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LINCOLN, NEB. – U.S. Senator Deb Fischer (R-Neb.), a member of the Senate Agriculture Committee, led a letter this month with eight of her Republican colleagues to the Government Accountability Office (GAO) seeking answers on recent baby formula shortages and asking for an investigation into the impact sole-source contracts in the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) program may have had. 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. “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 that answers the following questions:

  1. How did the price of infant formula change for both WIC and non-WIC customers after the introduction of sole-source rebates?
  2. 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?
  3. How have sole-source contracting and minimum infant formula stocking requirements impacted independent and small retailers?
  4. 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 U.S. Senators John Boozman (R-Ark.), John Cornyn (R-Texas), Shelly Moore Capito (R-W.Va.), Susan Collins (R-Maine), Roger Marshall (R-Kan.), Chuck Grassley (R-Iowa), Thom Tillis (R-N.C.), and James Risch (R-Idaho).

GAO recently shared confirmation that they will conduct the study.

“The Nebraska Grocery Industry Association, which represents all facets of the food industry in Nebraska, thanks Senator Fischer for leading this effort to further examine this single-source contracting structure for infant formula in WIC,” said Ansley Fellers, Executive Director of the Nebraska Grocery Industry Association. “This scheme has eliminated competition and increased volatility in a market designed to support our most vulnerable, and families are paying price: those who are WIC-eligible don’t have choice, and those who are not WIC-eligible are forced to pay higher prices. When state WIC contracts turn over – like some are now – our retailers and wholesalers are left with hundreds, thousands, and even millions of dollars in formula stocks that no longer, for no good reason, qualify for WIC. This antiquated structure makes no sense for retailers or consumers, and we very much appreciate Senator Fischer digging deeper.”

The full text of the letter is available here.

BACKGROUND:

Earlier this year, Senator Fischer cosponsored the Access to Baby Formula Act, which was signed into law on May 21, 2022. The legislation helps ensure families who rely on the WIC program can buy affordable formula.

In May, Senator Fischer sent a letter to the Food and Drug Administration about its inadequate investigation into Abbott Nutrition’s Michigan manufacturing facility and the agency’s failure to mitigate the nationwide baby formula shortage.