0:00

N p r it.

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This indicator from Planet Money. I'm

0:13

Waylon Wang in

0:16

a Chicago and

0:18

just over week ago. ago she was scrolling through

0:21

hitch with fade. When she noticed

0:23

lot of people timeline about

0:25

the national shortage of infant formula.

0:27

Nikki

0:28

is a mom herself and she remembers

0:30

having rough time with breastfeeding and

0:32

needing to supplement formula. So

0:34

she sprang into action. She set

0:36

up Google form to connect parents, with

0:38

people, wanting to help and made digital flyer

0:41

promoting her new Mutual Aid effort.

0:43

So

0:44

If. You're, you know, in Texas, anything you're at a cost

0:46

or whatever, and you see something, and there's somebody

0:48

that within you know, however, many miles of you

0:51

less pair you guys. Up the Google for

0:53

just filled up like two hundred people

0:55

before I knew it, there are a lot of reasons behind

0:57

the formula crisis, but one

1:00

big factor is actually A. Government

1:02

nutrition program aimed at helping

1:04

moms and babies about half

1:06

the formula bought in the U.S. gets distributed

1:09

through this program and, that means that

1:11

the government has played an outsized role

1:13

in shaping the market for baby formula

1:16

Today on the show, we pull back the curtain

1:18

on this unique market for baby formula

1:20

in the U.S. and look at whether the shortage

1:23

means and might be time for an overhaul.

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2:07

David Davis, as an economist at South

2:09

Dakota State University, he's been studying

2:12

the infant for.

2:12

The market for the last two decades

2:14

this is a really interesting market rate

2:17

is it is really interesting confluence

2:19

of economics,

2:22

and policy and food assistance

2:25

I'd never would plan to be an expert

2:27

on baby formula but. here

2:29

i am

2:30

There is, a big part of the formula

2:32

market because of because national program called

2:34

with or women infants and children This

2:37

provides money for food and formula,

2:39

as well as health screenings for pregnant women, new

2:42

moms and kids, up to the age of bias.

2:44

Breastfeeding? Support is a big part of the with

2:46

program to bet breastfeeding is

2:48

not always an option for families, for

2:51

some it's physical issue like then

2:53

babies are born prematurely for.

2:55

Others, it's societal issue: lots

2:57

of women have to go back to work soon after giving

2:59

birth, and it can be hard for them to keep

3:01

nursing when that happens so. weak

3:04

parents get assistance and buying formula,

3:06

which can often be the sole source

3:08

of nutrition for.

3:09

Their. babies David says that in the nineteen

3:11

eighties, the cost of formula was going

3:13

up faster than the rate of inflation and

3:15

this is basically an issue for state officials

3:18

running with. Programs because Formula

3:20

was eating up a huge share of their federal

3:22

grant money states that I'm looking

3:24

for ways to bring down the cost of Formula

3:27

accomplice to which administrator

3:29

his. Arms.

3:30

The mob with this idea to start asking

3:32

for rebates for manufacturers

3:35

in other words the state sponsored a better

3:37

deal on formula but, of

3:39

course they had to give the formula companies

3:42

something in return and they offered

3:45

in exchange for the rebate you

3:47

again Source

3:49

contracts for the state so you would get the entire

3:51

states with market.

3:53

The decide which manufacture would get that

3:55

sole source contract Steve

3:57

companies go through a competitive bidding.

4:00

That they have to present sealed beds

4:02

and whatever former lawmaker offered their

4:04

biggest discount would get that.

4:06

Exclusive deal in nineteen eighty nine

4:08

a federal law essentially mandated

4:10

that state agencies use this

4:13

competitive bidding process for buying infant

4:15

formula and, once company

4:17

one that exclusive with contract

4:19

for state it was all but guaranteed

4:22

total market dominance in that state

4:24

thanks to what researchers describe as kind

4:26

of spillover effect

4:28

Then. Here's what would happen because

4:30

work is such a large programme

4:32

grocery store is would dedicate the most

4:34

sell space to whatever formula brands

4:36

had that sole source contract and

4:39

then non. Which shoppers would end up buying

4:41

that brand to because that was all they

4:43

saw when they went to the supermarket so.

4:45

thanks to the spillover effect the with

4:47

system of warden so full of contracts

4:49

ended up creating no winners

4:51

Takes. All market for formula in each

4:54

state, if you are a different

4:56

formula manufacturer, and you want to sell

4:58

your brand of infant formula In that

5:00

state, you better have the WIC contract.

5:02

Otherwise, you probably only going to have

5:05

about 50% position

5:07

in the marketplace or maybe, even something less than

5:09

that rated

5:12

a state of banded together to get the best

5:14

deal for their WIC programs. For

5:16

example, Washington state is part of group

5:18

of 24 states that run their bidding

5:20

system together. They all go with

5:22

the same manufacturer Abbott,

5:24

which is one of just four companies that

5:26

dominate the formula industry and is

5:28

the leader with more than 40% of the

5:30

market in

5:32

a Washington. And

5:34

he says that the state Collective

5:36

buying power, got them very

5:39

good discount on Abbott's formula. Honestly.

5:41

The one we get in Washington is pretty generous 100%

5:46

on the basic

5:48

formula that

5:50

you're making money. Now, we

5:56

don't use that money for anything else. So

5:58

formula companies are finding that.

6:00

"The was worse paying states

6:02

in some cases to use their formula

6:04

for which they would bet that known

6:06

with customers would see their products on

6:08

sea bug cells and that would help them

6:10

profit"

6:11

This is some with a competitive bids

6:13

and exclusive contracts, it works pretty well.

6:16

So it didn't win at it

6:18

voluntarily recalled Powder Formula's

6:20

need, added Sturgi's Michigan plant in February,

6:23

it was devastating for families added

6:26

to the recall after for reports

6:28

of bacterial infections and in fence

6:30

that eight formula made in that factory.

6:32

Have it set of found evidence of one of the banks

6:34

here and the plans, but not in any of it's distributed

6:37

products either way it expanded

6:39

it's recall after the deaths of two incense?

6:42

Drop it in the Washington Post this weekend Abbott

6:44

see I apologized quote to

6:46

every family was let down since our voluntary

6:48

recall exacerbated our nation's baby

6:50

formula shortage and quiet he.

6:53

also plays also five million dollar fund for

6:55

certain families whose babies are hospitalized

6:57

because they can get specialized formula

7:00

I don't recall has been a particular hardship

7:02

on with families because they can only

7:04

use their benefits on that kind of formula

7:07

if they buy different brands they have to pay out of

7:09

pocket.

7:09

We had over fifteen thousand

7:12

babies in Washington State using

7:14

one or more of these kinds of recalled

7:16

formulas.

7:18

Then. Weeks after the recall was announced,

7:20

Paul's office work to the federal government says

7:22

figure out some stopgap measure is the

7:24

allowed with families to get cash refunds

7:26

and formula that was. affected the expanded

7:28

the kinds of formula that families could get

7:30

with their with benefits, but with the Abbott

7:32

plant in Michigan close, the crisis kept

7:35

escalating.

7:36

We have people call us saying they

7:38

have gone from store to store or,

7:41

even from county to county and

7:43

in eastern washington the counties are really

7:45

big so if you have to go to two

7:47

or three counties to find what you need

7:49

you might be driving more than one hundred miles

7:51

to make that happen

7:53

Also, she's heard him different ideas of how

7:55

to improve the system to prevent another

7:57

crisis, maybe having and emergencies.

8:00

The pilot formula. The or allowing

8:02

with families to keep having more flexibility

8:04

and what?

8:05

Milan. They can buy, we do get a tremendous

8:07

amount of support for the program from

8:09

the formula rebate, so that's

8:11

good thing on the other hand

8:14

we have to rely on. One single

8:16

source for much of our formula and

8:18

as we can see it leaves us vulnerable

8:21

to problem in the system.

8:22

There are all kinds of situations like this, where we

8:25

are reducing our resilience and

8:27

we don't realize this until this a major

8:29

crisis and we have to do something drastic

8:32

and fast to fix the situation and.

8:34

What's? Happening now with the infant formula shortage

8:37

in response to a market, say Thai Food and

8:39

Drug Administration regularly said import

8:41

restrictions and as winner takes

8:43

all week procurement, the Biden administration.

8:46

Is scrambling last week

8:48

and invokes the defense production as to

8:50

increase manufacturing baby formula,

8:53

and on Sunday the first of what's expected

8:55

to be several military flights from Europe

8:57

arrived. With hypo allergenic formula.

9:00

Lots of parents are still in the latch. So

9:02

in the meantime, people like

9:04

Mickey veale the mother who put together the Google

9:06

form. They are helping. However, they

9:08

can Mickey has been driving around

9:10

looking for formula that she can buy and

9:13

give away is

9:14

heartbreaking because you'll go in the store and you'll

9:16

just see the whole like, you'll

9:18

see a whole shelf, just cleared

9:20

out. But I have faith

9:22

in community faith. In the people that

9:24

have been held out. Last

9:26

week, Abbott did reach a deal with the

9:28

FDA that would allow it to restart

9:30

operations at its plant Michigan, but

9:33

it could take another to eight weeks

9:35

after reopening for products

9:37

to arrive on store shelves.

9:42

This

9:43

episode was produced by Nikki will let an engineered

9:45

by Josh Newell was fact-checked by

9:47

Corey Bridges

9:48

via laser, senior producer, kincannon

9:51

edits, the show. And the indicator is

9:53

a production NPR.

9:57

This is Tamara Keith from

9:59

the in. P. Our politics podcast we've

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been following the news of the draft

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