These days he walks into the children’s aisle of my local New York drugstore, like a Soviet supermarket of the 1970s. Shelves are usually clogged with jars of baby formula, empty except for messages warning customers that they can buy a maximum of three jars.
This deficit has fueled such a national crisis that the White House is looking for an answer. The formula is missing in 43 percent of U.S. stores and is growing. Healthcare professionals are forced to warn desperate mothers not to risk their children’s health by diluting or making their own mix.
The problems are rooted in a highly concentrated domestic market that has been distorted by government intervention and disrupted by pandemic-related accumulation, supply chain problems and security concerns. This confusing story provides important lessons for politicians everywhere as they seek to bring the production of essential goods closer to home.
The US formula market has long been dominated by only three players: Abbott, Gerber and Mead Johnson, who account for the lion’s share of sales in a sluggish market. The trio owes its strength to the U.S. government. Approximately two-thirds of all blends are purchased under the Women, Infants and Children Nutrition Program, a federal low-income family financing scheme that contracts exclusively with these three domestic producers. Strict security restrictions and import duties suppressed competition from Europe and Canada. Fully 98 percent of the American formula is produced domestically.
This combination contributed to stable production, but did not leave the industry without reason to invest in additional capacity. Then came Covid and an unexpected drop in birth rates. The number of daily births decreased an average of 0.39 percent annually from 2000 to 2019 before declining sharply in the winter of 2020-21. In the first months of the pandemic, Americans stockpiled baby formulas along with toilet paper and pasta, but then store orders fell as birth rates dropped and parents began to use their supplies.
Since then, compound manufacturers, like almost everyone, are struggling to find workers and trucks to manufacture and transport their product. Thus, they were ill-prepared for growth when fertility resumed and demand increased.
The pressure was felt everywhere, but especially at the Michigan plant owned by Abbott, the largest supplier. The Office of Food and Drug Administration last year found bad practices that failed to control microbial growth, and the informant claimed poor record keeping and poor cleaning. The debate failed to change, and tragedy struck. Several infants fell ill, at least four were hospitalized, two died. The plant was shut down in February, and Abbott recalled several brands of the mixture. Then came prices and deficits.
On Monday, the FDA and Abbott reached an agreement this could lead to the opening of a factory. The federal government said in court documents that both the FDA and Abbott’s own samples found potentially deadly cronobacter bacteria in the plant, although no link between the formula and the actual disease has been established.
Once the FDA agrees the plant is clean, the company predicts it will take at least two weeks to resume production and eight weeks for the mixture to hit supermarket shelves. Danone, which creates a competitor’s formula, predicted that supplies would remain limited at least until August.
There is a warning in this. U.S. authorities were simply trying to ensure that American children were fed safe, local formulas from reliable sources when they put up trade barriers and limited purchase contracts. But their intervention put the country in dangerous dependence on a small number of suppliers, who in turn relied on very few manufacturing plants.
As a positive step, the FDA announced plans this week loosen the rules of the import formula, and Abbott flew with supplies from Ireland. To give families more opportunities and flexibility in supply to the United States, constant change is needed that removes barriers while protecting children.
The defeat of the formula could easily be repeated if the authorities return to local production important, tightly regulated supplies such as vaccines and personal protective equipment. Government contracts and protectionism can help start production quickly and provide the necessary base, but without control they can lead to complacency and underinvestment.
Stimulating a busy market with lots of reliable competitors should be a long-term goal, for the baby mix and everything else.