.