Dental Equipment and Supplies

Industry Snapshot

Essential to the practice of dentistry, the dental equipment and supply industry represents a modestly sized market compared to the other medical supply and equipment industries. The industry was expected to continue its sustained growth, fueled by increasing costs of dental care, an aging U.S. population, a greater number of people covered by dental insurance, and technological advances in dental equipment, including advanced root canal procedure machines, less expensive oral cameras, and improvements in dental implants.

The 762 dental equipment and supply firms in this industry together produced $4.6 billion in 2008 revenue, a significant increase over $2.66 billion in 1997 revenue.

Organization and Structure

Dental professional equipment, which made up approximately 23 percent of the industry in the mid-2000s, includes dental chairs, dental hand instruments, and drills and lasers. Dental professional supplies, which made up approximately 41 percent of the industry, includes plaster, amalgams (alloyed metals used for filling cavities), impression materials, cements, and dental tools and tool parts such as abrasive points and diamond heads. Dental laboratory equipment and supplies account for approximately 22 percent of the industry's shipment values and include precious (gold, platinum, and silver) and non-precious dental metals; artificial teeth and dentures; and other dental appliances such as bridges, waxes, and crowns.

Dental equipment and dental supplies are regarded as separate markets, with some companies manufacturing only supplies; some manufacturing only equipment; and other, generally larger, companies with a diverse mix of medical products, manufacturing equipment, and supplies. These products are then sold to dentists, dental laboratories, and dental colleges.

The majority of manufacturers were small- and medium-sized companies, with only 4 percent of the total reporting 100 or more employees. However, the largest establishments accounted for more than 65 percent of shipment values. By the mid-2000s, large medical supply companies also included dental products in their portfolios, thus changing the market from exclusive type manufacturers (small- to medium-sized companies) to multi-manufacturers (large companies).

The bulk of the industry's manufacturing establishments were in California, which had approximately 170 facilities in the mid-2000s, leading all other states in dental equipment and supply production. New York was a distant second, with about 53 manufacturing establishments, and Illinois followed with 48 facilities. Aside from the concentration of facilities on the West Coast, in the Northeast, and in the Great Lakes region, dental equipment and supply production was scattered throughout the country, with manufacturers in 22 states.

Background and Development

Manufacturers of dental equipment and dental supplies first emerged as an appreciable component of U.S. industry in the 1890s, although the first manufacturers of such products undoubtedly originated much earlier, appearing during the genesis of the nation itself, when the practice of dentistry first began in the United States. In fact, the earliest progenitors of the dental equipment and supply industry were the dentists themselves, who made their own equipment in workshops adjoining their public offices. In the following decades, as the nation's population grew and the magnitude of the country's commerce increased, the production of dental equipment and supplies became distinct from the practice of dentistry, leading to the emergence of small, independent dental manufacturing companies by the latter half of the nineteenth century.

Once the manufacture of dental equipment and supplies became a distinct segment of the dental industry, characterized by small, frequently family-owned businesses, many of which appeared in the 1890s, the dental equipment and supply industry was truly born. During the next half century, the industry remained small, comprised of companies that generated a negligible amount of revenue. The modern version of the dental equipment and supply industry, which began to assume the characteristics of the industry in existence during the 1990s, would not emerge until the 1960s, when a combination of developments engendered a new breed of dental equipment and supply manufacturers.

By the 1960s, the scope of the dental equipment and supply industry widened considerably, and its market matured significantly, drawing the attention of would-be manufacturers and investors. The shift toward preventive dentistry altered the complexion of the dental equipment and supply industry, but it did not significantly change the composition of the industry. The approximately 500 small, independent manufacturers that comprised the industry continued to resemble the industry of 50 years earlier. Its sales volume still represented a modest sum, amounting to roughly $150 million per year as the movement toward preventive dentistry gained momentum. Nevertheless, it had not yet attracted large manufacturing concerns. Its largest manufacturer, S.S. White Dental Manufacturing Co., generated $40 million in sales in 1961. The optimism pervading the industry, therefore, was attributable to the expectation of future transformation rather than a dramatic transformation.

During the early 1960s, the average U.S. family spent twice as much annually on dental care as they had 10 years earlier as a natural extension of a society growing increasingly more affluent, while the number of prepaid dental plans multiplied during the same period, covering approximately 700,000 Americans. These prepaid plans, from either private insurance plans or union-employer agreements, grew exponentially during the decade and into the 1970s, fueling much of the optimism articulated by manufacturers and industry pundits during this 20-year period. Union-sponsored dental care plans proliferated after the landmark agreement reached between the International Longshoremen's & Warehousemen's Union and the Washington State Dental Association in 1954, when the first such program was initiated.

By the mid-1960s, thanks in large part to the growth of union dental care plans, the number of Americans provided with an opportunity for dental care increased to 3 million from the 700,000 covered roughly five years earlier. Also, Medicare, a U.S. government health insurance program for those over 65 years of age, and Medicaid, a program that provided medical care to those who could not pay for it, both came into existence in 1965, and promised to extend dental coverage throughout the country. By the end of the decade, the number of Americans covered by dental care plans doubled again in a five-year period and included more than 6 million people.

The increase in the number of potential dental care customers that sparked so much interest in the dental equipment and supply industry during the 1960s persuaded larger, conglomerate manufacturing companies with no previous vested interest in the dental field to begin dental equipment production. Many of the small independent manufacturing concerns were absorbed by the incursion of these larger companies, altering the composition of the industry. Meanwhile, those manufacturers already in the industry diversified, applying the same technology used in the production of dental equipment to the manufacture of non-dental products. Consequently, as this period of mergers and diversification occurred into the late 1960s, the typical manufacturer in the industry changed from a small independent company that was almost entirely devoted to the production of dental-related products, to a larger, more diversified manufacturer.

However, this transformation did not have an equally significant effect on the industry's sales volume. From the $150 million generated by U.S. manufacturers at the beginning of the decade, the industry's sales volume increased to only about $280 million by the beginning of the 1970s, a total that seemed to belie the industry's growth in other areas over the course of the decade. Dental equipment manufacturers supplied two revolutionary pieces of equipment during the dental industry's emergence as a more visible sector of the health care field: the air-driven, high-speed drill and the reclining dentist's chair.

By the mid-1970s approximately 30 million Americans were covered under some sort of dental care plan, which represented a tremendous increase during the previous 15 years. When this figure was analyzed to reflect the number of those who actually visited dentists, rather than the number who were provided the opportunity to visit a dentist, the reason for the industry's lagging growth in sales volume became readily apparent. Of all the people receiving dental care in the United States, only 15 percent were covered by dental insurance, compared to more than 90 percent for health care. Since a large proportion of the people covered by dental insurance opted not to receive dental care, the number of people insured in the country, which over the past 20 years had inspired much of the optimism within the dental equipment and supply industry, proved to be a misleading figure. More people with dental insurance did not necessarily translate into an increase in the industry's sales volume.

Once this misleading measure of the industry's potential growth was removed, a clearer estimate of its true position within the larger health care field showed a relatively small industry, generating roughly $670 million in revenue in 1975.

As the industry progressed past the mid-1970s, when it was mired for several years in a global recession, its growth during the 1980s continued at a moderate rate. By 1982, the industry's sales volume increased to $1.11 billion, having eclipsed the $1 billion mark three years earlier. In the face of a sharp decline in the number of labor contract agreements that included dental care coverage, the industry's sales volume increased only marginally by the end of the decade, reaching $1.27 billion.

Ambiguity about U.S. health care reform and its effect on dentistry, coupled with deleterious economic conditions during the early 1990s, stunted the dental equipment and supply industry's growth in 1995. This caused shipment values to increase only 2 percent (to $2.39 billion), compared to the 14 percent growth recorded between 1993 and 1994. Projections for the industry's growth called for a 3 percent increase in aggregate revenue from 1995 to 1998, fueled in part by the growth of certain fledgling areas of dentistry, such as periodontal surgery, laser treatments, and cosmetic dentistry.

Dental products and accessories have become more specialized and targeted to end users: adults, children, and infants. Dental floss and dental picks, products for healthier gums, and premixed fillings are all examples of these niche products. The biggest product changes have occurred in children's dentistry. Various manufacturers added specialty-type products for children, including brighter colors, different packaging, timers to help children know how long to brush, and smaller sizes.

During the 1990s, manufacturers focused on gum care. Dental supply and equipment manufacturers built relationships within the community of 140,000 dentists by conducting research on dental care and publishing the results in various studies. For example, Bausch & Lomb conducted one of the largest ongoing studies on plaque removal by using different brushes to remove plaque on implant wearers.

New product introductions in the late 1990s included advanced toothbrushes that enabled users to decrease the plaque formation around the gum line (for adults and children), and dental floss with fluoride, mint-flavoring, whitening abilities, and a special feature called non-shredding, which prevents breakage of the floss. New ways of flossing were introduced that allowed users greater precision and control to reach plaque in between teeth by using specially designed prongs.

Other introductions in the dental equipment industry that were expected to increase sales to dentists were oral cancer tests, digital radiography (which decreases radiation exposure to the patient by 90 percent), the "Save-A-Tooth" program developed by 3M, oral cameras that provide dentists with an easier option for root canals, and more consumer-related dental products to increase patients' awareness of the importance of self-care.

Current Conditions

Steady growth of the industry during the early 2000s, which continued through the end of the decade, was driven by several market factors. First, the U.S. population was growing older, and older people require more dental care, particularly because people were keeping their natural teeth longer. In 2005, there were approximately 35 million Americans 65 years and older, and that number was expected to grow to nearly 40 million by 2010 and more than 50 million by 2020. In addition, dentists performed more corrective procedures on younger children, fixing problems over time, rather than waiting until the teen years. From a financial perspective the industry has enjoyed steady growth. Industry revenue has increased yearly throughout the mid- to late 2000s, with $4.6 billion in dental equipment and supplies shipped in 2008.

Second, demand was growing for specialty procedures and specialty products. As the dental industry advances, making dental procedure less painful and more aesthetically pleasing, more people--adults, children, and teens--are having their teeth straightened, whitened, and repaired for cosmetic purposes. According to the American Association of Orthodontists, 4.5 million Americans wear braces or other dental appliances. Gone are the days of "metal mouth" braces; by the mid-2000s braces were not only less obtrusive in the patient's mouth, but also lighter and less painful. Aesthetics was the fastest growing sector in orthodontics with options for clear brackets, preferred by many adults, or a variety of available colors, popular among teens.

Third, the dentistry industry was relatively successful in its campaign to promote preventive care. The trend for regular visits to the dentist was further helped by an increasing number of people who were covered by dental insurance, making dental care more affordable. At the same time that visits to the dentist increased, the number of dentists in the United States decreased. This led dental professionals to invest in more advanced equipment to make their business offices run more smoothly.

Finally, numerous advances have been made in procedures and equipment. The market for equipment upgrades was still not mature, allowing for anticipated growth of approximately 6 percent annually in the United States through the end of the 2000s. Upgraded dental chairs, digital-based radiology equipment, specialized drills and lasers, and 3-D technology were quickly emerging in the market.

Improvement in procedures and products included Invisalign's system of straightening teeth using a series of clear, removable retainers. Running approximately $5,000 for the treatment, Invisalign could replace the need for braces in cases of mild to moderate orthodontic problems. Also, in 2005 Nobel Biocare, a global leader in dental prosthetics, introduced its Procera System for minimally invasive dental implants.

Advanced technology allows dentists to improve productivity and respond quickly to trends. CAD/CAM systems, for example, help dentists customize all-ceramic crowns, bridges, or veneers from ceramic blanks during one patient visit, eliminating the reliance on an outside laboratory.

Industry Leaders

DENTSPLY International Inc., of York, Pennsylvania, was the world's leading manufacturer and distributor of dental prosthetics. The company manufactures dental X-ray systems, cutting instruments, ultrasonic scalers, and polishers, and other dental equipment under more than 100 brand names. DENTSPLY reported net sales of more than $2.19 billion in 2008. Of the company"s 2006 sales, 42 percent were in the U.S., 38 percent in Europe, and 20 percent in the rest of the world.

DENTSPLY held 75 to 80 percent of the U.S. market share in the mid- to late 2000s, while its closest competitors held less than 5 percent. This market domination led the U.S. Department of Justice to file suit against DENTSPLY in 1999 for allegedly acting unlawfully to retain a monopoly because the company does not allow sales representatives to market any other branded products. The U.S. District Court for the District of Delaware ruled in favor of DENTSPLY in 2003, but that decision was overturned by the Philadelphia-based U.S. Court of Appeals for the Third Circuit. DENTSPLY appealed to the Supreme Court, which in 2006 denied hearing the case, ending nearly seven years of litigation.

Patterson Companies Inc., formerly Patterson Dental, of St. Paul, Minnesota, reported revenue of nearly $3.1 billion in 2008, up from $2.8 billion for the fiscal year ending in April 2007. Patterson Dental was the largest segment of the company, which also includes companion-pet veterinarian supplies and rehabilitation supplies.

America and the World

U.S. manufacturers controlled roughly half of the international market for dental equipment and supplies. This lead in the global dental equipment and supply market was largely predicated on the ability of U.S. manufacturers to incorporate high technology into the production of their merchandise. The dental equipment and supply markets in Canada, Germany, Japan, Italy, Mexico, and France proved to be the strongest export destinations for U.S. manufacturers, while manufacturers in Germany and Japan posed the greatest threat to the overwhelming lead of U.S. manufacturers in the global market. In the mid-2000s, the U.S. retail market accounted for over 35 percent of the global dental supply market. Despite this seemingly dominant position, the U.S. held neither a trade surplus nor deficit, with both exports and imports totaling $1.3 billion.