A Tooth-Straightening Startup Runs Into Resistance

(Bloomberg Businessweek) -- It’s been a busy two years for SmileDirectClub, the hard-charging startup that promises what many customers undoubtedly consider a win-win: plastic aligners to straighten teeth for a fraction of what they would pay to get treatment through a dentist. Even better, they don’t have to go to the dentist at all. The company became ubiquitous, its ads appearing in social media feeds and on TV, buses, and billboards. Since 2017 it’s opened 342 retail locations—“SmileShops”—across the U.S. and in Canada; that includes more than 94 kiosks in CVS pharmacies. And in the first half of 2019, the company sold close to 232,000 sets of aligners—nearly as many as in all of 2018.

On Aug. 16, the company quietly filed for an initial public offering, one that market-watchers say will sell $1 billion worth of shares when it closes this fall. Although not yet profitable, SmileDirect is valued at $3.2 billion. The company has proven so successful—conceptually, if not actually—that it’s led the way for several smaller competitors. Still, SmileDirect faces challenges from dentists who say the company puts patients at risk.

The idea behind SmileDirect was simple: Orthodontics isn’t nearly as complicated as dentists would have you believe. In 2013 co-founders Alex Fenkell and Jordan Katzman were developing a driver’s-license-renewal business and spending time in the offices of Katzman’s venture-capitalist father, David. Conversations about one of the elder Katzman’s most lucrative investments, 1-800-Contacts, took them in a different direction. “It inspired us to look for the next multibillion-dollar industry that we could disrupt, one which had that medically regulated component,” Fenkell says.

The pair soon settled on the clear plastic Invisalign braces developed by Align Technology Inc. in the 1990s. Ease is a big part of the pitch—patients can slip the braces on and off. But it still requires a licensed dentist’s touch. Fenkell and Katzman suspected the aligners could be prescribed and monitored remotely. Fenkell says conversations they had with dentists confirmed their hunch. Katzman’s father was intrigued. “David told us, ‘If we can get 500 people through a pilot site, there probably could be a business here,’ ” recalls Fenkell. They officially founded SmileDirect in May 2014.

In place of dental visits, a customer goes to a shop for a digital scan or buys a kit to make a mold of her teeth and gums. The results are sent for review to a dentist licensed in the customer’s state. The company seldom requires dental records or X-rays, but the patient must affirm that another dentist has found her to be in good oral health. Once the dentist approves a treatment, SmileDirect makes a series of aligners to wear over several months; the customer periodically takes photos of her teeth for the dentist to review. The cost is $1,895 for a basic set, about 60% less than traditional braces.

Is it safe? SmileDirect’s consent form acknowledges that its service is not equal to visiting a dentist. “Because I am choosing not to engage the in-patient services of a local dental professional,” patients agree, their teeth will improve but “still be compromised.” Four teaching orthodontists interviewed for this article say it’s dangerous to prescribe aligners without a diagnostic exam or review of X-rays that could detect gum disease or cavities. Plus, they say, patient-taken photos don’t match real-time monitoring.

Dr. Jeffrey Sulitzer, SmileDirect’s chief clinical officer, says the company’s procedures are no less thorough than what dentists in daily practice do. The company’s customers have no trouble taking photos, he says. As for obtaining medical records or X-rays, “why create an additional layer that doesn’t exist in the traditional environment?” Sulitzer declined to comment on the consent form’s fine print except to say, through company spokeswoman Carrie Moore, that “moving teeth is a simple, safe process that is elective and noninvasive.”

As the SmileDirect has grown, however, more customers are saying that their teeth have been compromised. In the last three years to mid-August, consumers had lodged some 1,050 complaints on the Better Business Bureau website; complaints had totaled 592 as of Dec. 18. Many described broken and loose teeth and misaligned bites.

Moore says clinical issues are the source of less than half the complaints, and she points to positive reviews on other sites, including the BBB’s.

Some customers have sought refunds. But those who accept must sign a secret agreement to not discuss their experience anywhere and to withdraw any complaints they’ve made to any government agency, including the state dental board. The American Dental Association and American Association of Orthodontists have asked the Food and Drug Administration, which regulates aligners, to sanction SmileDirect for treating prescription medical devices like an over-the-counter product. The FDA hasn’t taken action.

However, it’s state dental boards that regulate dentistry. The orthodontist association has made formal complaints in 36 states, demanding they enforce their laws against practicing dentistry without a license. (The company doesn’t directly employ licensed dentists; rather, it’s structured to provide services, such as its platform, to them.) But in many states, the dental board only has authority over licensed practitioners, says Dr. Jeffrey Cole, president of the American Dental Association, predicting that the company will be allowed to continue operating as it now does.

At least two dental boards, in Georgia and Alabama, are seeking to bar the company from scanning patients’ teeth without a dentist physically present, prompting SmileDirect to sue. The company says the dental boards’ actions violate SmileDirect’s rights under federal law and the Constitution. This spring, federal judges in both cases dismissed many of the company’s claims, though they allowed others to proceed. SmileDirect is appealing the orders.

Arkansas recently passed a law that requires an in-person exam before a doctor can treat a patient remotely, with some exceptions. Kevin O’Dwyer, a state dental board lawyer, says, “there’s no doubt” SmileDirect violates the law. The matter has drawn the attention of the state attorney general. SmileDirect says the in-person requirement is an attempt to block competition and impede its innovations; it says “it abides by all proper and enforceable laws applicable to its business.”

The battle over SmileDirect probably won’t end in court. Deborah Ferguson, the Arkansas state representative and a dentist who co-wrote the law requiring in-person exams, expects to see the company at the statehouse if the attorney general opts to take action. “It’s really about not letting big companies make money at the expense of patients who don’t understand the complexity of treatment,” she says.

To contact the editor responsible for this story: Dimitra Kessenides at dkessenides1@bloomberg.net

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