Company Responsible for Tainted Baby Formula Has Monopoly Over Aid Program Sales

Corporate negligence has contributed to an infant formula shortage. The company responsible has the exclusive right to sell its formula directly to the parents of nearly half of all newborns in the United States who receive federally funded nutrition assistance.

Abbott Nutrition is the sole provider of infant formulaAccording to data from U.S. Department of Agriculture, (USDA), there are 34 states, seven Indian Tribes Organizations, four territories, Washington, D.C., and four territories that receive U.S. government aid programs.

According to records, these beneficiaries include 589,295 infants, 47.42 per cent of all infants in Special Supplemental Nutrition Program for Women, Infants, Children (WIC). The agency numbers were obtained by a Freedom of Information Act (FOIA), request.

Most public health experts recommend that newborns subsist on breastmilk because it has better nutritional value than formula, and because it helps bolster infants’ fragile immune systems. Breastfeeding is associated lower rates of infant mortalityThis is the most devastating for Indigenous and Black communities.

However, infant formula is not allowed. acceptable alternative to breastfeeding for parents who can’t or don’t nurse their babies, many of whom don’t have the luxury of taking the time to breastfeed. Research has shown that the majority of breastmilk formula sales in America are from women who can’t or won’t nurse their babies. financed by WICThe primary nutritional assistance program in America for low-income parents of newborns and expecting parents is.

Federal law requires that state agencies administering WIC grant one company exclusive rights to sell infant formula to program beneficiaries via licensed supermarkets. This framework has been in effect since 1989, when Congress amended the law to save money.

Abbott makes the well-known formula brands Similac (Alimentum), and EleCare. The company’s facility in Sturgis, Michigan, which is at the heart of the shortage, makes all three, among other nutritional products for infants. The firm issued a voluntary recall of products from the factory in February, amid investigations by the authorities. However, the plant has remained closed. Food and Drug Administration(FDA), and the issuance of a Consumer Advisory from the agency.

The recall has worsened a national shortage of infant formula initially caused supply chain issues that affected many industries during COVID-19. as several media outlets have reported in recent days. The severe shortage of formula has been felt most in Minnesota, Connecticut. Hawaii, Iowa. Maryland, North and South Dakota. Rhode Island. Texas.

USDA records show that Abbott is the sole source contractor for WIC programs across all of these states. This means that low-income parents living in these states will need to purchase Abbott products if their infant formula purchases are to be reimbursed by the government.

The Abbott plant in Sturgis was contaminated with deadly foodborne disease. This led to the recall and advisory. The presence Cronobacter sakazakiiAfter four cronobacter hospitalizations, FDA officials discovered that cronobacter could be fatal to newborns. Two of the Sturgis-related patients died. The FDA said that cronobacter “may have contributed” to their deaths.

The FDA, company and other regulators knew of problems at the Sturgis facility long before the February recall. The FDA, the Centers for Disease Control and Prevention, and state and municipal officials were notified of consumer complaints about cronobacter and products made at the plant as early as September 2021.

After a Minnesota infant contracted cronobacter, officials in Minnesota made it known to federal officials. According to the report, the baby was admitted to the hospital for 22 days. He eventually survived. Politico.

Though product samples collected by FDA officials at the Sturgis facility tested negative for cronobacter, four “environmental samples” collected by the agency tested positive for the deadly bacteria amid an investigation that revealed lax attitudes by management toward product safety.

An FDA inspector found in February 2022 that Abbott “did not establish a system of process controls … designed to ensure that infant formula does not become adulterated due to the presence of microorganisms in the formula or in the processing environment,” and that the company failed to “ensure that all surfaces that contacted infant formula were maintained to protect infant formula from being contaminated by any source.”

The FDA has been criticised for its inaction on this matter until this year. Rep. Raja Krishnamoorthi (D.Illinois), chairperson of the House Oversight Subcommittee on Economic and Consumer Policy wrote to the agency on March 24It was asked why the FDA didn’t warn the public sooner. Krishnamoorthi stated that the FDA detected cronobacter in Sturgis at the Abbott facility in Sturgis 8 times between 2019-2022.

“FDA must do more to ensure no lives are lost, or babies sickened, due to delayed inspections and late consumer warnings,” the lawmaker said.

The sole-source contractor system has saved public money on WIC by forcing manufacturers into aggressive competition to offer rebates to public officials. According to policy analysts, this system has allowed both the U.S. government (and its state partners) to offer rebates to public administrators. expand the program to 2 million additional beneficiaries annually. Unlike Social Security and Medicare — programs that, by law, have to pay benefits to all those who are eligible — WIC is only available to those who qualify if Congress has allocated funding for the program.

However, the sole-source system had unintended consequences. One academic studyCompanies that win state auctions are able increase the prices of infant formula products by 26 to 35 percent. Another academic study, which was funded by USDA, found that the winners of state auctions end up dominating the market for infant formula, and that not all of those who end up buying the company’s product receive WIC benefits.

This so-called “spillover” effect happens, in part, because the auction winner inevitably dominates retail shelf space — a reality exposed by the current supply shortage. USDA respondedTo the Abbott recall, enabling states where the company won sole-source auctions to reimburse WIC beneficiaries for substitutes. The geographic areas where there are the greatest shortages and shortage numbers indicate that alternatives have not been easy to find in jurisdictions with exclusive rights to WIC beneficiaries. Retailers have responded by restricting customer purchases of formula.

The system has helped dominant suppliers consolidate oligopoly power. Three corporations sell the vast majority of the infant formula in the U.S. — Abbott, Mead Johnson and Nestlé — and those who don’t qualify for WIC benefits, including many low-income people, suffer as a result. The threshold for WIC eligibility is 185% of the federal poverty line. Although the threshold is not met, varies by household sizeTo be eligible for the program, a single parent who works 40 hours per semaine would have to make $15.50 an hour.

In an effort to stop formula theft, many retailers keep their infant formula locked-and-key.This has likely made matters worse due to shortages. The national price for all major formula brands has spiked 18 percentInflation has outpaced inflation by more than two-to-1 in the past year.

The system doesn’t have to be structured like this. Many European countries have formula prices. is about halfIt is lower than in the United States, which suggests the existence of stronger consumer protections to prevent monopoly power. The U.S. government could encourage breastfeeding by joining many other countries around the world that require employers to give their workers breastmilk. some form of paid parental leave.

Recent years have seen some progress. The Affordable Care Act of 2010 amended labor law to give breastfeeding parents the right to pump breastmilk at work in a private location “other than a bathroom.” Advocates say, however, that many workers who don’t receive basic workplace protections were excluded — roughly 9 million or 60 percent of all breastfeeding parents.

Even if the U.S. government didn’t enact new labor laws, there are still steps that it could take to encourage the consumption of breastmilk by infants. Brazil’s public healthcare system has, for example. a national networkBreastmilk banks that support breastfeeding more than 180,000Babies on an annual basis.

However, some institutions are extremely powerful and profit from the existing system. Several of these institutions are incredibly powerful. world’s largest asset managers — including Vanguard, BlackRock, State Street and Morgan Stanley — are among Abbott’s largest shareholders. The company’s pediatric nutrition products made around $2 billion in the U.S. alone in 2020. Revenue growth, Abbott’s annual report from that year noted, “was led by share growth of Similac®, Abbott’s infant formula brand.”

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