Oct 26 2022
WASHINGTON––Following a letter by U.S. Senators John Boozman (R-AR), Ranking Member of the Senate Agriculture Committee, and Deb Fischer (R-NE) calling for the Government Accountability Office (GAO) to examine the recent baby formula shortages and the impact sole-source contracts in the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) program may have had on availability, the agency confirmed it will investigate.
The share of formula in the United States that is consumed by WIC infants is estimated to be over 50 percent.
“We have heard concerns expressed about the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) impact on the infant formula market, in particular in the light of current supply shortages,” the senators wrote in early October. “The shut-down of the Abbott manufacturing plant led to foreseeable shortages of certain infant formula products for WIC participants, but also affects non-WIC formula buyers, retailers and grocers.”
“To address the high cost of infant formula under WIC, states were required to pursue cost containment systems in 1989 under the Child Nutrition and WIC Reauthorization Act. As a result, all states pursued sole-source contracts with infant formula manufacturers, who then sends rebates to the WIC state agency. These rebates have saved the WIC program between $1 to $2 billion annually. While these savings have allowed the WIC program to stretch funding farther, some stakeholders have expressed concerns with unintended consequences these contracts have on the market,” the senators continued.
The senators requested a GAO analysis to answer the following questions:
- How did the price of infant formula change for both WIC and non-WIC customers after the introduction of sole-source rebates?
- How did particular market characteristics such as market concentration, methods of marketing, and barriers to entry impact the size of the rebates offered by manufacturers?
- How have sole-source contracting and minimum infant formula stocking requirements impacted independent and small retailers?
- What legislative or regulatory changes could improve sole-source contracting? What other measures could address cost containment of infant formula under WIC?
Additional cosigners to the letter include Senators John Cornyn (R-TX), Shelly Moore Capito (R-WV), Susan Collins (R-ME), Roger Marshall (R-KS), Chuck Grassley (R-IA), Thom Tillis (R-NC) and James Risch (R-ID).
Earlier this year, Boozman introduced the Access to Baby Formula Act, which was signed into law on May 21, 2022, to help ensure families who rely on the WIC program can buy affordable formula by giving the U.S. Department of Agriculture (USDA) the authority to be more flexible during a crisis and require baby formula manufacturers to have a plan in place to respond to shortages.
Boozman has also questioned the U.S. Food and Drug Administration (FDA) regarding the agency’s ongoing strategy to replenish the supply of baby formula across the country and expressed concerns that it has not approved enough formula applications to restore national baby formula supplies or prevent another shortage from occurring.