FDA Finally Admits It Caused the Baby Formula Shortage

“it’s the FDA’s unnecessary and protectionist rules that effectively ban foreign-made baby formula from being imported into the United States. On Wednesday, the agency announced plans to tweak those rules so foreign formula manufacturers can permanently import their goods into the U.S., giving American consumers greater choice in the marketplace and ensuring more robust supply chains.”

” When the Abbott Nutrition plant in Michigan was forced to close temporarily due to an FDA investigation into possible contamination, it created a supply shock that left store shelves empty and parents scrambling to find formula. Because of the FDA’s protectionist rules (and high tariffs levied on foreign-made formula), markets could not adapt quickly to the shortage here in America”

“In testimony to Congress, FDA officials admitted to botching the response to the contamination at the Abbott plant. But the real culprit of the recent shortage was a deeper and more pervasive one. No matter what nationalists like Sen. Josh Hawley (R–Mo.) might suggest, closing off the country to international trade is not a recipe for resilience. The baby formula crisis demonstrated that it is quite the opposite.
So it’s good to see the FDA admit those mistakes and crack open the door to allowing foreign formula into the U.S. on a permanent basis.

Unfortunately, the list of policy changes the FDA announced..mostly amounts to providing technical assistance to foreign firms that want to sell formula here. That is, offering help in navigating the complex approval process, rather than sweeping aside those regulations entirely. If a formula maker has passed muster under E.U. regulations, that should be good enough for the FDA.

There’s also the matter of tariffs on imported formula, which are so high that they effectively make any imported formula uncompetitive in the American market. Why would a foreign manufacturer like Holle or HiPP go through the complicated FDA approval process (even after the announced changes) if it knows in advance that its goods won’t be able to compete on a level playing field in America?”

Eric Adams’ Emergency Price Controls on Baby Formula Will Make the City’s Shortage Worse

“The country’s ongoing shortage of infant formula has been exacerbated and prolonged by a long list of counterproductive government interventions: from tariffs and trade restrictions to price-distorting subsidies and nonsensical labeling requirements.

New York City Mayor Eric Adams has decided to throw one more log on the fire by issuing an emergency order limiting price increases on infant formula.

“The nationwide infant formula shortage has caused unimaginable pain and anxiety for families across New York—and we must act with urgency,” said Adams on Sunday. “This emergency executive order will help us to crack down on any retailer looking to capitalize on this crisis by jacking up prices on this essential good.”

The mayor’s order invokes city rules that prohibit merchants from raising prices more than 10 percent from where they were 30–60 days preceding the emergency. Adams urged people to report potential gouging to the city’s Department of Consumer and Worker Protection.”

“sudden price hikes discourage people from engaging in harmful and unproductive hoarding.”

“Higher prices make once unprofitable activities suddenly lucrative. For example, it’s usually not profitable to drive 100 miles to sell people bags of ice. That calculation changes when a hurricane drives up the price of ice to $15 a bag.

Conversely, if price gouging laws force a bag of ice to be sold at $1, hurricane or not, a lot fewer potential suppliers are going to be induced to take that trip. The result is more people go without ice.

Adams’s order will similarly deprive New Yorkers of much-needed formula. Out-of-city suppliers who might have incurred higher transportation costs to reap the rewards of higher prices in the Big Apple will instead sell off closer to home. That’ll be particularly true if they’re located in a jurisdiction that hasn’t banned market prices on baby formula.

The federal policies driving the formula shortage—whether that’s prohibitive tariffs on baby formula or labeling rules that keep European products off the market—are outside the control of local officials like Adams, who are nevertheless expected by their constituents to do something.

The least the mayor could do, however, is not make the formula problem worse. His emergency order shows he can’t even clear that bar.”

How the baby formula shortage links back to a federal nutrition program

“The uproar over infant formula shortages is prompting lawmakers to confront how a federal nutrition program may be helping a small handful of formula manufacturers dominate the U.S. market.

The federal government’s widely-used nutrition program for women, infants and children, known as WIC, is by far the largest purchaser of formula in the U.S., with more than half of infant formula in the U.S. going through the program. And just two companies serve close to 90 percent of the infants who receive benefits through the program, in part because of the way WIC awards its contracts.”

“The Abbott recall and resulting shortages were especially disruptive for WIC recipients. About half of all babies born in the U.S. qualify for WIC, which serves low-income families. Many of these households don’t have the time or resources to drive around looking for alternative formula brands or scour the internet for available stocks. Even if parents and caregivers could find alternative formulas, their WIC benefits might not have covered the specific brand they could find when the shortages first hit.

For the past three decades, WIC has used what’s called sole-source contracting, which is designed to save the program money by allowing the states to buy formula far below retail prices. The National WIC Association estimates that state rebates save about $1.7 billion in costs each year. When a state contracts with a company, all WIC participants in the state use that same manufacturer. Just three companies have been awarded contracts during this time: Abbott Nutrition; Mead Johnson, which makes Enfamil; and Nestle, which makes Gerber.”

““The dirty secret about WIC is these formula companies actually lose money on formula that they sell through WIC,” because the lowest bidder ends up winning the state contracts, explained a former Democratic Senate aide. “But what happens is… if you give birth in a hospital and you request formula, you’re going to get the formula that is whoever has the WIC contract,” allowing the formula makers to reach a massive pool of new customers. Getting a state WIC contract can also mean more favorable shelf space at retailers across the state and more brand loyalty.

Not everyone agrees about the extent to which sole-source contracting has driven consolidation in the formula industry, versus other factors, like overall consolidation across the food sector and high food safety regulatory costs, since infant formula is more highly regulated than most other foods.”

” But the USDA’s Economic Research Service in 2011 found that switching a state WIC contract gave the new manufacturer about a 74 percent bump up in market share in the state. Most of that is the result of WIC participants switching — since they make up more than half the market — but the rest is the result of more preferential treatment at the retail level.”

Taking Formula From Immigrant Babies Won’t Fix the Shortage

“Migrants in detention centers aren’t free to leave facilities whenever they want to shop for baby formula. Legally, essential products must be provided to migrant children that the government has detained. “Facilities will provide access to…drinking water and food as appropriate,” reads the 1997 Flores settlement that addressed the treatment of migrant children. A 2015 Customs and Border Patrol document on detention standards noted that “food must be appropriate for at-risk detainees’ age and capabilities (such as formula and baby food).” These legal standards predate the Biden administration.

Nor would diverting baby formula away from immigrant detention centers ease supply chain woes in a meaningful way. Ursula—the facility Cammack singled out on Twitter—holds around 1,100 detainees. The number of American parents who rely on formula to feed their infants is on the order of millions. Though several Republican lawmakers and right-leaning news outlets are agitating about the “pallets of baby formula for all of the illegals who are crossing into the United States,” none have been able to say exactly how much formula is going to detention facilities or how often shipments are arriving.

The baby formula shortage is indeed a huge problem. About 40 percent of top baby formula brands are out of stock right now, and producers are warning that shortages could last for several months. But the shortage wasn’t caused by the government’s legal duty to feed the kids it has confined. “Much of the current shortage is rooted in a February recall of formula after a suspected bacterial outbreak at an Abbott Nutrition plant in Michigan,” explains Reason’s Eric Boehm. And while we could re-fill those shelves with formula from abroad, tariffs and quotas “make it burdensome and costly to import the supplies that are now desperately needed.”

You can’t solve the national shortage by making it harder for undocumented parents to feed their babies. Instead of looking for immigrant scapegoats, lawmakers should tackle the trade and regulatory policies that helped create the current shortage.”