NATIONAL NEWS

US safety, savings rules set stage for baby formula shortage

May 24, 2022, 10:26 AM | Updated: Jun 25, 2022, 8:55 pm
Baby formula is offered for sale at a big box store on Jan. 13, 2022, in Chicago, Illinois. Baby fo...
Baby formula is offered for sale at a big box store on Jan. 13, 2022, in Chicago, Illinois. Baby formula has been is short supply in many stores around the country for several months. (Photo by Scott Olson/Getty Images)
(Photo by Scott Olson/Getty Images)

WASHINGTON (AP) — A massive recall is getting most of the blame for the U.S. baby formula shortage, but experts say the products have long been vulnerable to this type of crisis due to decades-old policies that have allowed a handful of companies to corner the market.

Those government rules — aimed at assuring safe, affordable formula — are getting renewed scrutiny as President Joe Biden’s administration rushes to import formula from Europe.

“There’s perfectly good and safe baby formula available around the world. We just don’t have access to it,” said Bindiya Vakil, CEO of Resilinc, a supply chain analytics firm. ”We’ve created this problem by not setting up an infrastructure for imports.”

Federal regulators are expected to soon allow Abbott Nutrition to reopen the Michigan plant that’s been closed since February due to contamination problems. The factory is the largest of its kind in the U.S. and its shutdown — combined with pandemic-related supply chain problems — hobbled supplies of popular formulas and specialty formulas for children with rare medical conditions.

Lawmakers will hold three hearings on the issue this week, calling on company executives, government regulators and outside experts to testify. The attention could spur changes to government safety and contracting rules that have been in place since the 1980s and favor big U.S. manufacturers that are capable of navigating the complex requirements.

Baby formula is one of the few American products essentially unaffected by globalization, with 98% of the supply manufactured domestically. Four companies account for roughly 90% of the market: Abbott, Reckitt, Nestle and Perrigo, according to industry figures. That consolidation mirrors similar trends across the food industry.

But infant formula wasn’t part of a Biden administration initiative last year spotlighting dangerously concentrated industries, including prescription drugs, airlines, hearing aids and internet services.

Food experts say strict formula regulations set by the Food and Drug Administration have long limited competition.

Beginning in 1980, Congress gave the FDA authority to rigorously enforce the nutritional content of all formula sold in the U.S., imposing extra research and manufacturing standards that have few equivalents worldwide. The changes came after some babies were sickened by deficient formulas in the 1970s.

“They are pretty much the strictest food safety guidelines in the U.S. and America has some of the strictest guidelines in the world,” said Wendy White, a food safety expert at Georgia Tech.

Companies must consult with the FDA before selling a new formula, altering ingredients in an existing one or making major manufacturing changes. The result is only the biggest manufacturers have plants and procedures that comply with federal rules. And would-be competitors have little incentive to enter the field, given the declining U.S. birth rate.

“You have to have a lot of expertise, a lot of resources and a lot of research dollars,” White said.

There are other hurdles for foreign manufacturers looking to compete. The U.S. has long imposed tariffs and quotas on dairy imports from abroad, including Canada, in order to shield American milk producers from competition.

Responding to political pressure, the Biden administration has begun airlifting shipments of formula from Europe. The FDA is also waiving some requirements to encourage more imports from overseas manufacturers that are expected to boost supplies in coming weeks.

The biggest driver of the U.S. market, by far, is a massive federal nutrition program that provides formula and other foods to lower-income women and children. The WIC program accounts for more than 50% of the U.S. market, providing formula for more than 1.2 million babies, according to the National WIC Association, which represents state and local administrators who run the benefit.

Beginning in 1989, federal law has required states to award contracts to a single formula company, based on whichever one can offer the biggest discounts.

The effect is that contract winners quickly squeeze out much of the competition on store shelves. Today, all 50 WIC contracts are held by three companies: Abbott, Reckitt and Nestle, according to the association. Abbott is the leader, with 34 state contracts.

The competitive effects of these sole-source contracts have been researched for years. A 2011 study by the U.S. Department of Agriculture found that whichever company wins a state’s WIC contract typically sees their market share grow by 74%, on average, as WIC recipients switch to their brand.

But not everyone supports overhauling the system. Brian Dittmeier of the National WIC Association says doing away with sole-source contracts would jeopardize the savings that allow the plan to serve so many Americans. Instead he says manufacturers should be held accountable for not investing in their own capacity.

“This is a manufacturing failure,” Dittmeier said. “The fact is there just is not enough product to fulfill the demand that manufacturers have drummed up over the years.” His group supports calls by some lawmakers for a federal antitrust investigation into the industry.

WIC contracts are generally rebid every four years and market share swings back and forth between the handful of players who compete.

Dr. Steven Abrams, a pediatrician at the University of Texas at Austin, says Congress should revisit the WIC program.

“We need to take a comprehensive look at where the failures happened and where we can fix them,” said Abrams. “We need to consider whether we really want to have a situation where there’s that much dominance in the program.”

___

AP Business Writer Marcy Gordon contributed to this story. Follow Matthew Perrone on Twitter: @AP_FDAwriter.

___

The Associated Press Health and Science Department receives support from the Howard Hughes Medical Institute’s Department of Science Education. The AP is solely responsible for all content.

KSL 5 TV Live

Top Stories

National News

FILE - This undated artist rending provided by the U.S. Air Force shows a U.S. Air Force graphic of...
TARA COPP Associated Press

Pentagon debuts its new stealth bomber, the B-21 Raider

The United States' newest nuclear stealth bomber is making its public debut after years of secret development. The new bomber is part of the Pentagon's answer to rising concerns over a future conflict with China.
16 hours ago
FILE: LONDON, ENGLAND - AUGUST 03:  The Airbnb logo is displayed on a computer screen on August 3, ...
Shay O'Connor

Families of tourists found dead in Mexico Airbnb plan to file lawsuit

A news conference was held Thursday with the mothers who lost their children last month in Mexico to carbon monoxide poisoning at an Airbnb.
16 hours ago
F.B.I. Director Christopher Wray speaks at a press conference at the U.S. Department of Justice on ...
ERIC TUCKER, Associated Press

FBI director raises national security concerns about TikTok

FBI Director Chris Wray is raising national security concerns about TikTok, warning Friday that control of the popular video sharing app is in the hands of a Chinese government “that doesn't share our values.”
16 hours ago
Flyer for killings of University of Idaho students...
REBECCA BOONE Associated Press

EXPLAINER: Deaths of 4 Idaho students fuel online sleuths

The deaths of four University of Idaho students nearly three weeks ago has riled up thousands of would-be armchair sleuths, many of whom are posting speculation and unfounded rumors about the fatal stabbings online.
16 hours ago
A hiring sign is displayed in a window of a store in Manhattan on December 02, 2022 in New York Cit...
Paul Wiseman, AP Economics Writer

EXPLAINER: 5 key takeaways from the November jobs report

For nearly nine months, the Federal Reserve has relentlessly raised interest rates to try to slow the U.S. job market and bring inflation under control.
16 hours ago
MIAMI, FLORIDA - MAY 02:  A Carnival Cruise ship is docked at the PortMiami as the company becomes ...
Jason Hanna and Melissa Alonso, CNN

Cruise ship passenger rescued from ocean isn’t sure how he went overboard, he tells ABC

An Alabama man who rescuers pulled from the Gulf of Mexico hours after he was reported missing from a cruise ship doesn't know how he wound up in the water.
16 hours ago

Sponsored Articles

house with for rent sign posted...
Chase Harrington, president and COO of Entrata

Top 5 reasons you may want to consider apartment life over owning a home

There are many benefits of renting that can be overshadowed by the allure of buying a home. Here are five reasons why renting might be right for you.
Festive kitchen in Christmas decorations. Christmas dining room....
Lighting Design

6 Holiday Decor Trends to Try in 2022

We've rounded out the top 6 holiday decor trends for 2022 so you can be ahead of the game before you start shopping. 
Happy diverse college or university students are having fun on their graduation day...
BYU MBA at the Marriott School of Business

How to choose what MBA program is right for you: Take this quiz before you apply!

Wondering what MBA program is right for you? Take this quiz before you apply to see if it will help you meet your goals.
Diverse Group of Energetic Professionals Team Meeting in Modern Office: Brainstorming IT Programmer...
Les Olson

Don’t let a ransomware attack get you down | Protect your workplace today with cyber insurance

Business owners and operators should be on guard to protect their workplace. Cyber insurance can protect you from online attacks.
Hand turning a thermostat knob to increase savings by decreasing energy consumption. Composite imag...
Lighting Design

5 Lighting Tips to Save Energy and Money in Your Home

Advances in lighting technology make it easier to use smart features to cut costs. Read for tips to save energy by using different lighting strategies in your home.
Portrait of smiling practitioner with multi-ethnic senior people...
Summit Vista

How retirement communities help with healthy aging

There are many benefits that retirement communities contribute to healthy aging. Learn more about how it can enhance your life, or the life of your loved ones.
US safety, savings rules set stage for baby formula shortage