Challenges in Supply, Market Competition, and Regulation of Infant Formula in the United States (2024)
Chapter: 7 Concluding Remarks
Chapter 7
Concluding Remarks
This report, sponsored by the Food and Drug Administration (FDA) and prepared by an ad hoc committee of the National Academies of Sciences, Engineering, and Medicine (the National Academies) at the request of Congress to “examine and report on challenges in supply, market competition, and regulation of infant formula in the United States,” offers recommendations on measures to address infant formula supply and market conditions. FDA also indicated that “all-of-government” solutions were of interest. In response to this charge, the Committee on Challenges in Supply, Market Competition, and Regulation of Infant Formula in the United States:
- Characterized the supply chain for the infant formula market in general and the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) market, in particular;
- Developed a narrative structured around the infant formula market before, during, and after the 2022 shortage, including a detailed timeline of the government’s response to the shortage; and
- Based its analysis, conclusions, and recommendations on key problems that it identified by adapting a “vulnerabilities framework” initially developed for the drug market.
In summary, the committee addressed the major elements of the statement of task (see Chapter 1, Box 1-1) by examining the characteristics of the infant formula market and the challenges to the supply of infant
formula before, during, and in response to the shortage; identifying key vulnerabilities; and recommending specific actions to reduce the likelihood and impact of future supply disruptions. The committee considered the differences between the United States, European, and other countries in formula markets; between U.S. regulations and Codex; and the barriers posed by these differences during the 2022 shortage. Because the statement of task asked the committee to consider “other related information,” the committee also examined factors such as breastfeeding, the 90-day notification requirements for new infant formulas, and the ways that the new authorities in the Access to Baby Formula Act (ABFA) (P.L. 117-129) and the Food and Drug Omnibus Reform Act of 2022 (FDORA) (P.L. 117-328) could be used to protect the supply, production, and availability of both non-exempt and exempt infant formulas, which had been limited during the shortage.
OVERARCHING PERSPECTIVES
The committee kept in mind three overarching perspectives, which include what and how to feed infants; how supply chains can ensure reliable and equitable access to safe infant formula for all users, including WIC participants; and preparation for future infant formula supply shocks, as described below.
The committee acknowledges that the use of breast milk and infant formula interact with one another—within families and in society at large. Families may use breast milk, infant formula, or both—simultaneously or sequentially. Factors that increase the use of one often decrease the use of the other. Given the central importance of breastfeeding to child health, the committee called attention to the need for action to promote and protect breastfeeding in the United States and worldwide. In the context of the shortage, the importance of breastfeeding was evident as a mitigating factor for families. The broader questions related to the prevalence of breastfeeding in the United States are being evaluated by a separate National Academies study that focuses on this issue.
Infant formula, the focus of the committee’s work, is an essential food for infants whose parents choose to or must use this product. The cost of infant formula can make it unaffordable for some low-income families. As a result, WIC plays an essential role by making infant formula available to infants in these families at no charge. The committee was attentive to policy recommendations that preserve the ability of WIC to serve all eligible families who seek to participate, without reducing benefits or changing eligibility rules.
Shortages can be caused by various factors. Planning and preparation are essential to minimize supply shocks and expeditiously mitigate the
effects of any shortages that may result. The recent designation of infant formula and medical foods as “critical foods” by enactment of FDORA reflects the special efforts needed to protect the supply and access to these products.
SOLUTIONS TO ADDRESS IDENTIFIED VULNERABILITIES
In developing its conclusions and recommendations, the committee was fully aware that building resiliency and having reliable supply chains for infant formula require a financial investment and a deliberate approach to who will bear those costs. Improving the resiliency of the infant formula market will require investment of resources by both the government and the private sector. Implementing these actions will require providing additional resources to the relevant government agencies and the development of financial incentives to ensure that manufacturing facilities for infant formula are modernized to maintain safety, quality, and resiliency. The findings, conclusions, and recommendations developed by the committee (see Chapter 6) can be summarized in five areas; these are discussed in the following sections.
Increase Breastfeeding Protection, Promotion, and Support
The committee concluded that continued breastfeeding reduced the proportion of families affected or severely affected by the shortage of infant formula and that attention to breastfeeding promotion, initiation, and support remains essential for infant health. A separate National Academies committee (Committee on Understanding Breastfeeding Promotion, Initiation and Support Across the United States)1 is examining broader questions related to the prevalence of breastfeeding in the United States. The current committee’s findings and conclusions within this report are important for future work on this topic.
Reduce and Mitigate Production Concentration
The committee determined that, for supply chain vulnerability, the relevant concentration concept is concentration of production capacity and not firm or sales concentration. The committee found that capacity concentration is likely high in the U.S. infant formula market. However, the committee also recognized that addressing this concentration through policy is challenging. The committee’s recommendations focus on incen-
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1 https://www.nationalacademies.org/our-work/understanding-breastfeeding-promotion-initiation-and-support-across-the-united-states-an-analysis (accessed April 22, 2024).
tivizing infant formula companies to reduce or mitigate concentration of production capacity, limiting the size of potential shortages, and mitigating their effect on consumers. We discuss this below.
Implement Risk Management and Resiliency Planning
Given the challenges inherent in reducing the concentration of production capacity, risk management and resiliency planning are essential to reduce the likelihood that a supply chain disruption is triggered and to buffer a disruption to reduce its effect. Legislation enacted in the wake of the 2022 infant formula shortage partially addresses this issue. The committee’s recommendations build upon these new authorities to make redundancy risk management plans, required by FDORA, a more effective risk management tool and to emphasize the importance of sector-wide risk management planning. To be effective, redundancy risk management plans must be implemented; thus, the committee recommends enforcement mechanisms as well as implementation incentives.
Improve Speed of Recovery from a Shortage
Mitigating the effects of a shortage relies on having tools in place to speed the recovery of supply and ensure access to these products. The committee’s recommendations include several approaches to assure a speedy recovery in the event of a future shortage. These include the tools to monitor factors that were known to contribute to the 2022 shortage, including the following:
- Detecting and tracing the origin of contamination by Cronobacter sakazakii;
- Inspection of facilities that includes remote access;
- Advanced notification of product discontinuance;
- Sustained awareness of the availability of infant formula in the international market that could meet the needs in the U.S. during a shortage; and
- Identification of barriers, such as tariffs, that need to be addressed quickly to mitigate the effects of a shortage.
To increase the effectiveness of prevention and management strategies, FDA has requested the National Advisory Committee on Microbiological Criteria for Foods Subcommittee on Cronobacter spp. (NACMCF)2
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2 https://www.fsis.usda.gov/policy/advisory-committees/national-advisory-committee-microbiological-criteria-foods-nacmcf/2022 (accessed April 22, 2024).
to provide information about the factors that contribute to the contamination of powdered infant formula and the production environment by Cronobacter sakazakii. This committee encourages the NACMCF subcommittee to consider the findings and conclusions from this report.
Mitigate Adverse Consumer Impact
During the shortage, consumers and health care providers struggled to identify and select appropriate substitute products. The committee’s recommendations focus on the need for information that addresses this challenge. In addition, these recommendations encourage U.S. government agencies to speak with one voice in its advice for the preparation of infant formula and to address the specific needs regarding access to exempt infant formula for those populations for which these products are a medical necessity.
Understanding the effects of the shortage on WIC raised concern in the committee that the program is vulnerable to factors other than a recall that could disrupt the supply chain. At present the contract-based remedies required under the ABFA address shortages caused by recalls but not those caused by other factors. The committee recommends extending some of these remedies to shortages caused by factors other than a recall. Even with those remedies in place, such non-recall shortages could unexpectedly and sharply increase WIC costs, with serious consequences for the families it serves. The committee identified two approaches to address this risk: (1) establishing an emergency contingency funding mechanism as proposed in the president’s FY 2025 budget and (2) research to model the potential effects of such shortages and estimate the contingency funds WIC would need. Action on these approaches is needed to avoid or mitigate the effects of any future shortage on WIC participants.
The committee also learned that many users of exempt infant formula require formulas specialized to their medical needs, making substitution to other infant formulas or even breast milk as a partial or sole source of nutrition potentially dangerous for this vulnerable population. The committee proposed several ways through which the U.S. Department of Health and Human Services (HHS) can provide additional buffers for these users.
ALIGNMENT WITH ONGOING FEDERAL GOVERNMENT EFFORTS
Throughout the committee’s deliberations, the committee paid close attention to the legislation enacted in response to the shortage (e.g., ABFA, FDORA), as well as the published reports commissioned by FDA: FDA’s
Immediate National Strategy to Increase the Resiliency of the U.S. Infant Formula Market, Dr. Steven Solomon’s Evaluation of the Infant Formula Response, and the Reagan-Udall report evaluating the Human Foods Program. The committee also paid attention to the report from the Federal Trade Commission (FTC) or regulations issued by federal agencies and ongoing activities such as efforts by the NACMCF on Cronobacter sakazakii, the National Academies committee to examine quality factors, and the HHS supply chain coordinator).
The committee aimed to acknowledge the importance of these actions and identify where additional steps are necessary. Based on the committee’s overarching viewpoint that many factors can contribute to shortages in the supply of critical foods, it is important to learn from the 2022 infant formula shortage to implement safeguards for the supply of critical foods.
The new authorities provide government agencies with some of the necessary tools to maintain the integrity of the supply chain for critical foods. However, these tools need to be strengthened and extended. Moreover, using these tools will require an ongoing effort to monitor the supply chain for critical foods and manage issues as soon as possible. Taken together, the committee’s recommendations involve numerous and diverse federal departments and agencies, including their working relationships with state and local agencies and various actors in the infant formula supply chain, as well as identifying specific areas in which these entities can work together to produce a more effective result.
As a part of the statement of task (see Chapter 1, Box 1-1), the committee was asked to consider “other related information.” In this context, the committee identified that the roots of factors that contributed to the shortage can be found in the framework for regulating infant formula that existed before the shortage, including the specifications related to the quality and safety of infant formula and the new infant formula notification process. A separate National Academies Committee on Protein Quality and Growth Monitoring Studies to Satisfy Quality Factor Requirements for Infant Formula is examining the criteria for the quality factors and may find the information gathered by our committee useful in its deliberations.3 The committee’s research recommendations encourage FDA to analyze whether changes are needed to the new infant formula notification process to more accurately reflect the nature of the submissions received.
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3 https://www.nationalacademies.org/our-work/protein-quality-and-growth-monitoring-studies-to-satisfy-quality-factor-requirements-for-infant-formula (accessed April 22, 2024).
VALUE OF USING A VULNERABILITIES FRAMEWORK
The committee adapted the concepts of a “vulnerabilities framework” that had been previously developed to study drivers of drug shortages. This approach resulted in the conclusions and recommendations summarized above and identified four major issues, described below, that would have been less obvious without this framework. As government agencies continue to take steps to protect the supply of critical foods, the committee encourages them to use such a vulnerability framework.
First, the committee identified that an analysis of vulnerabilities in the supply of infant formula had not been done before the shortage in 2022, and that such an analysis would likely have revealed the need for adequate infant formula resiliency planning and emergency preparedness. The committee identified that the risks to the U.S. supply of infant formula go beyond the factors that caused the 2022 shortage, including other triggers that may cause disruptions in all aspects of production of infant formula, including ingredients, packaging, and labeling of infant formula. In this context, risk management planning is dynamic and calls for ongoing efforts and vigilance by the relevant agencies.
Second, the committee identified WIC as uniquely affected by the 2022 infant formula shortage because of its role as the largest purchaser of infant formula and its use of a competitive bidding process that awards a single-supplier contract in each state. As a result, a single company dominates sales not only to WIC participants but to other consumers as well. In this context, WIC can potentiate supply chain disruptions at the state level, which created significant state-to-state variability in the severity of the 2022 shortage. Nonetheless, the committee concluded that altering the basic structure of the WIC contracting mechanism would likely substantially increase program costs and lead to higher wholesale prices, and ultimately higher retail prices, for infant formula for all consumers. Thus, the committee recommended incentivizing WIC bidders to invest in robust resiliency measures to reduce the likelihood of supply disruptions and mitigate their scope and concluded that contractual remedies are the best way to protect consumers from the effects of market rigidities that state-level sales concentration cause during a shortage. However, these remedies currently only apply to supply disruptions resulting from a recall and thus would not be adequate during a shortage precipitated by other factors.
Third, the committee identified situations in which the adverse effects of the shortage on families using infant formula resulted from communication problems. These effects were magnified for WIC participants and the families that must use exempt infant formulas. These problems resulted in unnecessary stockpiling of infant formula, spillover of demand
from non-exempt to exempt formulas that are required for certain individuals, and communications on behaviors to avoid without adequately explaining actions to take. These factors served as potentiators during the shortage. The committee’s recommendations recognize that developing standardized communication strategies before supply disruptions occur is an important component of resiliency planning.
Last, the vulnerability framework enabled the committee to characterize the role of breastfeeding in the infant formula market and identify that breastfeeding can function as a buffer. However, the committee recognized that the lack of breastfeeding may function as a potentiator if it increases reliance on infant formula. Given the importance of breastfeeding in infant health, factors beyond the vulnerability framework must also be considered. This report is about infant formula, but paying attention only to that form of feeding misses the important role of breastfeeding in nourishing U.S. infants and reducing the need to use infant formula. The committee concluded that continued breastfeeding reduced the proportion of families affected or severely affected by the shortage of infant formula and that attention to breastfeeding promotion, initiation, and support remains essential for infant health.
FINAL REMARKS
The infant formula shortage of 2022 revealed the inadequacy of risk management planning by both the infant formula industry and the federal government and created an exceptionally challenging situation for both families and WIC staff. The recommendations in this report provide several ways to address the problems that were identified. While the 2022 infant formula shortage was triggered by a specific cause, Cronobacter sakazakii contamination, this is not the only potential risk to the U.S. infant formula supply chain. Consequently, the report recommends comprehensive federal government cross-departmental study of risks, which could result in the need to request additional authorities and resources through congressional action. The insights gained from this analysis, when implemented, should provide additional protection for critical foods.
The consequences of the infant formula shortage of 2022 were felt by nearly all families feeding infant formula and affected most companies in the industry. This distress was most acute among low-income families and those with infants requiring exempt infant formula. The committee’s analyses revealed ways that future infant formula shortages could be prevented or mitigated. These analyses also revealed new concerns related to the vulnerability of the whole infant formula supply chain, which
is subject to geopolitical and “force of nature” threats that could result in more widespread shortages of longer duration. Our conclusions and recommendations are intended to ensure that the United States is better positioned to respond to any future supply disruption. The deliberations of the National Academies committee examining breastfeeding and the National Academies committee examining infant formula quality factors, as well as the NACMCF subcommittee, will identify additional steps that can contribute to improving the system to protect the health and safety of infants and the vulnerable populations that rely on these critical foods.
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