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May 27, 2022, 8:47 a.m. EDT

USDA offers to help states access more baby-formula brands for low-income families

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By Zoe Han

In a bid to help low-income parents obtain scarce baby formula amid a nationwide shortage, the U.S. Department of Agriculture will help cover the costs for states to buy alternative baby formulas as part of their nutrition-aid programs, the agency said Wednesday.

“Responding to the infant-formula shortage has been — and will continue to be — a team effort,” Agriculture Secretary Tom Vilsack said. “We encourage states and their formula manufacturers to work together to maximize access to infant formula for WIC participants, and USDA will provide the funding to make that possible.”

The USDA’s Special Supplemental Nutrition Program for Women, Infants, and Children (known as WIC), covering more than 1.2 million infants who collectively consume 56% of formula nationwide, provides monthly benefits to lower-income moms to buy baby formula, nutritious food and groceries.

The WIC program has been hit hard by the Abbott /zigman2/quotes/203724446/composite ABT -0.83% product recall in February because the manufacturer is the primary provider of formula for more than half of WIC agencies nationwide. Abbott’s recall intensified a pre-existing supply-chain shortage in the U.S. Some 45% of baby-formula brands were out-of-stock nationwide for the week ending May 8, according to Datasembly, a retail data company.

Though experts and officials have recommended that parents try using WIC to obtain formula, WIC parents have had challenges accessing baby formula covered by their benefits. WIC benefits can’t be used to buy formula online, and there are very specific requirements for using the benefits in stores. WIC only covers certain container sizes and formula brands.

The USDA said Wednesday that it’s encouraging state agencies to temporarily work with contract suppliers to allow more flexibility for WIC parents related to alternative sizes, forms, or brands of formula.

Currently, Abbott is covering the cost of non-Abbott formulas for states that have contracts with the company. USDA will be covering the additional costs for states that have contracts with formula makers Gerber or Reckitt Mead Johnson if the size, form, or brand of formula covered by the state’s contract isn’t available.

Three main players

With only three manufacturers in the bidding space for government contracts — the other two being Reckitt Mead Johnson /zigman2/quotes/204605475/delayed RBGPF -0.38% and Gerber /zigman2/quotes/208115528/delayed CH:NESN -0.60% — the Biden administration invoked the Defense Production Act on May 18 to speed up formula production and import formula from abroad for additional supply. The second batch of formula from Europe — weighing 60 tons — arrived Wednesday under the administration’s Operation Fly Formula program.

On Tuesday, the Federal Trade Commission launched an inquiry looking into business practices within the baby-formula industry, and the concentration of products on the market. Currently, the big three manufacturers comprise more than 80% of the infant-formula industry in the U.S. Imported infant formula carry tariffs of up to 17.5% — a high amount designed to protect domestic businesses.

Abbott Laboratories Chief Executive Robert Ford  apologized on May 22 for the company’s role  in the national formula shortage, and promised to ramp up production in June.

“Now, all states will be able to offer additional brand options and equip WIC parents with the resources needed to obtain whichever nutritionally appropriate formula is available on the shelf,” said Brian Dittmeier, Senior Director of Public Policy at the National WIC Association.

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