PRESS RELEASE: NEW REPORT: BIDEN TAKES SWIFT ACTION TO ADDRESS BABY FORMULA SHORTAGE
FOR IMMEDIATE RELEASE
June 1, 2022
Jack Miller, Communications Director
NEW REPORT: BIDEN TAKES SWIFT ACTION TO ADDRESS BABY FORMULA SHORTAGE
The Baby Formula Shortage is Result of a Monopolistic and Broken Industry
The national baby formula shortage is a crisis putting all young families at risk. Millions of Americans rely on formula to feed their youngest and the national recall, and subsequent supply shortage, highlighted the extreme market concentration of baby formula producers.
In the last few weeks, President Biden took swift and aggressive action to ease the shortage, ordering the U.S. military to airlift millions of containers of formula and enacting the Defense Production Act to boost production.
These steps stand in stark contrast to the 192 House Republicans who voted against a bill that would support the Food & Drug Administration’s efforts to address the shortage.
Today, Invest in America released a short report detailing the Biden-Harris Administration’s actions to address the formula shortage, the monopoly risk in the baby formula industry, and steps to lower costs for all Americans.
Actions Taken to Address the Baby Formula Shortage
To tackle the baby formula crisis, President Biden is using the power of the presidency to take action:
The Biden administration has invoked the Defense Production Act (DPA) to make sure that baby formula can be produced at home, which will increase production and speed up supply chains.
The White House also directed the Department of Health and Human Services (HHS), U.S. Department of Agriculture (USDA) to use Department of Defense (DOD) commercial aircraft to pick up overseas infant formula so it can get to stores faster.
President Biden supports the House-passed bill to support the Food & Drug Administration’s efforts to address the shortage. 192 House Republicans voted against this bill.
The Baby Formula Industry is Highly Monopolized
The infant formula industry is a multi-billion dollar business, and four companies control about 90% of the market.
Closer look: In 2008, three manufacturers accounted for almost 98 percent of all U.S. formula sales: Abbott had a 43-percent share of the market; Mead Johnson, 40 percent; and Nestlé (now Gerber), 15 percent.
Many states have only one formula maker for the entire state, since the government exercises buying power in USDA’s Women, Infant and Children program. Through price negotiation, one firm tends to become the de facto supplier for formula in a state.
One Factory Closure Creates a Crisis
To minimize costs and keep production low, which creates higher prices and maximizes profits, companies are concentrating production into a few, very large plants.
This creates huge risks if one factory closes. In February, a plant in Michigan closed, creating a crisis.
According to Claire Kelloway of Open Markets Institute, “a huge part of the crisis we’re seeing now is from the closure of one plant,”
“Having one or two factories in the U.S. or suppliers in the U.S. is not a way to be resilient. In fact, it’s a recipe for being vulnerable.” – Mary Lovely, Senior Fellow at the Peterson Institute for International Economics
Abbott Execs Spent $5B on Stock Buybacks Instead of Fixing the Factory That Closed
At the Michigan site that closed, equipment associated with the drying process was failing and in need of repair for several years. This allowed bacteria to enter the system and, “at times, led to bacteria not being adequately cleaned out in clean-on-place washes.”
The origin of the crisis was Abbott management’s refusal to repair old drying machines that were bound to fail.
Instead, they used $5.73 billion for stock buybacks. While the factory became a “proverbial petri dish,” Abbott executives got rich.
As laid out by Senate Finance Committee Chair Ron Wyden: “As Abbott spent billions buying back its own stock, it appears that it failed to make necessary repairs to fix a critical manufacturing plant of infant formula located in Michigan. As a result of the company’s mismanagement, the plant’s condition deteriorated to the point where it was shut down by the Food & Drug Administration (FDA) in February over safety concerns after several infants who consumed formula made at the plant fell ill from bacterial infections.”