Security in the US, savings rules set the stage for a shortage of baby formula – thereporteronline

MATTHEW PERRONE

WASHINGTON (AP) – The mass recall is blamed for the shortage of baby formulas in the US, but experts say products have long been vulnerable to this type of crisis due to long-standing policies that have allowed several companies to drive into a corner. the market.

These government rules – aimed at ensuring a safe and affordable formula – are being re-examined as the administration of President Joe Biden rushes to import the formula from Europe.

“There is a perfectly good and safe baby formula in the world. We just don’t have access to that, ”said Bindia Vakil, CEO of Resilinc, an analytical supply firm. “We created this problem by not creating the infrastructure to import.”

Abbott Nutrition said Tuesday it expects to restart its closed plant in Michigan on June 4 and begin shipping the new formula to stores in about three weeks. The factory is the largest of its kind in the US and has been closed since February as it supplied popular blends and special blends for children with rare diseases.

The company also said it had received permission from regulators to release 300,000 cans of its special blend EleCare for children with allergic and digestive disorders. The product was not part of the recall in February.

This week, lawmakers will hold three hearings on the issue, calling for testimony from company executives, government regulators and outside experts. This focus could spur changes in government security rules and contracts that have been in place since the 1980s, and help large U.S. manufacturers that are able to navigate complex requirements.

Baby formulas are one of the few American products that are virtually unaffected by globalization, with 98% of supplies made domestically. Four companies occupy about 90% of the market: Abbott, Reckitt, Nestle and Perrigo, according to industry data. This consolidation reflects similar trends in the food industry.

But the infant formula was not part of a Biden administration initiative last year that covered dangerously concentrated industries, including prescription drugs, airlines, hearing aids and online services.

The Federal Trade Commission announced Tuesday that it has launched an investigation into the formula shortage, seeking information on any fraudulent or fraudulent business practices related to it. The agency said it also seeks to shed light on what has led to a concentration in the baby formula market and weak supply chains.

Food experts say strict recipe rules set by the Food and Drug Administration have long restricted competition.

Beginning in 1980, Congress gave the FDA the power to strictly monitor the nutritional value of all formulas sold in the United States by introducing additional standards of research and production that have few equivalents worldwide. The change came after some babies fell ill with deficient formulas in the 1970s.

“They’re pretty much the strictest food safety guidelines in the U.S., and in America some of the strictest guidelines in the world,” said Wendy White, a food safety expert at Georgia Technology Center.

Companies should consult with the FDA before selling a new formula by modifying ingredients in an existing one or making major changes to production. As a result, only the largest manufacturers have plants and procedures that comply with federal regulations. And potential competitors have little incentive to go out on the field, given the declining birth rate in the US.

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

There are other obstacles for foreign manufacturers who want to compete. The U.S. has long imposed tariffs and quotas on imports of dairy products from abroad, including from Canada, to protect U.S. milk producers from competition.

Responding to political pressure, the Biden administration began transporting formulas from Europe. In a corresponding move, the FDA said on Tuesday it would allow the import of 2 million cans of Kendal Nutricare formulas from the UK to increase supplies. The products are expected to hit U.S. stores early next month.

The biggest driver of the U.S. market is certainly the massive federal nutrition program, which provides blends and other foods to low-income women and children. The WIC program occupies more than 50% of the U.S. market, providing a mixture for more than 1.2 million infants, according to the National WIC Association, which represents state and local administrators who provide assistance.

Beginning in 1989, federal law required states to contract with one company under a formula, whichever could offer the largest discounts.

The effect is that contract winners are quickly squeezing out most of the competition on store shelves. Today, all 50 WIC contracts are held by three companies: Abbott, Reckitt and Nestle, the association said. Abbott is a leader with 34 government contracts.

The competitive effects of these single-source contracts have been studied for years. A 2011 study by the U.S. Department of Agriculture found that no matter which company wins a contract with WIC state, their market share typically grows by an average of 74% when WIC recipients switch to their brand.

But not everyone supports overhauling the system. Brian Dittmeier of the National WIC Association says abandoning single-source contracts will 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 capabilities.

“It’s a production failure,” Dittmeier said. “The fact is that there is simply not enough product to meet the demand that manufacturers have been building up over the years.” His group supports calls by some lawmakers for a federal antitrust investigation into the industry.

WIC contracts are usually rescheduled every four years, and market share fluctuates between several players competing.

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

“We need to thoroughly consider where the failures occurred and where we can fix them,” Abrams said. “We need to think about whether we really want to have a situation where there is so much dominance in the program.”

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

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