The American Baby Food Crisis is a Result of Weak Leadership and Regulatory Incompetence.

UPDATE: The FDA has taken responsibility for the Baby Food Crisis but they're wrong - the real culprits are the state-by-state monopolies created by the WIC program.

UPDATE: The FDA now admits responsibility for this year’s baby formula crisis. The FDA believes the problem stemmed from its “unnecessary and protectionist rules that effectively ban foreign-made baby formula from being imported into the United States.”¹ While their rules were indeed unnecessary and protectionist the real cause of the crisis is the defacto monopolies the WIC program creates in each state. Simply allowing more manufacturers in the United States won’t end the monopolies - Congress must act to allow women in America to decide which formula to buy for their babies…

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The United States is facing an unprecedented baby food formula crisis that is years in the making. According to Bloomberg 1 in 5 states is 90% out of baby formula.² During Jimmy Carter’s presidency the federal government, in its infinite wisdom, granted a de facto monopoly to three companies to manufacture the nation’s supply of baby formula. Then this year federal regulators decided to shut down the only American-owned company that is the sole source provider of baby formula for 2/3rds of the country without any consideration of the impact of their actions on the lives of the nation’s infants and mothers.³

THE MONOPOLY

Two of the three companies that the federal government allows to operate baby formula monopolies in the United States are foreign-owned. Enfamil is made by UK-based Reckitt⁴ while Gerber is made by Switzerland-based Nestlé⁵. Only Similac is made by US-based Abbott Labs⁶ - the company that owns the baby formula plant that federal regulators shut down. The federal government enforces a de facto monopoly in several ways.

Since this chart was created Abbott has taken over several of the states Gerber previously supplied - giving the only American supplier of baby formula 2/3rds of the state WIC contracts.

First, the federal government, through WIC⁷ grants to each state, buys 56% of the nation’s baby formula.⁸ Then every four years each state enters into a sole-source contract with one of the three WIC-approved baby formula manufacturers. In 1980 Congress passed legislation allowing the FDA to enforce onerous regulations making it all but impossible for new entrants to enter the market.⁹ As the EU implemented even more onerous regulations than the FDA, Congress levied massive tariffs on baby formula made outside of the US safeguarding the de facto state-by-state monopoly.¹⁰

The company that wins a state’s WIC contract is guaranteed 56% of the baby formula sales in that state but the reality is that they end up with 98% of the state’s baby formula market - a de facto monopoly by definition - by controlling shelf space in grocery stores and distribution by hospitals to mothers who have just given birth.¹¹ Perversely, most mothers in America have just one or two options for baby formula, while mothers in China and the EU can choose from more than a dozen options.

THE CRISIS

In February the FDA and CDC pressured Abbott Labs to recall Similac after three infants using the formula fell ill with Cronobacter sakazakii infections and a fourth contracted Salmonella. It is important to note that infants in 2/3rds of states ALSO use Similac so every sick child in a majority of states consumes the same formula - making any connection meaningless.¹²

When the CDC analyzed the actual formula consumed by each baby it tested negative for the bacteria. The CDC’s tests on product samples from the same lots were also negative. When the CDC conducted DNA tests on the bacteria infecting the infants they found the strains were not related to one another. Cronobacter sakazakii is commonly found on counters and other surfaces in most homes but is only dangerous to the very young and very old. Simply washing a baby’s bottle in the dishwasher kills the bacteria making it safe for use. The CDC did find bacteria in some bathrooms at the Abbott Lab facility but it wasn’t found on the production line and it wasn’t genetically related to the bacteria that infected the infants. Nevertheless, the FDA shut down the plant for various unrelated health and safety violations.

The shutdown was Robert Califf’s first act as FDA Commissioner after his appointment by President Biden earlier that month. To justify his decision to cut off more than half of America’s supply of baby formula Califf testified that Abbott’s baby formula plant had ‘egregiously unsanitary’ conditions. He testified that bacteria was found in various non-production areas of the facility, that some of the equipment was cracked, that there was a leak in the roof resulting in standing water when it rained, and that employees weren’t washing their hands frequently enough.

If there were dozens of suppliers of baby formula (like in China) Califf’s action would be reasonable but in a scenario where the government has created a monopoly and the monopolist in question is the sole-source provider of baby formula for 2/3rds of the United States, it was unthinkable - especially because there were NO links between the four illnesses and the plant. So what should Califf have done (or should do now)?

The answer is simple. Before shutting down more than half of the country’s supply of baby formula he should have (and still can if he wants to end this madness now):

• Hired a sanitation firm to completely sanitize the non-production areas where bacteria was found. Put them on a temporary contract to keep the areas clean until the FDA is certain Abbott can do it themselves.

• Repair or replace the ‘cracked’ equipment.

• Hire a roofing company to repair or replace the leaking roof.

• Hire bathroom attendants to ensure Abbott employees are washing their hands. Put them on a temporary contract until Abbott can do it themselves.

Then send Abbott the bill. The fact is, before spending millions setting up FDA testing facilities in Europe and calling up the military to conduct emergency airlifts of baby formula¹³ Califf needs to roll up his sleeves and get to work fixing the problems while keeping the plant running. If the government is going to create a monopoly and limit the supply of baby formula it cannot use its power to shut down that monopoly without replacing its production capacity first. This is just common sense.

THE SOLUTION

Assuming someone in the Biden administration wakes up and starts using the unlimited resources of the federal government to allow the Similac plant to resume production we need to end the baby formula monopolies and adopt baby formula regulations used in Europe and Asia

Today women in China and Europe have the freedom to choose from dozens of brands with various organic and non-GMO formulas, various levels of iron fortification, cow or goat lactose options, sucrose-free formulas, or the option of including probiotics. Today only wealthy American mothers who are willing to break the law and import European formulas have that choice.¹⁴

Mothers who receive funding from the government’s Women, Infants and Children program should be able to buy ANY brand of formula they want - not the brand that unelected state regulators select every four years based on which company took them hunting, fishing, or to the Super Bowl.¹⁵

The government needs to open the market by providing loan guarantees and other incentives to allow additional domestic companies to quickly and safely enter the baby formula market and once that is accomplished it should eliminate all tariffs on foreign-made baby formula to ensure American mothers have the freedom to choose the best formula at the best price - regardless of their status or wealth. The fact of the matter is the Biden administration’s decision to shut down the Similac factory has endangered the lives of millions of infants.¹⁶

UPDATE: Abbott announced that they should be able to start shipping formula to consumers starting on June 20th after negotiating with the Biden administration.¹⁷ There is literally no reason they shouldn’t start shipping today. It is time to end the baby food monopolies…

1. https://reason.com/2022/07/07/fda-finally-admits-it-caused-the-baby-formula-shortage/

2. https://www.bloomberg.com/news/articles/2022-06-02/us-baby-formula-shortages-hit-74-despite-biden-action

3. https://www.npr.org/2022/05/19/1099748064/baby-infant-formula-shortages#:~:text=Abbott%20%E2%80%94%20the%20company%20behind%20the,buy%20any%20brand%20of%20formula.

4. https://en.wikipedia.org/wiki/Reckitt

5. https://en.wikipedia.org/wiki/Nestl%C3%A9

6. https://en.wikipedia.org/wiki/Abbott_Laboratories

7. https://www.fns.usda.gov/wic/wic-special-project-grants

8. https://www.ers.usda.gov/data-products/chart-gallery/gallery/chart-detail/?chartId=78481

9. https://www.pbs.org/newshour/nation/safety-rules-keep-competition-out-of-infant-formula-market-set-stage-for-shortages

10. https://fortune.com/2022/05/17/us-infant-baby-formula-shortage-imports-fda-nutrition-tariffs-usmca/

11. https://media.ruddcenter.uconn.edu/PDFs/Choi2020_Article_EffectsOfUnitedStatesWICInfant.pdf

12. https://www.reuters.com/business/healthcare-pharmaceuticals/what-happened-with-abbott-baby-formula-that-worsened-us-shortage-2022-05-16/

13. https://www.nytimes.com/2022/06/01/us/politics/baby-formula-europe-airlift.html

14. https://www.abc10.com/article/news/verify/health-verify/amazon-canada-not-shipping-baby-formula-orders-to-united-states/536-607ca8a3-aaf7-423a-bb4f-ce98f711d4f2

15. https://www.natlawreview.com/article/abbott-laboratories-pays-5475-million-settlement-healthcare-fraud-case

16. https://www.npr.org/2022/06/02/1102479185/baby-formula-shortage-disparities

17. https://www.abbott.com/corpnewsroom/nutrition-health-and-wellness/abbott-update-on-powder-formula-recall.html