Big-Government Interference Caused the Baby Formula Crisis by Marc A. Thiessen

Political crossfire Big-Government Interference Caused the Baby Formula Crisis

by Marc A. thiessen

the Biden administration is getting hammered for the baby formula shortage – and deservedly so. A whistleblower notified the Food and Drug Administration in October of unsanitary conditions at a baby formula factory, but the FDA did not shutter the plant until February, and the president took no steps to address the crisis – such as easing import rules – until May. That is inexcusable.

But that plodding response is not the main reason parents across the country are scrambling to find formula for their babies. Neither are pandemic-related supply-chain issues. The reason is big-government interference, which has distorted the baby formula market and produced the Soviet-style shortages we are experiencing today.

The shuttering of a single baby formula plant should not lead to bare shelves. Other food production facilities sometimes fail health inspections, but halting production at one factory does not send the entire country into crisis. That’s because we have multiple companies producing everything we eat – from meat, to vegetables, to processed foods – which means when something happens at one factory, other producers can step in to make up for shortfalls.

Not so with baby formula. Just two manufacturers – Abbott and Reckitt, the makers of Similac and Enfamil, respectively – are responsible for almost 80% of baby formula production in the United States; they have shared a virtual duopoly since the 1950s. Why? Because, as the Wall Street Journal reports, baby formula is so tightly regulated that it is nearly impossible for new entrants to break into the market.

The FDA treats baby formula like a pharmaceutical product instead of food for infants. Clinical studies and other requirements cost millions of dollars before a company can bring a product online, and the FDA subjects producers to pharmaceutical-grade regulation and inspection. Case in point: ByHeart is the first new formula manufacturer approved by the FDA in more than 15 years. To win approval, it had to raise $190 million to cover the cost of research and development, clinical growth studies, and a host of other FDA requirements. It took the company more than five years jumping over government hurdles to open its first manufacturing plant, which finally began production this year.

This is absurd. Except in the case of specialty formula for infants with certain medical conditions, baby formula is not a pharmaceutical product. It’s food. Formula generally contains purified cow’s milk, whey or soybeans for protein; vegetable oils for fat; lactose for carbohydrates; and a mix of vitamins and minerals. That’s it.

No other food is regulated that way – including baby food. As every parent knows, at six months of age, babies start transitioning from formula to pureed fruits, vegetables, oatmeal and meat. Unlike baby formula, baby food is produced by many companies – from Beech-Nut to Earth’s Best, Gerber, Yumi, Heinz, Nature’s One, Happy Family and Plum Organics. So why is it OK to give 6-monthold infants food that is subject only to basic health and safety guidelines, but the food we give them in the first six months of their lives is regulated like a vaccine?

If a single baby food plant shut down, we wouldn’t see parents struggling to feed their children; other companies would happily step in and make up for lost production. But thanks to the federal government, the shutdown of a single Abbott plant, responsible for one-fifth of all U.S. baby formula production, has left us with bare shelves and with almost no competitors ready to step in to fill the gap.

It gets worse. Government also distorts the baby formula market through the Women, Infants, and Children supplemental nutrition program. According to the Wall Street Journal, WIC “has deepened the hold that major manufacturers such as Abbott have over formula sales” resulting in “a marketplace with little competition and little flexibility.” Under WIC, each state grants exclusive contracts to a single manufacturer in exchange for discounts. Only the winning manufacturer’s product can be bought with the government vouchers issued to lower-income parents. This also increases sales to non-WIC consumers, because stores in each state tend to primarily stock the WIC-approved brand – giving the government-chosen company a near-monopoly in that state.

This is a toxic marriage of big government and big business to crowd out competition. First government raises prices through overregulation and a lack of free-market competition, and then it justifies mass government purchases from single manufacturers by arguing these are necessary to negotiate discounts. The discounts would not be necessary if there were more producers of baby formula competing for the business of American parents. Then store shelves would be filled with as much cheap baby formula as there is banana puree.

What is the solution? Stop treating formula like a pharmaceutical product, except in specialty cases. Eliminate the barriers to entry that allow 80% of the market to be dominated by two manufacturers. Treat baby formula like baby food, with common-sense measures to make sure that factories are clean and products are safe. If we did that, then American parents would not have to worry about the Biden administration’s incompetent response to this crisis – because it would have never have happened in the first place.