Booker, Duckworth and Klobuchar lead 8 senators to ask USDA to address infant formula shortages

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washington d.c. — Today, U.S. Senators Cory Booker (D-NJ), Tammy Duckworth (D-IL) and Amy Klobuchar (D-MN) led a group of eight senators in urging the Department of Agriculture (USDA) to deal with extremely high levels of corporate concentration in the infant formula market following recent news of nationwide infant formula shortages.

“The infant formula industry has reached an alarming level of corporate concentration with four companies – Abbott Nutrition, Mead Johnson, Gerber and Perrigo – controlling almost 90% of the infant formula market. Abbott Nutrition, the maker of the currently recalled products, alone controls approximately 40% of the infant formula market,” the senators wrote in a letter to USDA Secretary Vilsack. “This level of concentration has created a fragile system unable to respond adequately to shocks in the supply chain. Unfortunately, this puts our most vulnerable populations at risk and has a disproportionate impact on low-income families who depend on programs such as the Special Supplemental Nutrition Program for Women, Infants and Children (WIC).

The Senators continued, “Extremely high levels of concentration in the infant formula market create a serious health risk to infants in the event of a supply disruption from a major manufacturer. Therefore, this issue deserves immediate antitrust scrutiny. While federal contracts may have played a role in consolidating the infant formula market, the food giants bear most of the responsibility for hyperconsolidation across the food system. This is yet another example of how alarming levels of consolidation are hurting American families and can no longer be ignored.

The letter was co-signed by Senators Kirsten Gillibrand (D-NY), Tina Smith (D-MN), Elizabeth Warren (D-MA), Richard Blumenthal (D-CT) and Patrick Leahy (D-VT).

The full letter can be viewed below and downloaded here.

The Honorable Thomas J. Vilsack

secretary

united states department of agriculture

1400 Independence Avenue South West

Washington, D.C. 20250

Dear Secretary Vilsack:

We are writing about the current state of the infant formula industry amid a nationwide shortage that is jeopardizing the ability of families to adequately and safely feed their infants while putting danger those who depend on specialized preparations. As we work to mitigate the immediate impacts of the current crisis, we respectfully request that the United States Department of Agriculture (USDA) take action within your authority to address the extremely high levels of corporate concentration in the infant formula market.

The infant formula industry has reached an alarming level of corporate concentration with four companies – Abbott Nutrition, Mead Johnson, Gerber and Perrigo – controlling almost 90% of the infant formula market. Abbott Nutrition, the maker of the products currently under recall, alone controls about 40% of the infant formula market. This level of concentration has created a fragile system unable to respond adequately to shocks in the supply chain. Unfortunately, this puts our most vulnerable populations at risk and has a disproportionate impact on low-income families who depend on programs such as the Special Supplemental Nutrition Program for Women, Infants and Children (WIC).

Currently, an estimated 50-66% of all infant formula sold in the United States is purchased through WIC. In the three decades since WIC adopted the sole-source contract model, only three companies — Abbott Nutrition, Mead Johnson and Gerber — have won contracts. Additionally, when a business wins a WIC contract in a given state, it also enjoys a significant ripple effect on non-WIC purchases, as retailers provide increased storage space to the WIC-contracted brand. For example, in 2007, California transferred its contract from Abbott Nutrition to Mead Johnson. This change caused Abbott Nutrition’s market share in California to drop from 90% to 5%, while Mead Johnson’s market share increased from 5% to 95%. For current contracts, Abbott Nutrition is WIC’s sole supplier in 23 states and the District of Columbia, while Gerber serves nine states and Mead Johnson serves 18 states.

We support the USDA’s goal of stretching WIC resources as much as possible, and it’s clear that the sole-source contract model has helped contain costs and serve more WIC participants. However, this crisis has brought to light the fact that systemic resilience must be a factor in decision-making about programs in the future. To be clear, we don’t believe the WIC program is responsible for the current shortages felt across the country, but we are concerned that the sole-source contract model is contributing to market concentration. Under normal circumstances, this does not pose an immediate threat to the ability of families to provide food for their babies and infants, but amidst a shock to the supply chain, it is clear that the current level of concentration has created a fragile system unable to meet the needs of vulnerable consumers. This may merit exploring new ways to enhance market competition and ensure formula access for WIC participants, including the possibility of multi-source contracts.

Extremely high levels of concentration in the infant formula market create a serious health risk to infants should supply from a major manufacturer be disrupted. Therefore, this issue deserves immediate antitrust scrutiny. While federal contracts may have played a role in consolidating the infant formula market, the food giants bear most of the responsibility for hyperconsolidation across the food system. This is yet another example of how alarming levels of consolidation are hurting American families and can no longer be ignored.

Thank you for your immediate attention to this matter. We look forward to working alongside those in government to strengthen our food system.

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