Challenges in Supply, Market Competition, and Regulation of Infant Formula in the United States (2024)

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Chapter 1 Introduction Millions of families purchase infant formula each year, and approxi- mately three-quarters of infants receive infant formula at some point in their first 6 months of life (CDC, 2023). Infant formula is defined as “a food which purports to be or is represented for special dietary use solely as a food for infants by reason of its simulation of human milk or its suit- ability as a complete or partial substitute for human milk” (21 USCS § 321 (z)). Infant formula is designed to provide essential nutrients such as proteins, fats, carbohydrates, vitamins, and minerals necessary for growth and development when breast milk is unavailable. The American Academy of Pediatrics (AAP) and the World Health Organization (WHO) recommend exclusive breastfeeding, or providing only breast milk, until about 6 months after birth (Meek and Noble, 2022; WHO, n.d.). They also recommend continued breastfeeding, along with complementary foods, until the infant is 2 years of age or older (Meek and Noble, 2022; WHO, n.d.). However, not every infant is fully breastfed throughout infancy. Many parents and caregivers are either unable or choose not to breastfeed their infants for various reasons. While more than four in five U.S. infants receive some breast milk after birth, by 6 months of age, only one in four receives breast milk exclusively (CDC, 2022). Commercially prepared infant formula is generally the safest alterna- tive to breast milk (AAP, 2023). In the United States, the Food and Drug Administration (FDA) oversees safe manufacturing of these products to support healthy growth (FDA, 2024). Between September 2021 and February 2022, FDA received information regarding four cases of infant 21 PREPUBLICATION COPY—Uncorrected Proofs 

22 INFANT FORMULA REGULATION illness or death after consuming powdered infant formula (see Appen- dix C; FDA, 2022a). Since each of these infants consumed powdered infant formula products manufactured by Abbott Nutrition (Abbott) in Sturgis, Michigan, FDA initiated an investigation at the facility, which revealed unsanitary conditions (FDA, 2022a). As a result, FDA warned consumers not to use certain products manufactured at this facility and, subsequently, Abbott issued a voluntary recall of certain infant formula products and temporarily ceased production of all infant formula manu- factured at their Sturgis facility (which makes only powdered infant for- mula) (Abbott, 2022; FDA, 2022a,b, 2023). Abbott produces both infant formula for full-term healthy infants (non-exempt infant formula) and infant formulas for infants that have inborn errors of metabolism, low birth weight, or who otherwise have unusual medical or dietary problems (exempt infant formulas) (Abbott, 2022; FDA, 2024). In 2022, along with Reckitt Benckiser-Meade Johnson (RBMJ) and Nestle, Abbott was one of the three largest manufacturers of infant formula in the United States. In December 2022, Abbott accounted for nearly 30 percent of the infant formula market (FDA, 2022b). Abbott also held 32 of the 70 Special Supplemental Nutrition Program for Women, Infants, and Children1 (WIC) state, territory, and tribal contracts, which covered 45 percent of infants participating in this program (Hodges et al., 2024). Because of the distribution of WIC contracts among states, impact of the recalls and severity of supply chain shortages differed geographi- cally. More information about WIC’s role in infant formula purchasing is available in Chapter 4. The Abbott infant formula recalls and overall production pause at its site in Sturgis, Michigan, further stressed a supply chain that was already strained by the COVID-19 pandemic, causing a widespread shortage that created hardships for parents and caregivers who rely on infant formula to feed their infants. In addition, the recall and production pause led to panic buying (e.g., purchasing large quantities of infant formula out of fear that infant formula would no longer be available) by consumers (FDA, 2023). This infant formula shortage was unprecedented in the United States in its scope and duration, leading various government entities to begin taking steps in February 2022 to increase the amount of infant formula available in the United States (see timeline in Chapter 5 and Appendix C). 1 WIC provides low-income women, infants, and children under age 5 who are at nutrition risk with nutrition education, referrals to health care, breastfeeding support (see Appen- dix I), and nutritious foods, including infant formula for infants who are not fully breastfed (USDA, 2024a). WIC served an estimated 39 percent of all infants in the United States in fiscal year 2022 (USDA, 2024b). PREPUBLICATION COPY—Uncorrected Proofs 

INTRODUCTION 23 Actions included enforcement discretion, invocation of the Defense Pro- duction Act, and Operation Fly Formula (FDA, 2022a; White House, 2022). These responses are described in more detail in Chapter 5. THE COMMITTEE’S TASK AND APPROACH Following the 2022 infant formula shortage, Congress included language in the 2023 Consolidated Appropriations Act (P.L. 117-328 § 3401) relating to protecting infants and improving infant formula supply. Among other measures, the Act provided funding for FDA to enter into an agreement with the National Academies of Sciences, Engineering, and Medicine (the National Academies) to examine and report on the chal- lenges in supply, market competition, and regulation of infant formula (see Box 1-1). FDA also provided additional topics for the National Acad- emies to consider in its analysis (see Box 1-2). In response, the National Academies convened a committee comprising of experts in areas of pub- lic health safety and policy; public health nutrition and policy; infant health and nutrition; equity in access to formula supply; business and Box 1-1 Statement of Task An ad hoc committee of the National Academies of Sciences, Engineering, and Medicine will examine and report on challenges in supply, market competition, and regulation of infant formula in the United States. Specifically, the committee will assess and evaluate: 1. Characteristics of the U.S. infant formula market, including number, mar- ket share and other properties; 2. Challenges in supply, or market competition with respect to such formula; 3. Differences in infant formula marketed in the United States and infant for- mula marketed in the European Union, including with respect to nutritional content and applicable labeling and other regulatory requirements; and 4 Other related information. The committee will produce a report of its findings, conclusions, and rec- ommendations, including recommendations for infant formula manufacturers, on measures to address supply and market competition in the United States as described in H.R. 2617 of the FY2023 Omnibus Bill. PREPUBLICATION COPY—Uncorrected Proofs 

24 INFANT FORMULA REGULATION BOX 1-2 Additional Topics Requested by FDA for Consideration by the National Academies Committee 1. Infant formula marketed in the United States: a. Characterization of the current U.S. infant formula market 2018/2019 (pre- COVID-19 pandemic), 2020/2021 (before the Abbott recall), and current (2023), including number, market share, and other characteristics (e.g., multi-national, domestic, foreign) of firms marketing infant formula in the U.S. and similar for firms manufacturing infant formula for the U.S. market (the latter including contract manufacturers producing infant formula for private labels, retailers, etc.) and including, as appropriate, fully-notified infant formulas and infant formulas marketed subject to FDA’s exercise of enforcement discretion under its May 2022 Enforcement Discretion Policy guidance; b. Types of infant formula (e.g., exempt and non-exempt infant formulas) and physical form (e.g., powdered and liquid) marketed or produced by the firms above; c. Manufacturing sites for infant formula marketed in the United States (do- mestic and foreign), to the extent possible, indicating the specific formulas manufactured at a given site, but at a minimum, whether non-exempt or exempt, or both categories of infant formulas were or are manufactured at a given site. (Backup infrastructure helpful in maintaining production capacity is of particular interest); d. Amount of formula produced domestically for the U.S. market and amount imported, broken out by routine and medical specialty categories; e. Firms supplying infant formulas, both non-exempt and exempt formulas, for distribution through WIC, broken out by state; and economics, including supply chain dynamics; and regulatory standards and oversight. The aim of the current report is to examine and report on challenges in supply, market competition, and regulation of infant formula in the United States. As directed by the statement of task and additional topics to consider provided by FDA (Boxes 1-1, 1-2), the committee gathered evidence from several sources, including federal government websites, peer-reviewed published literature, and public sessions with relevant stakeholders (see Appendix D). Details on the committee’s methodologi- cal approach are included in Chapter 2. SCOPE OF THE REPORT The committee interpreted the task as a request to explain the vul- nerabilities that were exposed during the shortage, describe the extent to which actions taken by relevant stakeholders have addressed these PREPUBLICATION COPY—Uncorrected Proofs 

INTRODUCTION 25 f. Other related topics, as identified by FDA and the National Academies at initial meetings on this project. 2. Any challenges in supply, or market competition with respect to such infant formula, including: a. Necessary investments and resources including capital investments, human resources, research and development, and any other relevant information; b. Tariffs; c. Structure and implementation of USDA’s WIC program by states; d. Other marketplace barriers, incentives, and disincentives; e. Sourcing of key ingredients specifically for infant formula (e.g., vitamin andmineral pre-mixes, individual amino acids); and f. Other related topics as identified by FDA and the National Academies at initialmeetings on this project. 3. Any differences between infant formula marketed in the United States and infant formula marketed in the European Union (EU), including with respect to nutritional content and applicable labeling and other regulatory requirements and oversight (e.g., finished product testing, ingredients, inspections), also including: a. Similar comparison with infant formula marketed in the United Kingdom (whichexited the EU on January 31, 2020); b. Similar comparison with infant formula marketed in Australia and New Zealand; c. Similar comparison with infant formula marketed in Canada and Mexico; and d. Other jurisdictions as identified by FDA and National Academies at initial meetings on this project. vulnerabilities, identify the gaps that remain to be addressed, and recom- mend how to address them. Based on the statement of task and conversa- tions with FDA during the first public session, the committee acknowl- edged that certain related topics are being covered in depth by other committees. Therefore, the committee limited consideration of these top- ics to those aspects that impact the supply of infant formula and may have contributed to vulnerabilities exposed in the 2022 infant formula shortage. These areas are: increasing breastfeeding support, preventing or iden- tifying Cronobacter sakazakii in powdered infant formula, and assessing quality factors (e.g., infant growth monitoring studies or protein quality assessment) (see Appendix E). ORGANIZATION OF THE REPORT This report is divided into seven chapters. The first chapter describes the statutory and other requirements and the scope of the current study. The second chapter characterizes the committee’s methods to respond to PREPUBLICATION COPY—Uncorrected Proofs 

26 INFANT FORMULA REGULATION the statement of task. The third chapter describes the U.S. regulatory and international infant formula landscape before the 2022 infant formula shortage, while the fourth chapter specifically explores the U.S. infant formula supply and demand landscape before the 2022 shortage. The fifth chapter describes events that precipitated the shortage, as well as actions taken by stakeholders in response to the shortage. The sixth chapter describes the vulnerabilities identified by the committee and provides conclusions and recommendations, as requested by the statement of task. Finally, the seventh chapter provides the committee’s concluding remarks. REFERENCES AAP (American Academy of Pediatrics). 2023. Infant food and feeding. https://www.aap. org/en/patient-care/healthy-active-living-for-families/infant-food-and-feeding/ (accessed April 11, 2024). Abbott. 2022. Abbott is restarting Similac production at Sturgis. https://www.abbott.com/ corpnewsroom/nutrition-health-and-wellness/abbott-update-on-powder-formula- recall.html (accessed April 11, 2024). CDC (Centers for Disease Control and Prevention). 2022. Cow’s milk and milk alternatives https://www.cdc.gov/nutrition/infantandtoddlernutrition/foods-and-drinks/cows- milk-and-milk-alternatives.html#:~:text=At%2012%20months%20old%20(but,of%20 nutrients%20your%20baby%20needs (accessed April 11, 2024) CDC. 2023. Results: Breastfeeding rates. https://www.cdc.gov/breastfeeding/data/nis_data/ results.html (accessed April 11, 2024). FDA (U.S. Food and Drug Administration). 2024. Infant formula. https://www.fda.gov/ food/resources-you-food/infant-formula (accessed April 11, 2024). FDA. 2023. The U.S. Food and Drug Administration’s immediate national strategy to increase the resiliency of the U.S. Infant formula market. https://www.fda.gov/food/infant-formula- guidance-documents-regulatory-information/immediate-national-strategy-increase- resiliency-us-infant-formula-market (accessed April 11, 2024). FDA. 2022a. Timeline of infant formula related activities. https://www.fda.gov/media/158737/ download (accessed April 11, 2024). FDA. 2022b. Abbott voluntarily recalls powder formulas manufactured at one plant. https://www. fda.gov/safety/recalls-market-withdrawals-safety-alerts/abbott-voluntarily-recalls- powder-formulas-manufactured-one-plant (accessed April 11, 2024). Hodges, L., S. Toossi, J. E. Todd, and C. Ryan-Claytor. 2024. The Special Supplemental Nutrition Program for Women, infants, and Children (WIC): Background, trends, and economic issues. (Report No. EIB-267). U.S. Department of Agriculture, Economic Research Service. https://www.ers.usda.gov/webdocs/publications/108589/eib-267.pdf?v=2278.9 (accessed April 11, 2024). Meek, J. Y., and L. Noble. 2022. Policy statement: Breastfeeding and the use of human milk. Pediatrics 150(1):e2022057988. USDA (U.S. Department of Agriculture) 2024a. Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) https://www.fns.usda.gov/wic (accessed April 11, 2024). USDA. 2024b. WIC program https://www.ers.usda.gov/topics/food-nutrition-assistance/ wic-program/ (accessed April 22, 2024). PREPUBLICATION COPY—Uncorrected Proofs 

INTRODUCTION 27 White House. 2022. Fact sheet: President Biden announces new actions to address infant formula shortage. https://www.whitehouse.gov/briefing-room/statements-releases/2022/ 05/18/fact-sheet-president-biden-announces-new-actions-to-address-infant-formula- shortage/ (accessed April 11, 2024). WHO (World Health Organization). n.d. Breastfeeding. https://www.who.int/health-topics/ breastfeeding#tab=tab_1 (accessed April 11, 2024). PREPUBLICATION COPY—Uncorrected Proofs 

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