Why did we run out of infant formula?

Plus: What you need to know for the solar eclipse.

Monday. In case you haven’t heard yet, a total solar eclipse will be visible across North America today.. Why is that such a big deal? On average, a solar eclipse occurs over a specific location only once every 375 years. So, if you are planning to watch the eclipse, here is a video with everything you need to know so you don’t hurt your eyes (WATCH VIDEO). Age alone is doing quite the number on my eyesight, so I plan to be extra careful.

Moving on to something that made headlines a couple of years ago but hasn’t been discussed much lately, why did we run out of infant formula in 2022? Do we finally have some answers, and have we made the necessary changes so that it doesn’t happen again? Let’s dive in.

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Why Did We Run Out Of Infant Formula?

I know 2022 seems like a lifetime ago, but do you remember when we ran out of infant formula? It took a couple of years, but the Federal Trade Commission (FTC) recently released a report after investigating what really happened (FIND THE REPORT HERE). 

The investigation was prompted by lawmakers curious about a market dominated by just two companies: Abbott and Mead Johnson. Those two companies own about 80% of the entire infant formula market. So what did the FTC find? The report included some surprising insights, especially concerning the Special Supplemental Nutrition Program for Women, Infants, and Children, commonly known as WIC.

WIC is a program that supports low-income pregnant women and young children by providing access to essential nutrition, including infant formula. It is a crucial program with strong bipartisan support, recognized for its effectiveness in improving health outcomes and potentially saving healthcare costs. Can you believe that—it is actually something both sides of the aisle tend to agree on. 

However, the FTC found that WIC also plays a significant role in shaping the infant formula market. This is because WIC purchases more than half of all infant formula in the U.S. through state-level contracts that often grant exclusive rights to one supplier, usually Abbott or Mead Johnson. These contracts require the companies to sell formula at steep discounts, which saves taxpayers money but gives these companies a dominant position in the states where they hold contracts. I’m no economist, but that’s no bueno. 

This arrangement has significant unintended consequences. The FTC report highlights that the current WIC contracting process, while cost-effective, might contribute to the fragility of the infant formula market. Depending on a single supplier, states can become highly vulnerable to supply disruptions, such as contamination incidents or manufacturing problems. This was evident in the recent crisis when a problem at one plant led to nationwide shortages.

On top of all that, the high market concentration discourages new companies from entering the market. The barriers to entry are already high due to the extensive and expensive FDA regulatory requirements needed before new formulas can be sold. The investment required for manufacturing is substantial, not just in terms of money but also in the specialized facilities required to produce a safe, high-quality formula.

Interestingly, the FTC's report also notes that WIC might indirectly cause formula prices to increase for families not eligible for the program. Since formula companies sell products at near break-even prices to WIC, they compensate by charging higher prices in the broader market. This can disproportionately affect families just above the WIC income threshold, who might struggle with the high cost of infant formula.

These findings are important for policymakers to consider, especially those looking at ways to improve the resilience of the system responsible for feeding future generations. So, what is the solution? Some suggestions include revising the WIC contracting process to allow more than one supplier in each state or creating incentives for new companies to enter the market. 

However, any discussion about changing WIC is sensitive, as it must not undermine the program's ability to provide essential nutrition to those who need it most.

The key takeaway? WIC is a great program that has delivered proven results. That said, no program is perfect, and it seems that the way WIC is structured today does have some serious unintended consequences we should consider. As the conversation around these issues continues, it's clear that any steps taken must balance cost savings and market stability with the need to ensure all families have reliable access to infant formula. 

It's a complex issue but one that is vital to the health and well-being of our country’s youngest tiny people. As we move forward, it will be crucial to keep all these factors in mind to prevent future shortages and build a more resilient supply system that all families can rely on, no matter what. 

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