Shades of Gray

The specter of gray market products is only overshadowed by counterfeit or black market goods. Mentor examines the legal, business and clinical implications of suspect dental devices and materials

By Mary Otto

Steadily, quietly, they flow through the marketplace that serves the many thousands of small-town dental offices, big-city clinics and dental laboratories across America.

Their packaging and appearance may make them nearly indistinguishable from other products and devices.

Yet they are different.

They may have entered the supply chain through a back channel. They may have been stolen from their rightful owners. They may even be skillfully produced fakes. Some are what their labels say they are. Others are not. Some are legal. Some are not. Sometimes, it can be hard to be sure.

Welcome to the world of gray and black market dental products. It's a world where there are more questions than answers. It's a troubling place from a clinical, business and legal perspective, and the full impact of these goods on the U.S. dental market is difficult, perhaps impossible, to calculate.

The appeal of these products often lies in their prices, which can be substantially lower than those available through supply chains established by name-brand manufacturers and offered by recognized distributors. But experts say the potential hazards they pose — to everyone from reputable manufacturers and sales representatives to oral health care providers and patients — lie in what is unknown about them.

 

SYSTEMATIC IDENTIFICATION

 

 

 

On Sept 20, the U.S. Food and Drug Administration (FDA) formally unveiled a new medical device tracking system that may, in time, help curb the flow of illegal gray and black market dental products while improving accountability for legitimate ones. Aimed at providing a consistent way to identify and trace medical and dental devices, the Unique Device Identification (UDI) system will require products distributed in the United States to carry a UDI. This is a unique numeric or alphanumeric code that identifies the version or model of the device, as well as specific production information, such as lot, batch number, expiration date and manufacturing date. The codes will be linked to the publically searchable Global Unique Device Identification Database, which will be administered by the FDA.

The system is reportedly intended to provide a foundation for a global, secure distribution chain, helping to address counterfeiting and diversion. In addition, administration officials hope the system will enhance the ability to report adverse events and quickly identify recalled devices, as well as reduce medical errors by enabling health care providers to precisely identify devices and obtain important information concerning device characteristics.

Dental Trade Alliance President and CEO Gary Price says he is hopeful that the system may address some of the industry's concerns about gray and black market dental products. "The FDA's new requirement that medical devices have UDIs may eventually have an impact, as manufacturers may be better able to track their products in the channel," notes Price. He acknowledges, however, that it will take a while to get dental products integrated into the system. Within a year, most high-risk (Class III) devices will be required to carry a UDI on their labels and packaging. The coding requirement will go into effect in three years for most moderate-risk (Class II) devices. But, says Price, "For most dental devices, the requirement for a UDI will not take effect until 2018." This is because manufacturers of Class I devices that have not been exempted from the requirement will have five years to comply.

 

POINTS OF DIFFERENTIATION

But what are gray market dental products anyway? And how do they differ from black market goods and counterfeits?

"Gray market products are legal products that are distributed in a manner unintended or unauthorized by the manufacturer," notes Gary Price, president and CEO of the Dental Trade Alliance, the chief trade organization representing distributors, manufacturers and laboratories that provide dental equipment, supplies and materials throughout the U.S., Canada and Mexico. "Black market goods are generally products that are stolen and then sold. There are also counterfeit items," he adds, "and any products in these last two categories are, obviously, illegal."

Although black market and counterfeit goods clearly breach the law, when it comes to the legality of gray market products, federal authorities stress there are actually shades of gray.

"The term 'gray market' refers to a number of situations," explains Synim Rivers, MPH, CHES, from the U.S. Food and Drug Administration's (FDA) Office of Media Affairs. The FDA, of course, is the agency that regulates a wide range of dental products, from fluoridated toothpaste to state-of-the-art imaging devices. It also exercises authority over the design, manufacturing, packaging and importation of such products.

Typically, gray market products have been sold outside a company's established distribution chain for the country they are intended for. In many cases, a supplier buys products intended for a foreign market and then imports them for sale in the U.S. The products are offered more cheaply because they were originally priced for sale in a different market, often in a developing country or a place where the manufacturer was attempting to establish a market — both situations that might result in highly competitive pricing structures.

QUESTIONS OF LEGALITY

If a gray market product is identical to the one the company is legally marketing in this country, Rivers notes that its sale in the U.S. may be legal, at least from the FDA's perspective. But if the product varies from its counterparts that are intended for domestic consumption, its legality may be questionable. "If the original manufacturer did not intend the product for sale on the U.S. market, it may not comply with U.S. laws and regulations," she explains. "And the two versions — domestic and foreign — may be different, even if they have the same name."

Those differences may turn out to be significant. And while one product has undergone regulatory processes designed to ensure the safety and effectiveness of medical products sold in this country, the other may not. "If this is the case," she says," the foreign market device is an unapproved device in the U.S. and its sale here would be illegal."

In cases where medical and dental devices have been found to lack regulatory approval or clearance, the FDA has taken action against manufacturers and sellers, Rivers reports. Such products may lack essential labeling information, or may not include labeling in English. Or the products may have been mishandled in a way that could affect their safety or effectiveness. For example, she says that key ingredients in heat-sensitive products could be inactivated by improper storage. And there is another major concern.

DUBIOUS PATHS

HOW TO SPOT TROUBLE

Provo, Utah-based educator, researcher and clinician Gordon J. Christensen DDS, MSD, PhD, is founder and director of Practical Clinical Courses and CEO of the Clinicians Report newsletters. Having studied and written about gray and black market dental products, he offers helpful tips for sales representatives, care providers and others negotiating this shadowy world. Based on this research and a June 2010 article he wrote for the Journal of the American Dental Association, Christensen advises researching sellers, especially when purchasing products online. And as a general rule, he advocates using authorized distributors with recognizable names. He also notes that prospective buyers should expect to pay a fair price. After all, as the old adage suggests, "If it looks too good to be true, it probably is."Additional signs that products may have been routed through improper channels include suspicious or altered packaging, expired goods, or foreign labeling that indicates the product was not intended for sale in this country.

"Products available on the gray market may be defective goods that have been diverted from planned destruction, or products that may have been recalled," Rivers notes. "Additionally, if a product has left the company's established distribution chain, it can be difficult or impossible for the company to notify customers if safety issues arise, such as a recall."

Many of these same health and safety factors worry dental manufacturers and distributors, because no one wants to see reputations tarnished by defective products. Manufacturers, distributors and sales reps who handle such products risk losing the good faith of their customers.

"The issue of the gray market in the dental economy has been significant for many years," reports Price. "Manufacturers have concerns about gray marketing of their products because there is generally no way to determine the conditions under which the goods were obtained, stored or shipped. For many items and materials, unless ideal conditions are maintained, the quality of the product may be compromised."

Clearly, there is a lot at stake. While FDA officials say they are not aware of any reports of injuries or deaths related to gray or black market products, these materials and devices have the potential to cause damage to everyone involved, notes Gordon J. Christensen DDS, MSD, PhD, a Utah-based prosthodontist, researcher and dental educator who has written extensively about the gray and black markets. "It is impossible to predict the potential harm that can come from an out-of-date or improperly stored gray market product, but the risk is high," says Christensen. "Black market goods can be even more problematic, since there is no knowledge of what's in the products."

Yet the market is thriving.

"Manufacturers estimate that about 15% of the U.S. dental market is gray or black," reports Christensen, with low prices being their main appeal.

NEW CHANNELS, NEW TEMPTATIONS

Gray and black market products as well as counterfeits can regularly be found at trade shows. But their sales have skyrocketed thanks to the vast customer base and anonymity offered by the Internet, observes Mark Schonfeld, a partner at Burns & Levinson, a Boston law firm that specializes in intellectual property and science technology. "The Internet is the new street corner," says Schonfeld.

But some manufacturers are using patent and trademark laws to fight back against counterfeiters and black and gray marketeers. On behalf of manufacturers, Schonfeld regularly trawls the Internet for gray market medical devices that may violate trademark protections of name-brand goods. "If the products that are sold abroad are materially different from domestic goods, then they could be harmful to the manufacturer's reputation, because when the end user sees the trademark, he or she expects to get goods of a certain quality," he says.

To those who might suggest the manufacturers are more interested in controlling prices than protecting consumers, Schonfeld has a ready response. "Trademark law is designed to protect people's expectations," he says. "And the situation becomes more acute when you are talking about health and safety." If the instructions packaged with a device or product are in a foreign language, or the product itself differs in some other significant way, patients could be harmed, Schonfeld contends.

Still, in the shadows, the flow of such products and devices continues.

"Approximately 60% of my work is in counterfeit goods," reports Schonfeld, "with the remaining 40% in gray market. The interesting thing is the relationship between the two. The wholesalers who deal in counterfeit are often the same wholesalers who deal in gray market goods. They are always looking for a deal."

And in such scenarios, while a manufacturer's reputation may be at stake, unfortunately for the buyer who completes a transaction with these sellers, it's quite possibly a deal with the devil, payable in cash, health and safety.

MENTOR December 2013,4(12):27–28,31.

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