May 19, 2022

Congressman Neguse urges action to secure baby formula supply chain

Today, Congressman Joe Neguse signed on to a letter to President Biden in response to the growing consolidation in the baby formula market and the impact of market monopolization on rising costs and regional shortages of this critical food supplement. The letter urges the White House and relevant federal agencies to use all tools at their disposal to restore competition and increase resiliency to secure this vital supply chain.

“Across the country, parents are struggling to find adequate, reliable sources of baby formula. In particular, families with children who require specialty formulas due to allergies or disabilities find it nearly impossible to locate these products,” the members wrote. “The problem is so pronounced that the nationwide out-of-stock rate for baby formula has hit 43% — up from between 2-8% in the first half of 2021 — and is continuing to climb. Shortages exacerbated by global supply chain disruptions and inflation have resulted in the average cost of the most popular baby formula brands rising 18% in the last year. Resale prices in the secondary market are often marked up at extraordinary rates, with online sellers on eBay and Craigslist listing products for double or triple their retail prices. Price hikes and supply shortages have left parents at a loss for how to feed their children. In some instances, parents are taking desperate and even dangerous measures, such as rationing supplies or brewing their own baby formula.”

The members continued, “Increased supplier concentration in the baby formula market is central to the shortages now facing American families. Just two companies — Abbott and Reckitt — control 80% of domestic baby formula production. This highly concentrated market is incredibly brittle, rendering it unable to absorb supply shocks that a healthy, resilient market can easily weather.”

The members request that the White House and relevant federal agencies:

Use the Defense Production Act of 1950 to ramp up production of baby formula, focusing on partnering with smaller regional suppliers to build up their production capacity;

  • Designate baby formula as a scarce product under the Defense Production Act and investigate and prosecute hoarding and price gouging of baby formula under the Act or other relevant laws;
  • Monitor and prosecute reports of “scam formula” flooding the market;
  • Study concentration in the baby formula market, in particular by scrutinizing past mergers, investigating anticompetitive conduct, and looking into vertical market integration that may add to supply chain fragility;
  • Determine whether the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) can make changes to its baby formula procurement program to purchase from a more diverse array of partners and bolster competitors of the largest baby formula producers; and,
  • Determine whether, at least in the short term, it is possible to increase production and importation of formula from abroad.

Joining Rep. Neguse on the letter are Reps. Mary Gay Scanlon (PA-05), Kathy Castor (FL-14), Yvette Clarke (NY-09), Emanuel Cleaver (MO-05), Steve Cohen (TN-09), David Cicilline (RI-01), Madeleine Dean (PA-04), Peter DeFazio (OR-04), Val Demings (FL-10), Mark DeSaulnier (CA-11), Dwight Evans (PA-03), John Garamendi (CA-03), Sara Jacobs (CA-53), Pramila Jayapal (WA-07), Hakeem Jeffries (NY-08), Henry C. “Hank” Johnson (GA-04), Ro Khanna (CA-17), Annie Kuster (NH-02), Barbara Lee (CA-13), Teresa Leger Fernandez (NM-03), Zoe Lofgren (CA-19), Kathy Manning (NC-06), Betty McCollum (MN-04), Jerrold Nadler (NY-10), Joe Neguse (CO-02), Marie Newman (IL-03), Eleanor Holmes Norton (DC), Dean Philips (MN-03), Ayanna Pressley (MA-07), Jamie Raskin (MD-08), Lucille Roybal-Allard (CA-40), Brad Sherman (CA-30), Eric Swalwell (CA-15), Rashida Tlaib (MI-13), David Trone (MD-06), Lauren Underwood (IL-14), Bonnie Watson Coleman (NJ-12), Peter Welch (VT), and Nikema Williams (GA-05).

The full letter can be read at: https://scanlon.house.gov/uploadedfiles/concentrationinbabyformulasupplychain.pdf