WASHINGTON, D.C. – U.S. Senator Thom Tillis (R-NC) and his colleagues recently sent a letter 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.
GAO recently shared confirmation that they will conduct the study.
The senators requested a GAO analysis that answers the following questions:
- How did the price of infant formula change for both WIC and non-WIC customers after the introduction of sole-source rebates?
- 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?
- How have sole-source contracting and minimum infant formula stocking requirements impacted independent and small retailers?
- What legislative or regulatory changes could improve sole-source contracting? What other measures could address cost containment of infant formula under WIC?
The full text of the letter is available here.