The National Baby Formula Shortage and the Inequitable U.S. Food System

Introduction and summary

Food and nutrition are literally life-giving and life-sustaining, yet parents and caretakers in the United States who rely on infant and specialty formulas for their loved ones’ health and nutritional needs face high prices and severe shortages. As of May 2022, 43 percent of formula products were out of stock nationwide—a massive increase from the average out-of-stock rate of between 2 percent and 8 percent at the start of the year.1 Some states, including Iowa, the Dakotas, Missouri, and Texas, are grappling with out-of-stock rates of more than 50 percent.2 The cost of infant and specialized formula was already untenably high for many, but recent safety concerns, supply chain issues, and challenges related to the COVID-19 pandemic have raised the price of baby formula to alarming highs and driven stock frighteningly low.






Over the past year, the average cost of the most popular baby formula products went up by as much as 18 percent3 at a time when millions are still struggling to recover from the pandemic and resulting economic recession. Making things even worse are the actions of a few—those who purchase formula at retail stores and resell it online at a severe markup, both increasing costs for vulnerable families and driving up scarcity.4

Read how the Biden administration and Congress can get baby formula back on the shelves

But the formula crisis reveals major flaws in the U.S. food production and distribution system, especially in times of emergencies, as well as weaknesses in the country’s social safety net resulting in inequitable access to food and nutrition. This report looks at how the crisis emerged and considers the longer-term opportunities to make U.S. food production, supply, and distribution systems more responsive, resilient, and equitable to ensure that all individuals and families have access to life-saving food and nourishment. The Center for American Progress recommends interventions and reforms that prioritize access and affordability to key food and nutrition; ideas to reduce market concentration, thus increasing supply; workplace policies to support parents and caregivers; increased oversight on consumer health and safety; and the reauthorization of key legislation that gives Americans the opportunity to create a truly inclusive and equitable food system.

The baby formula crisis and the conditions that created it

The formula shortage stemmed from a product recall by an Abbott Nutrition facility in Michigan, where unsanitary conditions and contaminated products led the U.S. Food and Drug Administration (FDA) to temporarily shut down the facility. Abbott re-opened the facility in early June, under strict FDA oversight, but was forced to close the plant again on June 15 due to torrential rain and flooding in the area.5 The Abbott closure was the catalyst to a crisis that has been years in the making: Policies and legislation that have permitted market consolidation of formula production by just a few companies, ongoing supply chain issues due to the pandemic, and corporate profiteering made this national shortage possible.6

What has been made abundantly clear during the national formula shortage is that there is a dearth of long-term solutions to create a more equitable, sustainable food system so that everyone across the nation has access to safe nutritious foods in their community.

The formula crisis has resulted in huge inequities, leaving millions of the most vulnerable—such as infants and children, women, grandparents who provide care, people of color, people with disabilities and/or chronic illnesses, LGBTQI+ people, and the elderly—without access to affordable and sometimes life-sustaining food and nutrition in their communities.7 Furthermore, the crisis sheds light on just how reliant the U.S. food system is on a small number of big corporations that control the majority market share of everyday grocery items and links throughout the food chain—from seeds and fertilizers to agribusinesses and slaughterhouses to grocery stores and supermarkets.8

The Biden administration and Congress are taking steps to address the current crisis and ensure that infant and specialty formula are fully stocked on grocery store shelves.9 However, once the immediate crisis abates, many of the challenges that created it in the first place will remain—including market consolidation, supply chain issues, and a lack of policies that prioritize the needs of infants, working parents, and people with disabilities or other illnesses. What has been made abundantly clear during the national formula shortage is that there is a dearth of long-term solutions to create a more equitable, sustainable food system so that everyone across the nation has access to safe nutritious foods in their community.

Market concentration has made the formula market vulnerable to large supply shocks

The supply of baby formula in the United States is highly concentrated. Three brand-name domestic producers—Abbott, Mead-Johnson, and Nestlé—supply about 98 percent of all formula domestically.10 The remainder is supplied by Perrigo—a domestic producer of store brands11 for several retailers such as Walmart, CVS, and Target—and a small amount is imported. The shutdown of the Abbott factory in Michigan, which accounted for approximately 43 percent of total consumption of formula according to the most recently available data,12 has had devastating consequences.

43%

The percentage of out-of-stock baby formula accounted for by the shuttered Abbott factory in Michigan

The baby formula market has some important idiosyncrasies that appear to contribute to market concentration. About half of all infant formula is purchased by state agencies and distributed through the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). Federal law requires state WIC agencies to purchase formula via sole-source competitive contracts. Awards are based on the net price the agency must pay, which is the wholesale price charged to all buyers minus a rebate to the state agencies. These rebates are a large source of revenue for the WIC program—in the range of $1 billion to $2 billion annually—amounting to about one-quarter of all funding.13

WIC is a highly effective anti-hunger program

It is important to note that WIC is a highly effective program. It supported around 6.24 million low-income mothers, infants, and children up to age 5 in fiscal year 2021,14 improving the health and nutrition of low-income participants and resulting in better health and academic outcomes for students.15 WIC is also cost-effective. Its competitive bidding process is essential to its efficacy and is intended to keep prices affordable,16 especially for low-income parents and caregivers. WIC’s competitive bidding process results in savings up to $2 billion per year, allowing the program to serve approximately 2 million more participants annually.17

A sole-source contract generates large spillover effects for the winning firm that compensate for the rebates paid to WIC. The guaranteed volume of WIC sales causes retailers to give the contract winner prominent shelf space and product placement, and widespread WIC usage may increase physician referrals for contract brands. A new contract winner in a state typically sees its market share rise by 74 percent, and the market share of the other suppliers declines by an equivalent amount.18 The privileged retail treatment given to contract winners appears to make it difficult for new entrants to generate much in the way of sales. Perrigo, for example, currently supplies store-branded, FDA-approved formula to several national retailers. This shows that profitable production for the sizable non-WIC market is possible. However, Perrigo does not sell its own branded products nationally and thus has a smaller market share than its larger brand name competitors.19

While producers in other advanced economies are capable of meeting FDA production and labeling standards, they do not have a significant presence in the U.S. infant formula market. Tariffs and quotas, along with the cost of transporting products with limited shelf life, may explain why they do not ship products from their home facilities. Tariffs can be as high as 17.5 percent, and there are quotas limiting imports from the rest of North America.20 However, if tariffs are the obstacle, and there are profits to be made, more multinationals could follow the example of the three primary producers of formula in the United States—Reckitt Benckiser Group (United Kingdom-based owner of Mead-Johnson), Perrigo (based in Ireland), or Nestle (based in Switzerland)—and set up U.S. subsidiaries to avoid tariffs.

The Biden administration has taken several steps to increase supply in the short term. Foreign products that meet FDA standards are being airlifted to the United States, and the administration has invoked the Defense Production Act to give domestic producers priority for needed input components to manufacture more formula.21 Congress quickly passed the Access to Baby Formula Act to increase flexibility for WIC participants to purchase other formula products other than the sole-source contractor,22 and the FDA prioritized the safe reopening of the Abbott plant while expediting the evaluation of imports23 to determine if foreign producers meet FDA safety, nutrition, and other requirements.24

The formula shortage heavily affects the most vulnerable

The infant and specialty formula crisis offers an alarming commentary on this country’s priorities around food and hunger, particularly when it comes to ensuring that parents and caregivers have access to the safe, affordable, and nutritious foods needed for their infants’ healthy growth and development.

Effects of the crisis on low-income and working mothers

WIC has played an important role over the years in making infant formula affordable and accessible to low-income families, but amid the current formula crisis, that access has become severely hindered.

The effects of the national shortage are being felt by millions of families across the United States, since most parents feed their children formula at some point early in their lives.25 However, it has taken a particularly significant toll on low-income working mothers.26 All people should be able to choose the feeding method that is best suited for their family—whether that be breastfeeding, formula feeding, or a combination—but lower-income women often do not have the ability to make that choice, and they are more likely to rely on infant formula than breastfeeding or start their children on formula earlier.27 There are a variety of reasons for this, including inadequate paid family and medical leave policies that prevent women from having the time and support to initiate and sustain breastfeeding; a lack of flexibility and privacy for mothers to breastfeed or pump while at work; and difficultly affording lactation consultants or breastfeeding equipment.28 Instead, many low-income mothers—around 1.6 million in FY 201829—are covered by WIC because, while breastfeeding is difficult to maintain for the reasons listed above, baby formula remains prohibitively expensive. In fact, families can spend up to $1,500 per year on formula alone,30 and prices have only continued to climb over the past year, with the average cost of formula products increasing by as much as 18 percent.31 WIC has played an important role over the years in making infant formula affordable and accessible to low-income families, but amid the current formula crisis, that access has become severely hindered.

Effects of the crisis on disabled populations and parents

The formula shortage is equally challenging for infants and individuals with disabilities or other people with certain allergies, gastrointestinal conditions, and metabolic disorders who rely on formula for their nutritional intake and survival.32 There is limited research on the breastfeeding experiences of disabled people, but barriers can include issues with milk supply that limit breastfeeding and difficulties communicating with health care providers and lactation consultants due to accessibility or accommodation needs.33 Additionally, infants with disabilities or medical conditions may be allergic to breast milk34 or have nutritional needs that require specific formula brands that cannot be substituted.35 Due to the disproportionate number of disabled people living in poverty,36 accessing formula (often in person) is a large economic and accessibility barrier. According to a 2019 report from the National Disability Institute, the poverty rate for disabled adults is more than double that of nondisabled adults, and this is further exacerbated for disabled people of color.37 In addition, people with certain medical conditions may be unable to breastfeed, including people who are being treated with chemotherapy or have other medical issues that lead to parent-child separation.38

Due to the disproportionate number of disabled people living in poverty, accessing formula is a large economic and accessibility barrier.

Effects of the crisis on LGBTQI+, foster, and adoptive parents

The formula shortage also affects grandparents who provide care and LGBTQI+, foster, and adoptive parents who rely on formula for their infants’ healthy growth and development. LGBTQI+ families face unique concerns in the wake of this formula shortage.39 An estimated 292,000 children40 live in households with same-sex parents, and same-sex couples are seven times more likely to foster or adopt than opposite-sex couples.41 Parents who adopt or who have babies through surrogates, including many LGBTQI+ parents, may be more likely to rely on formula for feeding their children, significantly raising the stakes42 for these households if formula is not available.

In addition, due to employment discrimination, workforce exclusion, and other determinants of health, LGBTQI+ people collectively report higher rates43 of economic insecurity than non-LGBTQI+ people, heightening financial barriers to accessing formula when there are supply shortages and price fluctuations. Compared with non-LGBTQI+ populations, LGBTQI+ communities also report higher participation rates in public benefit programs, including nutrition assistance programs.44 For example, according to 2019 data from the Federal Reserve Board, LGBTQI+ households with children were almost twice as likely to receive assistance through the WIC nutrition program than non-LGBTQI+ households (14.8 percent compared with 8 percent) and through Supplemental Nutrition Assistance Program (SNAP) benefits, formerly known as food stamps (14.6 percent compared with 7.8 percent).45

Health consequences of the formula crisis

Infant and specialty formula itself is often exceedingly expensive.46 The high cost of baby formula, even when not amid a national shortage, forces some parents to modify or substitute formula, but this can lead to malnutrition and other serious health risks. The FDA has specific requirements for nutrient compounds in infant formula vital to children’s early development.47 At-home fixes, such as watering down baby formula to stretch it longer, homemade alternatives, and the use of other milk types for infants less than one year old, such as cow’s milk or plant-based milk, do not contain the nutritional composition that babies need.48 Additionally, if prepared in unsanitary conditions, these homemade alternatives can also contain foodborne illnesses, which can be fatal for young children.

Malnutrition takes a particularly high toll in infants, leading to slowed physical, cognitive, and neurodevelopment growth, including difficulties with language and speech, motor skills, behavior, memory, learning, or other neurological functions.49 Several children with medical conditions that require specific formulas were recently hospitalized in Tennessee when their families were unable to access needed formulas.50

Malnutrition in infants takes a particularly high toll, leading to slowed physical, cognitive, and neurodevelopment growth, including difficulties with language and speech, motor skills, behavior, memory, learning, or other neurological functions.

These alternatives are even riskier for infants with allergies or metabolic disorders who need specialized formulas to ensure they still get the nutrients they need. The Abbott plant in Michigan held a near monopoly on the production of specialized formulas that thousands of people rely on. The FDA recently announced new permissions for Abbott’s Michigan plant to release some specialty formulas on a “case-by-case basis” while the investigation into the safety concerns reported last year continued.51 The plant reopened on June 4, 2022, with a requirement to comply with regular external health and safety audits,52 but was forced to close again on June 15 due to flooding from torrential rains in the area.53 It remains to be seen how this latest closure will affect the ongoing formula shortage.

WIC also contributes to young children’s healthy growth development. For every dollar spent on WIC services, the United States saves $2.48 in health care costs.54 WIC clinics actively collaborate with other federal programs, health care providers, the food industry, and retail partners to strengthen community health infrastructure. Increased linkages—particularly with health care providers—can help address existing health disparities, including persistently high rates of maternal and infant mortality and morbidity. Proposed federal legislation focused on social determinants of health would create an interagency council to promote collaboration and coordination across federal programs.55 It would also provide grants to support community-based, cross-sector collaborations to coordinate care and services in communities with significant unmet health and social needs with the aim of improved and equitable outcomes.

Finally, it is important to keep in mind the toll that being unable to feed one’s child takes on parents and caregivers, regardless of circumstance. As this crisis has shown, many are quick to judge parents—particularly women—for using formula in the first place as opposed to focusing on needed policy interventions that ensure all parents can keep their babies healthy. The backlash from some, asserting that parents should simply breastfeed, reveals the enduring stigma around formula feeding and a lack of understanding of the needs of disparate populations who rely on formula.56

Recommended legislative and policy action

Access and affordability remain key challenges to all kinds of families, as well as for infants and babies who rely on specialty formula for their survival. In the long term, the United States needs to increase the number of suppliers of domestic infant formula to reduce the risk of supply shocks. Perrigo, one of the few companies supplying baby formula to U.S. grocery stores, expects shortages and increased demand for formula to last to the end of the year.57 To mitigate enduring shortages, WIC contracting should be reconfigured to increase entry of more domestic producers. Financial incentives may also be needed to assure swift entry. To the extent possible, supply of foreign formula production that meets FDA standards should be encouraged. Policymakers might reconsider tariffs applied to reliable producers, or the FDA could be empowered to suspend tariffs on these companies in the event of a significant supply shortage.

In addition to policies that dilute market concentration and incentivize new market entrants to produce a range of formula products, as discussed above, Congress has an important legislative opportunity to address some of the limitations and inflexibilities of the WIC program, making it stronger and more responsive to future spikes in need. Federal child nutrition programs—which include WIC—have not been reauthorized since 2010.58 These programs have continued operating through the annual appropriations process but have not been improved or strengthened in more than a decade. In 2021, congressional leaders in the U.S. House of Representatives and the U.S. Senate expressed interest in advancing the reauthorization but have yet to address the issue in 2022. Congress should reauthorize child nutrition programs and WIC this year with an eye to preserving the rebate program while incentivizing other entrants into the market to offer a wider range of products and lower costs.

It should not take a national emergency for policy change to support parents and WIC participants. State flexibilities, such as allowing parents and caregivers the options of buying alternate formula products, alternate sizes, and brands of formula using WIC benefits, should be made widely available to better meet the needs of caregivers and to be more responsive, especially during times of emergencies or shortages. Furthermore, America needs family friendly policies that support mothers, in particular low-income mothers, in their decision to either breastfeed or use formula. These policies can include:

  • Pursue permanent national paid leave legislation that covers all employees—including part-time and self-employed workers—and is inclusive of “chosen family”;59 includes short- and long-term caregiving leave; and ensures adequate wage replacement for caregiving leave.
  • Enforce existing workplace breastfeeding protections for covered employees—as stipulated under the Break Time for Nursing Mothers provision of the Fair Labor Standards Act—and expanding the types of workers not currently protected by the Break Time law.60
  • Enact regulations to ensure people enrolled in traditional Medicaid plans are not forced to pay out of pocket for breastfeeding counseling and equipment—a practice that is prohibited for most Medicaid expansion and private plans—and require federal and state Medicaid plans to cover at least one breast pump per pump type (electric, manual, or battery-operated).61

And finally, there needs to be increased oversight and accountability to become more responsive to future supply shortages and to address health and safety concerns, ensuring a food system that is equitable and resilient. Compounding supply shortages, regulators are also confronting enduring health and safety issues in powdered infant formula manufacturing. As such, the pandemic has pointed to the need to build the government’s capabilities to detect and prevent threats early, to respond quickly to health emergencies, and to ensure coordination across federal agencies to leverage communication and resources more effectively to address disruptions.

There is no comprehensive mechanism for detecting or investigating deadly bacteria, such as Cronobacter sakazakii, which has been linked to powdered formula and can cause serious brain damage, developmental disabilities, and even death in babies.62 While the U.S. Centers for Disease Control and Prevention (CDC) and FDA are working with state and local health officials to investigate a recent outbreak of the Cronobacter bacteria that resulted in several babies being sick and two passing away, the lack of regular testing and reporting makes it challenging to determine just how many people were affected. Currently, there is only one state that requires doctors and labs to report Cronobacter sakazakii cases to authorities.63 And although the FDA established regulations in 2014 requiring formula makers to test samples from every product lot for Cronobacter, lots tend to vary significantly in size, making testing inadequate. As a result, the FDA is now seeking authority to require additional testing and reporting by formula makers to ensure greater health and safety standards.64

These actions are critical, as chronic underinvestment in the nation’s public health system, including in the data systems and workforce needed to ensure that key functions such as food safety operate smoothly, has left the nation vulnerable. It highlights the need for timely information to assess risk and inform critical decisions and reveals the need for—and limitations of—the nation’s public health data for tracking and monitoring disease. President Joe Biden’s FY 2023 budget includes funding to strengthen the nation’s public health infrastructure and early warning capabilities, including funding for the CDC to develop workforce, laboratory capacity, and data collection, as well as for the FDA to expand and modernize its regulatory capacity and laboratory infrastructure.65 Congress should pass these funding increases, among other necessary reforms.

Long-term reform of the nation’s food and nutrition system

Every child, individual, and community deserves a food system that delivers affordable, nutritious food that protects their health and well-being. But the infant formula crisis, along with the COVID-19 pandemic and resulting economic downturn, has exposed persistent and deeply damaging inequities in the U.S. food system that must be addressed as a country. In a survey conducted from April 27, 2022 to May 9, 2022, almost 34 million households reported that they sometimes or often did not have enough to eat during the week.66 More than 11 million households with children under age 18 reported that they sometimes or often did not have enough to eat during the week. And almost 4 million households with children who were getting federal food benefits through SNAP still struggled with food insecurity and hunger during this time.67 Food insecurity is felt most acutely by people of color, individuals with disabilities,68 and LGBTQI+ people.69

Despite the United States producing enough food to feed everyone within its borders,70 millions of Americans rely on federal food benefits and programs—such as WIC, SNAP, or school meal programs—and food banks for their next meal. Such programs are intended to be emergency or supplemental aid for individuals or families struggling with temporary financial precarity and hunger. But increasingly, these programs have turned into a resource of basic survival for millions. Simply put, the U.S. food system does not meet the needs of all communities, especially rural, low-income, and communities of color.

America’s hunger crisis—both the infant formula shortage and more systemic food insecurity—should be a wake-up call to policymakers, forcing their attention to longer-term solutions rooted in the goal of fostering equitable and sustainable access to food and nutrition.

Policymakers can begin with two upcoming legislative reauthorizations that give Congress the opportunity to take meaningful action in fostering a food system that better meets the needs of all Americans:

  • In 2022, Congress is due to reauthorize the Child Nutrition and Women, Infant and Children Act,71 which authorizes all federal child nutrition programs, including WIC, reaching millions of children and their families each day. While Congress is long overdue for reauthorizing the Child Nutrition Act, it must at minimum renew the programs’ funding in 2022 while using the broader reauthorization opportunity to rethink the country’s food and distribution systems, especially for the most vulnerable.
  • In 2023, Congress will turn its attention to reauthorizing the Farm Bill, which includes SNAP, the largest anti-hunger program that supplements the food budget of needy families, enabling them to purchase healthy food and move toward self-sufficiency.

Both bills offer Congress an unprecedented opportunity to strengthen and coordinate food production, distribution, and supply systems in this country, while addressing emerging challenges that are affecting the national and global food systems—such as pandemics, the impact of climate change on food production, economic recessions, and more.

Secondly, the White House is hosting a conference on hunger, nutrition, and health in the fall of 2022, which presents an opportunity to reimagine the nation’s food system, focusing on sustainable, resilient productions, strong supply chains, adequate supply, and access to quality, affordable, and culturally and nutritionally diverse food for every person.

Simply put, the U.S. food system does not meet the needs of all communities, especially rural, low-income, and communities of color.

The domestic infant formula industry would also be subject to any changes made by way of new laws affecting the country’s domestic manufacturing and supply chain resiliency. Provisions in the House-passed COMPETES Act72—currently being reconciled in a conference committee with the Senate-passed U.S. Innovation and Competition Act73—would foster market entry, with additional incentives for small- and medium-sized manufacturers. If passed in a final package, these provisions could increase supplier diversity and expand the number of producers in the domestic infant formula market. However, these proposals may only have value to potential manufacturers if WIC single-source contracting evolves to increase access to market share by new producers that would otherwise be shut out of the preferential treatment previously described.74

And thirdly, long-term efforts to rebuild the food production, distribution, and supply system in an equitable and sustainable way should be combined with intersectional policies that support and build stability for low-income and other marginalized communities. For example, instituting a livable minimum wage throughout the United States, coupled with paid family and medical leave and other worker protections—including those that allow parents the flexibility they need to breastfeed or pump—are imperative to ensuring that individuals and families have the means to care for themselves and their loved ones with dignity. Good jobs can give low-income individuals and families a step up to financial security and self-sufficiency, reducing poverty and reliance on emergency food resources. Similarly, investing in safety net programs—making them stronger, more resilient, and more responsive in times of crisis—can ensure that every person is fully supported during times of personal, national, and global financial precarity. An intersectional approach to addressing the systemic inequities in the country’s food system can be aligned with a whole-of-government approach to address food insecurity from multiple angles—from production to distribution to supply and access.

Conclusion

The infant formula crisis has made one thing clear: It is time for a wake-up call. No child or individual should go hungry in the wealthiest nation in the world. For too long, key parts of the U.S. food system have been underfunded, monopolized by a small number of key players, and dependent on systems that can easily be disrupted and/or are underregulated, resulting in food and nutritional inequities with dangerous implications.

Over the next year, the United States has a crucial, once-in-a-generation opportunity to improve the lives and health of millions of children and other vulnerable people by undertaking a coordinated cross-sector response across federal agencies, leveraging resources to build an equitable, sustainable food system that accounts for the needs of diverse communities. New policies can foster communities in which every person can not only survive but thrive and prosper. It is imperative for policymakers to take advantage of this opportunity, creating a society and economy that supports and works for all its residents.

Acknowledgments

The authors would like to thank Hailey Gibbs, Madeline Shepherd, Maggie Jo Buchanan, Seth Hanlon, Nicole Ndumele, and Emily Gee for their guidance. The authors also thank Justin Schweitzer, Anona Neal, and the CAP Editorial team for their valuable contributions to this report.