- Advertisement -spot_img
Friday, June 24, 2022

Safety rules keep competition off infant formula market, set stage for shortage

WASHINGTON ( Associated Press) — A massive recall is most likely to be blamed for a shortage of U.S. baby formula, but experts say the product has long been vulnerable to this type of crisis because of decades-old policies, Which has allowed a handful of companies to corner. Market.

Those government regulations – aimed at assuring safe, affordable formula – are under renewed scrutiny as President Joe Biden’s administration races to import formula from Europe.

watch: Biden invokes Defense Production Act to combat shortage of baby formula

“There is absolutely good and safe infant formula available around the world. We don’t have access to it,” said Bindiya Vakil, CEO of supply chain analytics firm Resilin. “We created this problem by not setting up the infrastructure for imports. is.”

Federal regulators are expected to soon allow Abbott Nutrition to reopen a Michigan plant that has been closed since February due to contamination problems. The factory is the largest of its kind in the US and its shutdown – combined with supply chain problems related to the pandemic – supplies popular formulas and specialty formulas to children with rare medical conditions.

Lawmakers will hold three hearings on the issue this week, calling on company executives, government regulators and outside experts to testify. Attention could drive changes to government security and contract regulations in force since the 1980s and favor larger US manufacturers who are better able to navigate complex requirements.

Baby formula is one of the few American products that is essentially unaffected by globalization, with 98% of the supply being manufactured domestically. According to industry statistics, four companies account for nearly 90% of the market: Abbott, Reckitt, Nestle and Perigo. This consolidation reflects similar trends in the food industry.

But infant formula was not part of the Biden administration’s initiative last year that highlighted dangerously focused industries including drugs, airlines, hearing aids and Internet services.

Food experts say the strict formula rules set by the Food and Drug Administration have long limited competition.

Beginning in 1980, Congress empowered the FDA to strictly enforce the nutritional content of all formulas sold in the US, implementing additional research and manufacturing standards that have few equivalents around the world. Changes occurred in the 1970s after some babies became ill from deficient formulas.

“They are the strictest food safety guidelines in the US and the US has some of the strictest guidelines in the world,” said Georgia Tech food safety expert Wendy White.

Companies should consult with the FDA before selling a new formula, changing ingredients in existing formula, or making major manufacturing changes. The result is only the largest manufacturers have plants and processes that comply with federal regulations. And given the declining US birth rate, competitors will have little incentive to enter the field.

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

There are other barriers for foreign manufacturers wanting to compete. The US has long imposed tariffs and quotas on dairy imports from overseas, including Canada, to protect American milk producers from competition.

Responding to political pressure, the Biden administration has begun airlifting shipments of formula from Europe. The FDA is also waiving some requirements to encourage more imports from foreign manufacturers, which is expected to boost supplies in the coming weeks.

By far the biggest driver of the US market is a massive federal nutrition program that provides formula and other foods to low-income women and children. The WIC program accounts for more than 50% of the U.S. market, according to the National WIC Association, which provides formula for more than 1.2 million infants, representing state and local administrators who run profits.

Beginning in 1989, federal law requires states to award contracts to a formula company, whichever can offer the greatest discount.

watch: How soon will baby formula be back on the shelves?

The effect is that the winner of the contract quickly squeezes out the majority of the competition on store shelves. Today, all 50 WIC contracts are held by three companies: Abbott, Reckitt and Nestle, according to the association. Abbott is the leader with 34 state contracts.

The competitive effects of these sole source contracts have been researched for years. A 2011 study by the U.S. Department of Agriculture found that whichever company wins the state’s WIC contract, typically with the WIC recipient switching to their brand, their market share increases by an average of 74%.

But not everyone supports overhauling the system. Brian Dietmeier of the National WIC Association says eliminating sole source contracts would threaten the savings that allow the plan to serve so many Americans. Instead he says that manufacturers should be held accountable for not investing in their capacity.

“It’s a manufacturing failure,” Deitmeier said. “The fact is there hasn’t been enough product to meet the demand of manufacturers over the years.” His group supports calls by some lawmakers for a federal antitrust investigation into the industry.

WIC contracts are typically re-bid every four years and market share moves back and forth between a handful of competing players.

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

“We need to take a comprehensive look at where the failures happened and where we can fix them,” Abrams said. “We need to consider whether we really want a situation where there is so much dominance in the program.”

Associated Press Business Writer Marci Gordon contributed to this story.

World Nation News Desk
World Nation News Deskhttps://worldnationnews.com/
World Nation News is a digital news portal website. Which provides important and latest breaking news updates to our audience in an effective and efficient ways, like world’s top stories, entertainment, sports, technology and much more news.
Latest news
Related news
- Advertisement -

LEAVE A REPLY

Please enter your comment!
Please enter your name here