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The legislation from Rep. Rosa DeLauro (D-Conn.) and Sen. Bob Casey (D-Pa.) is aimed at the marketing-concentration half of the safety-and-supply equation. It would allow companies that sell less than $750 million in formula annually to choose between two tax credits, one aimed at expanding their manufacturing operations and another for increasing their output. One would be worth 30 percent of the cost of building new factories or adding production lines to an existing facility up to a limit of $150 million. The other, inspired by the green-energy provisions in the Inflation Reduction Act, would pay $2 per pound of formula produced, up to 18 million pounds per company per year, for five years.
The manufacturing tax credits could be the boost that formula brands need to buy or build their own manufacturing facilities rather than relying on contract manufacturers such as Perrigo, which also makes private-label formulas for chain stores. Those credits might also encourage companies with existing factories to build excess production capacity so they could scale manufacturing up quickly in the event of a shortage.
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If firms don’t need to expand their physical operations, they could claim the production tax credits, giving them a financial boost as they try to claim greater market share. Even if companies claim production credits rather than manufacturing credits, such financial breathing room could also encourage companies to evaluate and update existing equipment.
“You just don’t want to become complacent,” says Laura Modi, co-founder and chief executive of the formula company Bobbie, which bought a factory last year. “Just because [a manufacturing line] was able to produce infant formula to a certain standard and a certain safety standard one day in the past, does not mean it doesn’t need further investment in the future.”
Scale matters for reasons other than pure competition. Upstart companies such as Bobbie or ByHeart, which operates its own factories, have not yet grown large enough to pursue the state-level contracts to provide formula at reduced costs to participants in the Special Supplemental Nutrition Program for Women, Infants and Children. Those families were especially vulnerable during the shortage because they could use their benefits to purchase only a single brand of formula.
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According to a report this month from the Federal Trade Commission, from 2003 to 2013 only three companies even bothered to bid for these contracts. If other firms scaled up enough to try for WIC contracts, states would have more leverage on price, safety and redundancy issues.
Increasing competition and capacity in the formula market is only half of what’s necessary to prevent a future shutdown. DeLauro emphasizes that the Food and Drug Administration needs both more funding for inspections and institutional changes that will allow it to deploy inspectors wisely and process warnings quickly. But a more robust market would allow regulators to act aggressively without worrying that they’d upend the formula supply for months on end.
Despite the bipartisan expression of urgency about the shortage in 2022, and despite their care in focusing on time-limited tax credits rather than an ongoing appropriation, both Casey and DeLauro told me they’ve yet to find Republican co-sponsors for the House and Senate versions of the bill.
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“All of us, myself included, have attention spans that are too short,” Casey acknowledged, suggesting that the country’s careening from crisis to crisis makes it more challenging to sustain congressional momentum once a chronic issue stops causing immediate pain.
But “this was not a partisan issue,” DeLauro told me. “Everyone was hit by it.” The question, she says, is whether her colleagues in both parties are still eager to tackle market consolidation and to bolster U.S. manufacturing.
DeLauro and Casey ought to have plenty of potential partners. When I spoke to more than 100 lawmakers last year about the best ways to prevent another formula shortage, dozens — among them Reps. Stephanie Bice (R-Okla.), Gus M. Bilirakis (R-Fla.), André Carson (D-Ind.), Bob Latta (R-Ohio) and Sens. Richard Blumenthal (D-Conn.), Sherrod Brown (D-Ohio) and Roger Wicker (R-Miss.) — emphasized the importance of issues such as bolstering American manufacturing, fostering competition in the formula marketplace and building a more resilient supply chain.
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Frantic parents aren’t casing stores for formula and calling congressional offices for help the way they were in 2022. But the formula market is still too concentrated, and another cohort of babies and parents still faces the risk of a shortage, even if they don’t know it. The hundreds of members of Congress who looked for solutions to the shortage two years ago should recall that bipartisan spirit and find ways to protect those young families.
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More than two years after safety concerns at a major infant formula manufacturing plant sparked a nationwide shortage, two Democratic lawmakers are introducing a bill aimed at creating a more competitive, stable market for this essential product.
The question now is whether the hundreds of lawmakers in both parties who declared the shortage a crisis in 2022 still remember the desperation parents felt then — and whether these representatives and senators can act on behalf of the babies who rely on formula now.
The shortage was the result of a collision between the hyper-concentration of manufacturers in the formula industry and the need to regulate them carefully.
In 2022, just four companies made 97 percent of the infant formula sold in the United States — and one of those subsequently bought another’s U.S. operations. That makes it difficult for food-safety regulators to come down hard without disrupting the supply chain. When Abbot Nutrition voluntarily shuttered its Sturgis, Mich., factory in early 2022 to address safety and sanitary concerns and recalled formula produced there, roughly 20 percent of formula production nationwide went offline.
Safety isn’t negotiable in infant formula: Babies have died after drinking formula containing the bacteria Cronobacter sakazakii. But the shortage had consequences, too. Pediatricians and parents struggled to source formulas for children with allergies and other metabolic conditions. Some infants even had to be hospitalized for lack of nourishment
The legislation from Rep. Rosa DeLauro (D-Conn.) and Sen. Bob Casey (D-Pa.) is aimed at the marketing-concentration half of the safety-and-supply equation. It would allow companies that sell less than $750 million in formula annually to choose between two tax credits, one aimed at expanding their manufacturing operations and another for increasing their output. One would be worth 30 percent of the cost of building new factories or adding production lines to an existing facility up to a limit of $150 million. The other, inspired by the green-energy provisions in the Inflation Reduction Act, would pay $2 per pound of formula produced, up to 18 million pounds per company per year, for five years.
The manufacturing tax credits could be the boost that formula brands need to buy or build their own manufacturing facilities rather than relying on contract manufacturers such as Perrigo, which also makes private-label formulas for chain stores. Those credits might also encourage companies with existing factories to build excess production capacity so they could scale manufacturing up quickly in the event of a shortage.
If firms don’t need to expand their physical operations, they could claim the production tax credits, giving them a financial boost as they try to claim greater market share. Even if companies claim production credits rather than manufacturing credits, such financial breathing room could also encourage companies to evaluate and update existing equipment.
“You just don’t want to become complacent,” says Laura Modi, co-founder and chief executive of the formula company Bobbie, which bought a factory last year. “Just because [a manufacturing line] was able to produce infant formula to a certain standard and a certain safety standard one day in the past, does not mean it doesn’t need further investment in the future.”
Scale matters for reasons other than pure competition. Upstart companies such as Bobbie or ByHeart, which operates its own factories, have not yet grown large enough to pursue the state-level contracts to provide formula at reduced costs to participants in the Special Supplemental Nutrition Program for Women, Infants and Children. Those families were especially vulnerable during the shortage because they could use their benefits to purchase only a single brand of formula.
According to a report this month from the Federal Trade Commission, from 2003 to 2013 only three companies even bothered to bid for these contracts. If other firms scaled up enough to try for WIC contracts, states would have more leverage on price, safety and redundancy issues.
Increasing competition and capacity in the formula market is only half of what’s necessary to prevent a future shutdown. DeLauro emphasizes that the Food and Drug Administration needs both more funding for inspections and institutional changes that will allow it to deploy inspectors wisely and process warnings quickly. But a more robust market would allow regulators to act aggressively without worrying that they’d upend the formula supply for months on end.
Despite the bipartisan expression of urgency about the shortage in 2022, and despite their care in focusing on time-limited tax credits rather than an ongoing appropriation, both Casey and DeLauro told me they’ve yet to find Republican co-sponsors for the House and Senate versions of the bill.
“All of us, myself included, have attention spans that are too short,” Casey acknowledged, suggesting that the country’s careening from crisis to crisis makes it more challenging to sustain congressional momentum once a chronic issue stops causing immediate pain.
But “this was not a partisan issue,” DeLauro told me. “Everyone was hit by it.” The question, she says, is whether her colleagues in both parties are still eager to tackle market consolidation and to bolster U.S. manufacturing.
DeLauro and Casey ought to have plenty of potential partners. When I spoke to more than 100 lawmakers last year about the best ways to prevent another formula shortage, dozens — among them Reps. Stephanie Bice (R-Okla.), Gus M. Bilirakis (R-Fla.), André Carson (D-Ind.), Bob Latta (R-Ohio) and Sens. Richard Blumenthal (D-Conn.), Sherrod Brown (D-Ohio) and Roger Wicker (R-Miss.) — emphasized the importance of issues such as bolstering American manufacturing, fostering competition in the formula marketplace and building a more resilient supply chain.
Frantic parents aren’t casing stores for formula and calling congressional offices for help the way they were in 2022. But the formula market is still too concentrated, and another cohort of babies and parents still faces the risk of a shortage, even if they don’t know it. The hundreds of members of Congress who looked for solutions to the shortage two years ago should recall that bipartisan spirit and find ways to protect those young families.
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