Perhaps it is truly time for governments to stop shopping for wars in foreign lands and get back to doing what they are paid to do: governing.

Since this report on this situation, the US government has finally responded:

Transportation Secretary Pete Buttigieg who washed his hands of the crisis, saying, “The government does not make baby formula, nor should it. Companies make formula.”

“Let’s be very clear,” Buttigieg said, “this is a capitalist country.”

Photo: Empty shelf where baby formula should be

23 May 2022 | James Porteous | Clipper Media News

by James Porteous

Who is to blame for the inability to feed babies? Politicians? No. Monopolies? No. Bad luck? No – it is an economic system that simply does not work.

I started Clipper Media News in part to share stories people were unlikely to see, and also to try and shed some light on how ‘media’ covers certain stories. The ones they do not want to cover at all because it might put the media or big business or wars or favoured nations in a bad light.

This fiction of a ‘free press’ is part of the idea that the supposed backbone of a free media is the ability to question anything, no matter how awkward or embarrassing that might be.

But it does not work quite that way. What happens instead, is that, quite often, you will read stories that almost appear to suggest they are about to shoulder or attribute blame, but then quickly veer off the normal path.

These ‘baby formula’ stories are a perfect example of this process in action.

As we know, no one in their right mind would suggest that feeding babies should be left to the whims of corporations whose only interest is profits. No one in their right mind would dare to pretend that the bottom line is more important than creating a system that works for the consumers, not the corporations.

But that is exactly what has happened. Knowingly. For a long time, three companies in the US have controlled something like 90% of the market. The feeding of babies ‘market.’

And the three companies, the government, and the press have known for a very long time that the ‘system’ could malfunction at any moment.

If a shortage of chips cut into the production of cars, so be it. Their problem, not ours. They wear it well.

But food, fuel – the list goes on and on. These are not commodities that require attention once every four or five years. They are constant. Most are the backbone of civil society. And yet they are treated like something you might find in a rich man’s garden.

So call ‘breaking of the story’ PHASE ONE. Here, a big problem, perhaps even an actual life or death threat to people who cannot defend themselves, and known to be an issue for a decade or more, finally happens. Babies cannot eat.

It cannot be ignored. But nor can it be seen to put the would-be baby-feeders in a bad light.

So on to PHASE TWO. At this point, it is time to acknowledge the problem, assess the blame right off the bat, and then fudge it.

One story below does this right away saying the lack of formula does not just affect babies. A 14-year-old also depends on it.

Oh, you think. Surely a 14-year-old should be able to sort out this problem. Maybe it is not such a big deal after all.

Another article says: America is running out of baby formula because 3 companies control the market and babies aren’t that profitable

Well, that is pretty darn hard-hitting! Well, sort of.

“The dilemma [manufacturers] have is that it’s not a very lucrative market,” says Patrick Penfield, a professor of supply chain management at Syracuse University. “The only way you can grow your market share is if you’re aggressively going after competition.” 

So, you see it is not their fault. It is your fault. And all the other fickle consumers who failed to buy their fair share of the product. Shame on you.

It goes on to say: “From a parent’s perspective, there’s no easy, magical answer right now.”

In short: There is little that anyone -parents, governments, politicians, babies- can do to fix this mess. And so be warned, dear parents, there is no magical answers right now. You are on your own.

Moving forward, the story will remain in PHASE THREE. In this phase, you might continue to watch for stories such as the emergency flights arriving with small amounts of formula. Without too much emphasis on the fact that these emergency flights will feed ‘some babies’ for ‘some days or weeks’ but otherwise? Not so much.

These will give the appearance that lessons have been learned and those in charge are moving forward in a concerted effort to fix ‘the problem,’ but in truth little will be done. Because not much can be done.

Much like the US promising to ‘loan’ Ukraine arms that will take 30 months or more to produce, it is simply not possible ‘ramp up’ formula production.

The idiotic, money-saving ‘just in time’ model might work fine when talking about party hats from China, but it is absurd, and potentially deadly, to make extra profits off of things that people actually need.

Like babies.

James Porteous | Clipper Media News

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It has now been almost a week since this ‘story’ broke. Nothing has been resolved.

But we have learned that Abbott, the FDA and the US Justice Department have ‘signed a consent decree with the corporation on May 16. This agreement guarantees that Abbott Labs will not be prosecuted or held responsible for the bacterial contamination of its baby formula products, in exchange for restarting its manufacturing operations at the Sturgis plant.’

AS you will see below, this is the same plant that the FDA concluded ‘that infant formulas manufactured at this plant “were produced under insanitary conditions.” He added that the formula “may be contaminated” with bacteria that is known to be fatal in infants’

And the government reaction: President Biden’s Transportation Secretary Pete Buttigieg who washed his hands of the crisis, saying, “The government does not make baby formula, nor should it. Companies make formula.”

“Let’s be very clear,” Buttigieg said, “this is a capitalist country.” Precisely. While Buttigieg made this statement to justify a position that the government should do nothing, the entire crisis condemns the social and economic system that the Biden administration and the entire state apparatus defends.

The US baby formula crisis and capitalism’s indifference to the lives of children

28 May 2022 | Kevin Reed | WSWS

The baby formula crisis that is threatening the lives of infants across the US deepened this week as the out-of-stock rate for baby formula on store shelves surged to 70 percent for the week ending May 22. The shortage rate during the previous week was 45 percent, according to the retail tracking firm Datasembly.

The supply shortage is so severe that there are now reports in some areas of the country of mothers attempting to purchase breast milk online from anonymous and independent sources such as Facebook and Craigslist. Pediatric nutritionists are warning that such measures are potentially very harmful to children.

The crisis of powdered formula supplies, 90 percent of which are produced by four monopolies that dominate the US pediatric nutrition industry, is not a mistake or a product of unforeseen circumstances. It is the outcome of a society run by a ruling elite that, in its singular preoccupation with increasing its wealth, is totally indifferent to the lives and well-being of children.

There has been a combination of criminal negligence, corporate profiteering, stock market manipulation and government complicity that have resulted in the shortage of the essential food needed by infants and toddlers, especially those from poor and working-class families.

The supply shortage began almost immediately following the onset of the coronavirus pandemic in February 2020 when supply chains and transportation were disrupted internationally. During the initial days of the pandemic, families stockpiled the formula and emptied shelves. This was followed by a sharp fall in sales, and manufacturers cut back on production.

Now, with an uptick in births and a dramatic decline in breastfeeding rates among new mothers, demand has shot up again. The inability of the producers to adapt to fluctuations in demand is itself an expression of the anarchistic and unplanned nature of capitalist economics.

The primary cause of the recent surge in the shortage stems from the shutdown in February of the baby formula factory operated by Abbott Labs in Sturgis, Michigan, the largest in the US. The plant is responsible for 25 percent of the US supply and produces the popular brand names Similac, Alimentum and EleCare.

In February, the US Food and Drug Administration (FDA) forced Abbott Labs to recall products and shut down the Sturgis facility. This action was taken only after it became clear that the conditions in the plant were so unsanitary that the federal government agency, which has a long history of collaboration with the corporations in the food and drug industries, could no longer look the other way.

During congressional testimony Wednesday, FDA Commissioner Dr. Robert Califf said the agency’s inspection of the Sturgis operations that began on January 31 revealed conditions that were “shocking” and “egregiously unsanitary.”

Dr. Califf told the Subcommittee on Oversight and Investigations of the House Energy and Commerce Committee that the “totality of evidence” obtained during the inspection caused the FDA to conclude that infant formulas manufactured at this plant “were produced under insanitary conditions.” He added that the formula “may be contaminated” with bacteria that is known to be fatal in infants.

Among the unsanitary conditions uncovered at the Sturgis factory were that multiple swab samples “later tested positive for the bacteria Cronobacter sakazakii,” cracks in the spray dryers used in the manufacturing process are “an issue related to previous foodborne illness outbreak in powdered infant formula” and water leaks and condensation that are known risk factors for deadly bacteria were found “in areas where dry powdered formula was produced.”

Califf also reported leaks in the roof, standing water in the factory and two instances in the past, based on internal company documents, when finished baby formula was known to have “environmental contamination with Cronobacter sakazakii.” The FDA commissioner claimed that these poisoned batches, which were produced by Abbott Labs in 2019 and 2020, had been destroyed by the company.

The FDA inspection was motivated in part by the fact that four infants, who had been fed nutrition products from the Sturgis factory, had been hospitalized between September and December 2021 with Cronobacter infection. Cronobacter sakazakii is a serious foodborne pathogen that can cause “severe, life-threatening infections,” including sepsis and meningitis as well as bowel damage. Two of the children died from their infections.

The agency was also belatedly responding to a report by a whistleblower who disclosed in October 2021 details about the dilapidated conditions at the Michigan factory. The whistleblower also highlighted the retaliatory policy of company management and its firing of employees who objected to the failure to follow FDA requirements, falsification of records, releasing untested products onto retail shelves and failure of antiquated equipment at the Sturgis facility.

Abbott Laboratories is a $200 billion global corporation that produces medical devices and health care products and was founded in 1888. The multinational has profited enormously over the past two years from its pandemic-related COVID testing products while its less profitable pediatric nutritionals operations have been starved of resources.

Meanwhile, the company—whose Executive Chairman Miles D. White earned $27 million and CEO and President Robert Ford earned $25 million in 2021—has rewarded its investors with billions of dollars in quarterly stock buybacks while the bacterial contamination of its baby formula products were well-known. In December 2021, after the FDA had notified Abbott Labs of a planned inspection of its Sturgis facility, the company announced a $5 billion stock repurchase authorization.

Throughout the bacterial contamination crisis, Abbott Labs has claimed there is no proof that its products have caused infants to become sick and die from life-threatening infections. The company has also maintained that the allegations in the 34-page whistleblower report are untrue.

The belligerence of Abbott Labs in the face of facts that it has acted in a criminally negligent manner has been bolstered by the FDA and the US Justice Department which signed a consent decree with the corporation on May 16. This agreement guarantees that Abbott Labs will not be prosecuted or held responsible for the bacterial contamination of its baby formula products, in exchange for restarting its manufacturing operations at the Sturgis plant.

The fact that millions of families are now desperately searching for baby formula on empty store shelves and forced to make life and death decisions to feed their infants is proof that the corporations and the government do not care about what happens to the lives of millions of children. This fact was confirmed in the recent comment by President Biden’s Transportation Secretary Pete Buttigieg who washed his hands of the crisis, saying, “The government does not make baby formula, nor should it. Companies make formula.”

“Let’s be very clear,” Buttigieg said, “this is a capitalist country.” Precisely. While Buttigieg made this statement to justify a position that the government should do nothing, the entire crisis condemns the social and economic system that the Biden administration and the entire state apparatus defends.

The formula shortage—coming in the midst of a massive surge in prices throughout the world and an ongoing pandemic that has already killed more than one million people in the United States—is another demonstration of the urgent necessity for the socialist reorganization of society.

Baby formula production and distribution—and other essential products and services required to sustain the lives of millions and billions of people on the earth—must be taken out of the hands of the financial parasites who own them. The working class must transform these resources into public property and operate them based on social need and not profit.

US military delivery of baby formula from Germany does little to stem supply crisis

23 May 2022 | Kevin Reed | WSWS

A US military airplane transported 75,000 pounds of imported baby formula from Ramstein Air Base in Germany to Indianapolis, Indiana, on Sunday amid the catastrophic nationwide shortage crisis of infant food in America.

The batch of baby formula, which was trucked from Switzerland to Germany, is the first shipment flown into the US from Europe as part of the Biden administration’s emergency Operation Fly Formula. The Department of Agriculture said on Saturday that “additional flights will be announced in the coming days.”

The corporate media is doing its best to present the arrival of three brands of powdered formula that are hypoallergenic as a significant measure to address the crisis. For example, CNN has been broadcasting over and over again for hours its video footage of 132 pallets being taken off the military C-17 cargo plane by servicemen driving forklifts and loading them onto FedEx trucks.

However, the amount of formula in the shipment from Germany will make just 500,000 eight-ounce bottles of baby food and does not even begin to address the magnitude of the crisis.

According to Agriculture Secretary Tom Vilsack, the Biden administration’s Operation Fly Formula shipment will feed a few thousand children for just one week. Meanwhile, there are approximately 1.2 million babies that get their formula through the federal government’s Special Supplemental Nutrition Program for Women, Infants and Children (WIC).

The dire conditions facing families from the crisis are beginning to emerge in news reports. CNN reported that a doctor at Le Bonheur Children’s Hospital in Memphis, Tennessee, said that two young patients were admitted because the special formula they need is out of stock, and they cannot tolerate replacements.

The CNN report also said that clinical dietitians at Medical University of South Carolina Shawn Jenkins Children’s Hospital in Charleston “reported that at least four babies were recently hospitalized for complications related to the ongoing formula shortage.” Three of the four babies were hospitalized due to intolerance to formula that they had been fed by parents because of the shortages. The other child became sick when a caregiver attempted to mix their own formula.

According to the data tracking firm Datasembly, nearly 45 percent of baby formula products were unavailable in the US for the week ending May 15, up from 43 percent the previous week.

On Thursday, US Food and Drug Administration (FDA) Commissioner Robert Califf told the House Appropriations Committee that families should get relief “soon” due to increased output from manufacturers and the military deliveries. When pressed, Califf said that the crisis would get better “gradually” and it “will be a few weeks before we are back to normal.”

But formula manufacturers and retailers say that it could take months for supplies to recover because the reasons for the crisis remain unresolved.

Baby formula shortages started as early as 2020 when the pandemic began, and supply chains were disrupted. Shipping delays and longer lead times for raw materials and packaging multiplied and compounded upon each other, causing limited supplies on retail shelves across the US over the past two years.

Then, in February of this year, Abbott Labs was forced to halt operations at its biggest factory in Sturgis, Michigan, which is responsible for one-fifth of all US baby formula production.

The $200 billion medical devices and health care company—which makes the popular Similac baby formula product—has previously refused to acknowledge that its factory was contaminated with bacteria and responsible for illness and death among infants that were fed with its products.

On Saturday, the Washington Post published a perfunctory corporate-speak “apology” from Robert Ford, chairman and CEO of Abbott Labs, that said the FDA had found “a bacteria in our plant” but that there was not “any connection between our products and the four reported illness in children.”

Ford did reveal that “some children have been hospitalized because of the lack of EleCare, a specialized formula for children who cannot digest other formulas and milks.” Although he said that this is “tragic and heartbreaking,” Ford did not offer any immediate solutions to the catastrophic situation other than to say, “it is consuming my thoughts and those of my colleagues.”

Instead, Ford said, “we wish we could provide them the formula they need today and are working to identify ways to do so,” and “we will prioritize EleCare when manufacturing resumes.” The conclusion of Ford’s statement emphasized the consent decree between Abbott Labs and the Biden administration to reopen the Michigan production facility.

The consent decree issued by the US Justice Department on May 16 concludes the government investigation into the role of Abbott Labs in producing a contaminated product in exchange for the reopening of its baby formula factory. The agreement amounts to corporate blackmail in which Abbott Labs avoids prosecution and admission of guilt, even though FDA testing found Cronobacter bacteria at the Sturgis factory because of the supply shortage crisis.

Whatever the phony expressions of concern from CEO Ford, the fact is that Abbott Labs has been preoccupied with the megaprofits it has been earning from pandemic-related products and abandoned any investment or development of the less lucrative baby formula operations. John Wallingford, a former baby formula executive and now an industry consultant, told the Wall Street Journal that the largest baby food manufacturers also make higher profit medical devices and health care products.

Wallingford told the Journal, “Companies that manufacture infant formula have to struggle to get investment for upgrading or building a new facility because they’re competing with dollars that will go to other, higher margin products.”

The baby formula supply crisis in the US and the government response to it are clear expressions of the breakdown of the capitalist system. Millions of families are struggling to feed their newborn babies, infants and toddlers because profits come before human life in America. As has been demonstrated throughout the coronavirus pandemic, in a society that is run by billionaire elites—such as those who control the $35 billion international pediatric nutrition industry—their stock portfolios and wealth accumulation are more important than the lives of millions of working class people.

Baby formula arrives in Indianapolis from Germany on US military aircraft to address critical need

22 May 2022 | By Polo Sandoval and Samantha Beech, CNN

The prescription formula will be distributed to areas around the country where there is the most acute need, a Biden administration official earlier told CNN. But the official said none of the first shipment would land on store shelves in the US, adding that Sunday’s shipment is hypoallergenic and will be fed to babies intolerant of protein in cow milk.

The shipment included 132 pallets of formula, which arrived on one C-17 cargo plane. The formula originated from Zurich, Switzerland, and was trucked to Germany, where it was loaded on the C-17 and flown to the US.

Agriculture Secretary Tom Vilsack, who greeted the arrival of the delivery in Indianapolis, sai shipment — the first of Operation Fly Formula — would provide enough formula for 9,000 babies and 18,000 toddlers for one week.

“It is a large shipment of very specific and specialized formula. Formula for moms and dads who have children who have allergies where the regular formula just simply will not work,” the secretary said at a news conference in Indianapolis shortly after the shipment landed.

The Biden administration official told CNN earlier that the product contained in the first shipment will be distributed to hospitals, doctors, home health care facilities and pharmacies in regions “where the needs are most acute.”

The aircraft on Sunday transported pallets of Nestlé Health Science formula — including Alfamino Infant and Alfamino Junior. At the site of the arrival in Indianapolis, a Nestlé spokesperson said, “Some cases are ready for distribution in the next couple of days. Others will be released into the supply chain after standard quality testing is completed.”

The White House announced later Sunday that the second flight of Operation Fly Formula, which includes “114 pallets of Gerber Good Start® Extensive HA infant formula,” was expected to “take place in the coming days.”

The White House said the “total amount of formula arriving in the first round of Operation Fly Formula” is the equivalent of 1.5 million doses of eight-ounce bottles.

President Joe Biden on Wednesday announced Operation Fly Formula, which directs the Department of Health and Human Services and the Department of Agriculture to utilize the Defense Department’s commercial planes to import formula from abroad.

Washington Politicians Helped Create the Baby Formula Shortage. Can They Solve It?

ABBY VESOULIS  MAY 17, 2022 9:00 AM EDT Time Magazine

As parents across the country frantically search for baby formula amid a nationwide shortage, many have heard that the source of the problem is in Sturgis, Mich.

That’s where Abbott, the multinational healthcare giant that sells formula under the Similac, Alimentum, and EleCare brands and controls 40% of the U.S. infant formula market, shut down its largest baby food plant in February after a type of bacteria linked to the hospitalization and death of several babies was found in the plant. (Abbott maintains there is not conclusive evidence its formulas harmed children.)

But the reason one plant shutting down has had such an outsized impact on the nation’s baby food supplycan be traced to Washington, specifically decisions made in the 1980s in Congressional hallways and beleaguered bureaucratic agencies.

Like most issues in Washington, the baby food shortage is a multifaceted one, but it comes down to a simple mismatch between supply and demand. Millions of families use baby formula, and too few brands supply it, leading to catastrophic shortages when just one of the major brands has a lapse in production.

By six months of age, roughly three-quarters of babies born in the U.S. are given at least some formula, according to 2020 data from the Centers for Disease Control and Prevention. But lower-income moms are more likely than higher-earning ones to use formula over breastfeeding and start their babies on it earlier in life, due, in part, to the absence of national paid parental leave policies and less flexibility for mothers in service-industry jobs to breastfeed.

Read more: 5 Parents on the Stress of Feeding Their Babies Amid Formula Shortage

Many of those mothers end up taking part in the Special Supplemental Nutrition Program for Women, Infant, and Children, also known as WIC, which is run by the U.S. Department of Agriculture. Through state agencies, WIC gives families earning at or below 185% the federal poverty line vouchers and electronic cards to purchase baby formula on the government’s dime. In 1989, Congress, hoping to keep WIC’s costs down, passed legislation requiring states to use competitive bidding to select one manufacturer of infant formula to be covered by WIC.

Roughly half to two-thirds of formula purchased in the U.S. is bought through WIC, according to government estimates. With so many low-income parents relying on formula, the move by Congress led to the bid winners in each state dominating the formula market there. That spurred the kind of intense consolidation in the U.S. formula industry that has not been seen in many other parts of the world.

Since the single-contract rule was established more than 30 years ago, only three companies–Abbott, Gerber, and Mead Johnson—have received those WIC contracts. Their control over the market has disincentivized the creation of new brands, which is why the recent loss of Abbott’s products from store shelves has left many parents with few alternatives.

As of May 8, 43% of the top-selling infant formula products were out of stock across the country, according to software platform Datasembly, with the range of standard shortages falling between 2% and 8%.

“The extremely high levels of concentration in the infant formula market creates a serious risk to infant health if there is any disruption to a major manufacturer’s supply,” Senators Cory Booker of New Jersey, Amy Klobuchar of Minnesota, Tammy Duckworth of Illinois, and five other Democratic Senators wrote to Agriculture Secretary Tom Vilsack last week, calling for an “immediate antitrust review.”

“This is yet another example of how alarming levels of consolidation hurts American families and can no longer be ignored,” they added.

‘Infant formula is the most regulated food that exists’

In Michigan, mother Elyssa Schmier is among those flummoxed by the empty baby formula shelves at her local grocery stores. She had hoped to exclusively breastfeed her son, who is eight months old, but her body wasn’t producing enough milk—even when she woke up every three hours to pump. Her doctor advised her to supplement with formula, which now makes up approximately 60% of her son’s bottles when she can find it in stores.

Schmier, a vice president with MomsRising, which advocates for issues facing mothers and families, expressed frustration with seeing people use the moment to guilt moms for using formula when exclusively breastfeeding a child isn’t feasible for many, especially after they have begun tapering. “The best way to feed a child,” she says, “is to feed a child.”

In Washington, many of the proposed solutions to Schmier’s dilemma are focused on the immediate crisis.

The Biden Administration has urged states to temporarily loosen regulations around what brands and sizes of formula parents are able to purchase with WIC. A White House official told reporters on Monday that the Administration was also working with the four largest formula brands to identify hurdles to increasing supply domestically; the Administration also announced it would expedite the application and approval process for the importation of non-domestic formulas.

That process normally moves at a snail’s pace due to strict safety regulations governing baby formula. “Infant formula is the most regulated food that exists, by far,” says Dr. Steven A. Abrams, a professor at the Dell Medical School at the University of Texas at Austin and the chairman of the American Academy of Pediatrics’ Committee on Nutrition. “The reason being that if you leave a component out, the baby can have severe brain damage and die.”

But international brands are also disincentivized from exporting their baby formula to the U.S. by tariffs as high as 17.5%. Rep. Nancy Mace, a South Carolina Republican, is working on a bill that would temporarily waive such tariffs on baby formula products.

Rep. Abigail Spanberger, a Virginia Democrat, agrees that there needs to be some form of tariff reduction. “The fastest way to get more formula onto the shelves, at least in the short term, is going to be tariff relief,” she told TIME Monday.

Lawmakers from both sides of the aisle, including Sen. Marco Rubio, Republican of Florida, Sen. Kirsten Gillibrand, Democrat of New York, and Spanberger, have also urged the Biden Administration to consider invoking the Defense Production Act, a law originally passed amid the Korean War that gives presidents broad powers to control domestic industries during emergency situations. Both Biden and former President Donald Trump invoked the DPA to speed up production of supplies needed to combat the pandemic. “There is ample precedent for using the DPA to address a crisis in peacetime,” Rubio said in a statement last week.

But after the current crisis is over, and grocery stores are back to being fully stocked with formula, the underlying consolidation issue will remain, as well as the potential for similar shortages in the future. Addressing that problem would require a major overhaul of WIC, the kind that some experts who follow the issue are skeptical will happen any time soon.

“There’s still not an awareness that one of the government’s key roles is to structure markets, so that you don’t have fragile supply chains,” says Matt Stoller, the director of research at the American Economic Liberties Project, an antitrust advocacy group, and the author of Goliath: The Hundred Year War Between Monopoly Power and Democracy.

Spanberger says there also needs to be more transparency about possible shortages. She and a Republican colleague have drafted a bill that would require baby food manufacturers to inform the Food and Drug Administration (FDA) if they anticipate shortages moving forward, like manufacturers of other products do already. “There are certain requirements on various different types of industries that if they are anticipating supply chain disruptions or shortages, that they are to make that known to FDA,” she says, while acknowledging that the proposal wouldn’t solve the current shortages. “This legislation, unfortunately, won’t help us in the here and now,” she says.

In the more immediate future, Abbott announced on Monday that it had reached a deal with the FDA to resume operations at its plant in Sturgis as soon as within the next two weeks after the plant addresses safety concerns.

This won’t solve Schmier’s problems overnight, though. Abbott has previously said that once that plant was running again, it would take six to eight weeks for baby formula from there to return to store shelves.

—with reporting by Alana Semuels in New York

America is running out of baby formula because 3 companies control the market and babies aren’t that profitable

14 May 2022 | COLIN LODEWICK | Fortune

A baby formula shortage gripping the U.S. since March has parents in a panic over where and when they’ll be able to find the products they need to feed their kids. 

The shortage has prompted the federal government to take drastic action. 

This week, the White House invoked the Defense Production Act to take pressure off the multiple supply chains involved in formula production and initiated “Operation Fly Formula” to fly in product from abroad. The FDA has also loosened regulations on foreign formula imports, and has urged other manufacturers to increase production while a single major plant remains shuttered. According to that plant’s manufacturer, it can be weeks or months before its products are back on store shelves.

With no easy end in sight, caregivers nationwide have been forced to devote their free time to driving between stores in search of formula, prompting retailers to limit the number of cans customers can buy. Others have turned to Facebook groups and informal support networks to acquire the nutritional products that work best for their kids. 

“I’ve looked online, I have my mom in Boston looking, my mother-in-law in Florida looking,” Elyssa Schmier previously told Fortune about her trouble finding formula for her 8-month-old son. “Everyone we know is looking for us and no one can find it.”

The out-of-stock rate, representing the amount of formula that’s not in stock compared to what’s typically available, was 45% for the week ending May 15, according to Datasembly, a provider of real-time product data for retailers and consumer packaged goods (CPG) brands.

How did a baby formula crisis spring up in one of the world’s richest countries? Experts say a recall by one of the industry’s largest manufacturers, persistent supply-chain issues, and a market dominated by only a few players have combined to form what one consumer goods expert calls a “perfect storm” affecting the supply of essential formula to millions of babies across the U.S. And the shortage could last for months. 

Here’s how we got here.

Poisoned baby formula 

Abbott Nutrition is the food sector arm of medical device and health care giant Abbott Laboratories, making products that range from carb-loaded drinks that help patients rebound from surgery, to energy drinks, to powder and liquid baby formula. Though it maintains a global manufacturing network, its plant in Sturgis, Mich., is among the few in the U.S. that produce formula.

On Feb. 17, Abbott voluntarily recalled its Sturgis-manufactured products and shut down the plant following reports that four infants fell ill from bacterial infection and two died after consuming formula produced in the plant. A whistleblower report, submitted to the FDA in October 2021, alleged further health and safety compliance issues at the facility and contributed to a formal inspection by the agency earlier this year.

Abbott is now waiting for approval to reopen. “We understand the situation is urgent—getting Sturgis up and running will help alleviate this shortage,” the company said in a statement to Fortune. After conducting its own investigation, which included genomic sequencing of bacteria, the company reported that nothing on its premises matched the specific strain of bacteria that caused the illnesses and deaths.

“The Cronobacter sakazakii that was found in environmental testing during the investigation was in non-product contact areas of the facility and has not been linked to any known infant illness,” the company said in a statement.

The FDA, however, found more problems with the facility that extended beyond the possibility of previous contamination. Following its own inspection, which occurred from Jan. 31 to March 18, the FDA says that it observed Cronobacter sakazakii “in medium and high care areas of powdered infant formula production”—a problem regardless of whether or not it was the same strain that caused the specific infant deaths. 

The agency additionally said in its report that the company “did not ensure that all surfaces that contacted infant formula were maintained to protect infant formula from being contaminated by any source.” According to the FDA, the company is still working to “correct findings” from its inspection. The plant has not yet been able to reopen as a result.

Abbott won’t be able to get product from its Sturgis facility on shelves for another six to eight weeks, according to the company. And that’s only if it reopens as soon as possible.

“From a parent’s perspective, there’s no easy, magical answer right now,” says Brian Ronholm, director of food policy for Consumer Reports, a nonprofit organization dedicated to ensuring product integrity.

Even after the plant reopens and begins to provide formula to families again, a larger question remains: How can closing a single manufacturing facility have such a drastic effect on millions of babies’ access to nutrition? 

A monopoly in the market

The baby formula market exists as a shared monopoly, with only a few manufacturers controlling nearly all supply.

Abbott had an approximately 43% market share a decade ago, according to a USDA report from 2011 — the most recent number available. Little has changed since then. The company still maintains exclusive provider contracts in many states with WIC, the USDA’s supplemental nutrition program for low-income families, which makes up nearly half of formula sales nationwide. A few other manufacturers, including Mead-Johnson and Nestlé, also have WIC contracts and control the rest of the market. 

In addition to its highly concentrated structure, the baby formula market is difficult for another reason. Its demand is set by the nation’s birth rate, and the market has been shrinking for years. The number of births has declined every year since 2008, except for 2014, according to the U.S. Census Bureau.

With only a few key players whose capacities are tied to a shrinking market, repercussions are inevitable when anything gets in the way of a certain product getting to store shelves. Other manufacturers are bound to struggle with an influx of new demand from consumers who can’t get what they’d typically buy.

“The dilemma [manufacturers] have is that it’s not a very lucrative market,” says Patrick Penfield, a professor of supply chain management at Syracuse University. “The only way you can grow your market share is if you’re aggressively going after competition.” 

Because Abbott is one of the biggest players in the game already, significantly expanding its share is not really an option. 

“If you can’t grow your market share, then you look at how you can reduce costs,” says Penfield. “And sometimes when you reduce the costs, you may not have the right protocols or procedures in place to make sure that you’re doing things properly.”

“I’m not saying that’s what Abbott Laboratories did,” he cautions. “But that would be an assumption of mine.”

Is the FDA responsible for the shortage? 

Abbott is not the only entity possibly at fault. “There’s plenty of blame to go around here,” says Scott Faber, a professor at Georgetown University’s law center and vice president of government affairs at Environmental Working Group, a nonprofit aimed at empowering consumers.

Faber sees the FDA itself as in part responsible for the shortage. The agency, he says, did not react fast enough to the whistleblower report and should have conducted a plant inspection sooner.

“When a drunk driver causes a car crash, the drunk driver bears much of the blame, but so does the bartender who looked the other way while serving one too many drinks,” he says.

When submitting the report for the record last month, Rep. Rosa DeLauro (D-Conn.) wrote: “I am equally concerned that the FDA reacted far too slowly to this report. The report was submitted to the FDA on Oct. 20, 2021. The FDA did not interview the whistleblower until late December 2021. According to news reports, FDA did not inspect the plant in person until Jan. 31, 2022, and the recall was not issued until Feb. 17, 2022.”

The agency did not finish its inspection and issue observations to Abbott until March 18. The company says that it has been working since then to update its education and training protocols as well as its cleaning and maintenance procedures. “The FDA would not have shut down that factory if they didn’t find anything. So there’s definitely some type of noncompliance that’s going on,” Penfield says.

Now the FDA is working to catch up to a crisis that seems to have been unfolding in slow motion for months.

“The FDA recognizes that many consumers have been unable to access infant formula and critical medical foods they are accustomed to using and are frustrated by their inability to do so,” the agency said in a statement to Fortune. “The agency is doing everything in its power to ensure there is adequate product available where and when they need it.”

The future of formula 

This week, the White House held a press conference to address the shortage and how it plans to get formula restocked as quickly as possible without compromising safety. 

“Those steps include first cutting red tape to get more infant formula to the shelves by urging states to provide flexibility in the WIC program, which can be a key driver of some supply disruptions,” said a senior administration official. The official added that the administration is calling on the FTC and state attorneys general to monitor price gouging by third-party sellers.

The official outlined a third avenue for alleviating the shortage: foreign imports. “The U.S. normally produces 98% percent of the infant formula it consumes, and trading partners in Mexico, Chile, Ireland, and the Netherlands are key sources of imports,” said the administration in a release that accompanied the press conference. 

However, there’s no timeline yet for when those formula imports will arrive in the U.S and be distributed. Friday, FDA commissioner Robert Califf tweeted that the agency will announce its plan next week.

When pressed about how long the shortage will last, the official said there is no estimate for when Abbott’s facility will resume functioning.

“I see continued shortages,” says Penfield about the coming weeks. “I think there’s a lot of pressure on Abbott to get that plant up and running. And until they do so, you’re gonna see these continued shortages.”

How US Baby Formula Monopolies Have Failed Families

20 May 2022 Bloomberg NewsMadison Muller and Leah Nylen

(Bloomberg) — Formula isn’t just for babies. April Crohare desperately needs it for her 14-year-old son, Charlie. Due to medical complications from a rare brain disorder called lissencephaly, his only source of nutrition comes from infant formula through a feeding tube.

The Crohares, who live in Maryland, had relied on Abbott Laboratories’ hypoallergenic brand EleCare to feed Charlie for almost half his life until the specialty formula was pulled off shelves in a February recall linked to bacterial contamination at Abbott’s Sturgis, Michigan, facility. She’s been frantically searching for it — or another product her son can digest without getting sick — ever since.

“This was the first time I’ve thought my kid was going to die because we can’t get formula, not because of all of his other medical issues,” Crohare said.

Decades of market consolidation in the US have resulted in problems like the one the Crohares and millions of other American families are now facing. Four companies — Abbott, Perrigo, Nestle SA and Mead Johnson — control 90% of the US supply of formula. 

The risks of that concentration only came into sharp relief recently, when the Food and Drug Administration recalled some of Abbott’s brands. That move came after four babies who consumed formula made at its plant were infected with cronobacter — two of them died.

Abbott said there’s no conclusive evidence linking its products to the infections and that analysis showed the strains taken from two infants’ samples didn’t match those found at its plant. The FDA did its own investigation into the cases, which it said it has since concluded, but the agency hasn’t provided any information to the public about what it found.

Some people like the Crohares have been scrambling for formula since the recall first started, because they rely on a specialty brand for which there aren’t many alternatives. Other families with less-specific formula needs have seen the problem become worse over time.

The recall led to panic buying and hoarding, creating shortages that have spread throughout the country.

More than 21% of store shelves that carry formula are bare as of May 15, according to IRI, a market analytics company. San Angelo, Texas, and Topeka, Kansas, are among the hardest-hit areas, with more than 30% out of stock as of May 8.

The Role of WIC in the Formula Shortage

The story of how those shelves ended up empty dates back years: The Covid-19 pandemic disrupted the supply chain for formula like it did for so many other household essentials. It also dates back decades, to the 1972 creation of a federal program to feed infants — the Special Supplemental Nutrition Program for Women, Infants, and Children, more commonly known as WIC.

The USDA estimates that WIC accounts for more than half of the country’s formula market. Some 45% of all American babies were eligible for WIC as of 2018, the most recent year data was available, and nearly all of those who are eligible use the program.

That makes WIC a crucial factor in the formula market, and the way it is structured has led to formula monopolies in the majority of US states. In 1989, Congress mandated that all states adopt competitive bidding for their WIC program. Under that law, states are required to award a formula contract to the lowest bidder, in most cases leaving one company in control of an entire state’s WIC formula allocation. 

Abbott has become a major player through this system, with the company now providing the formula for nearly half of the babies covered by WIC nationwide.

These monopolies created by WIC have made it hard for other brands to break into the market, David Davis, a professor of economics at South Dakota State University, said. “If you want to be even a minor player in the industry, you need the WIC contracts,” he said.

WIC contracts play a big role in how a formula maker does in a given state with other consumers as well. When a manufacturer clinches a state WIC contract, it boosts sales of its product to non-WIC consumers, according to a study from the US Department of Agriculture’s Economic Research Service, which analyzed the program’s effect on the infant formula market.

The opposite is also true: When a manufacturer loses a WIC contract, its market share in the non-WIC segment drops dramatically. For example, in August 2007, California switched its WIC contract from Abbott to Mead Johnson, and Abbott’s market share in the state, with both WIC and non-WIC consumers, dropped to 5% from 90%, according to the USDA study.

The same study showed in a 30-state analysis that manufacturers that won state WIC contracts experienced an average 18-point increase in market share among non-WIC consumers, while manufacturers that lost their contracts experienced an average 19-point decline in share. These results help explain why, despite selling their products at a discount to the WIC program, manufacturers have an incentive to secure those contracts.

Davis has tracked state-level bidding for WIC contracts for years and said sometimes several states will form alliances, so whichever manufacturer wins one contract, wins them all.

How Concentration Leaves Little Leeway

This kind of market concentration leaves little flexibility when something goes wrong. The current shortages are a frustrating illustration of that: Across the country, baby formula supply started dropping in early March, less than a month after Abbott recalled products from its Sturgis, Michigan, facility, according to data from IRI.

Federal Trade Commission Chair Lina Khan told a House panel Wednesday that the agency would “look at the mergers that contributed” to the current “fragile state” of the market.

“One plant has a really big impact on the industry,” Davis said. “This whole situation calls for a reexamination of how the formula market works.”

It hasn’t helped that trade and regulatory restrictions make imports of infant formula rare. FDA labeling rules prevent imports of formula made in Europe, since most lack the required US nutrition information. Infant formula that can be imported is also subject to an added tax of 17.5%. The United States, Mexico, Canada Agreement adopted by the Trump administration in 2020 also restricts infant formula imports from Canada, part of an effort to protect US dairy farmers from being undercut by Canadian rivals.

All of this has meant very few brands have much of a footprint in the US formula market. Marc Scheineson, an attorney at Alston & Bird who has represented formula startups, said that when a smaller player wins FDA authorization for a new formula product, it’s often immediately taken over by one of the bigger companies. 

“The antitrust laws are supposed to prevent that from happening, but they haven’t been zealously enforced in years,” Scheineson said. This type of unchecked market dominance, along with WIC contracts and heavy FDA regulations, have created an industry where “entry barriers are too high” and “competition is too great” for new formula makers to stand a chance.

That hasn’t stopped a startup called ByHeart from trying. Just a few weeks ago, it said it got FDA approval for its new plant in Pennsylvania, making it the first new formula manufacturing entrant in the US in the past 15 years. The company’s new formula launched on March 23, in the midst of Abbott’s recall.

ByHeart’s co-founders Mia Funt and Ron Belldegrun said they realize the company has launched during a “very complex time,” but that has only emboldened their mission. Just last week they took in three months’ worth of new customers, and they’ve invested millions into scaling the company to ensure they’re able to keep up with growing demand.

Belldegrun said other companies that have tried to enter the baby formula market in recent years “haven’t brought anything to the industry.” Years of commitment to innovation and owning their supply chain have positioned ByHeart to “be part of the solution,” he said.

Abbott CEO apologizes for the formula shortage as the first overseas shipment arrives

22 May 2022 | BECKY SULLIVAN |NPR

The CEO of Abbott, the company whose voluntary recall of several widely sold baby formula brands helped trigger a nationwide formula shortage, has apologized for the crisis, as the first overseas shipment of formula approved by President Biden arrived in the U.S. Sunday.

“We’re sorry to every family we’ve let down since our voluntary recall exacerbated our nation’s baby formula shortage,” wrote CEO Robert Ford in an op-ed published Saturday in the Washington Post.

The nationwide shortage has roots in supply chain disruptions and a market characterized by limited competition, exclusive contracts and few large suppliers.

But it was kicked into overdrive in February when Abbott, the nation’s largest manufacturer of baby formula, voluntarily closed a large plant in Michigan after four children fell sick with bacterial infections.

“We believe our voluntary recall was the right thing to do. We will not take risks when it comes to the health of children,” Ford wrote.

In the months since the recall, parents have reported empty shelves and limits on purchases from places where formula is in stock.

Children in Tennessee, Georgia, Wisconsin and other states have reportedly been hospitalized as a result of the formula shortage. Some of the products affected by the shortage are hypoallergenic formulas designed for children with milk allergies or other difficulties digesting food normally.

Abbott will establish a $5 million fund to help those families with medical and living expenses until the supply crisis is relieved, Ford announced.

This past week, President Biden invoked the Defense Production Act to boost production of baby formula and authorized the Defense Department to help fly formula in from overseas. The first of those shipments — 70,000 pounds of Nestle hypoallergenic formulas — arrived in Indianapolis on Sunday morning, the White House said.

Abbott’s plant in Michigan will reopen the first week of June. The company reached an agreement with the Food and Drug Administration last week to reopen the shuttered plant.

Production of Elecare and other hypoallergenic formulas will be prioritized, Ford said. “By the end of June, we will be supplying more formula to Americans than we were in January before the recall,” he said.

Why is there a shortage?

After four babies became sick with bacterial infections after consuming Abbott products made at a plant in Michigan, Abbott temporarily closed the facility and issued a voluntary recall for products made there.

But that plant – based in Sturgis, Mich. – is the largest formula plant in the U.S. and reportedly supplied about 20% of the nation’s baby formula.

The closure, along with pandemic-related supply chain disruptions that were already causing a pinch on baby formula, has become a full-blown crisis in part because of peculiarities about the U.S. baby formula market.

The vast majority of formula in the U.S. is produced by only four companies, including Abbott. High tariffs and FDA regulations mean that very little is imported from other countries.

Much of the nation’s baby formula is sold through WIC, the government program that provides subsidized groceries for low-income families.

States providing the benefit sign exclusive contracts with formula manufacturers. Abbott holds that exclusive contract in about two-thirds of states, and their shutdown has complicated purchases for families in those places.

As a result, many families have struggled to find baby formula on grocery shelves. According to Datasembly, a grocery industry data company, the nationwide out-of-stock rate was 43% for the week ending May 8th. The shortages were worst in San Antonio, Minneapolis and Des Moines, the company said.

“I want to reassure all Americans that we at FDA are very concerned about this and doing everything we can and working 24-by-7 to get things righted,” said FDA commissioner Dr. Robert Califf in an interview this week with NPR.