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The PharmaTell Team – well me, Robin, in particular – had Eyes on the US Baby Formula Shortage this week. I was curious as to how this happened, the cause, and the resolution. It is a complicated story…
A Brief Overview
In the fall of 2021, several babies fell ill (and 2 died) from rare bacterial infections attributed to infant formula – all were using formula from Abbott Nutrition.
The FDA began investigating the illnesses and was also contacted by a potential “whistle-blower” from the company in question about potential sanitation & quality issues at the plant.
Initially, batches of formula were recalled voluntarily and then the plant was closed and the FDA conducted an inspection. This resulted in a Form 483 issued to Abbott Nutrition. The company is currently working on remediations, hoping to have the formula back in stock in 3Q22. Note- Abbott issued a statement that none of the formulas that were marketed tested positive for the bacteria in question and the CDC reported no links between infant illnesses and Abbott formulas. On May 16 Abbott entered into a Consent Decree to create a path to reopening the plant. Additionally, they have been importing product from their EU plant, and producing in other US plants while also offering discounts and coupons for customers to offset price increases.
What Caused a Shortage?
Abbott Nutrition supplies over 40% of all Baby Formula sold in the US. Plus, they hold sole-supplier or majority-supplier contracts with many state welfare programs.
Over half of all infants are supplemented with formula during their first 3 months to help with healthy weight gain, or to overcome allergies or other health issues. Additionally, one in five babies receive formula in their first few days due to difficulties breastfeeding.
The US imports very little Baby Formula from other countries as FDA labeling requirements, nutritional requirements, tariffs, and surcharges make it difficult and cost-prohibitive for international manufacturers to sell products in the US.
The recall and plant closure caused sudden inventory reductions that resulted in increased prices, hoarding, and shortages in areas where brand restrictions are in place for low-income families on subsidies. Also, most parents are advised not to switch brands/formulas, which may cause GI distress.
What Did We Learn?
Well, the pandemic seemed to leave everyone on high alert for shortages and primed for stocking up on supplies. Many stores have implemented restrictions on purchase sizes to help regulate the stock. Hopefully, with the latest importation changes and ramp-up in production this will be a non-issue in a few weeks.
The FDA could not travel during the pandemic for plant inspections – affecting new product launches and likely general plant inspections as well. This process took over six months to be resolved – that seems way too long for something affecting the health of our children, or anyone for that matter. Additional funding for inspectors, travel, and regulatory enforcement personnel would have been a positive for the industry overall – but it was blocked in the Senate. Perhaps that should be an ongoing discussion as surely it would benefit everyone to be sure inspections are efficient and handled regularly and don’t delay access to safe products.
Some tariffs and taxation policies might need to be revisited if it is preventing us from having appropriate second-source suppliers for our essential goods. If the US plants are unable to step in to ensure supply – we should be partnering with other companies ex-US (that are already) supplying the rest of the world for our occasional extra supply needs.
This is a scenario that could happen again and should serve as a case study for scenario planning in essential areas that are serviced mainly by one or two key suppliers.
References: I used a series of articles in The Factual newsletter that gave different views of the situation in addition to Abbott PR and internal reports.
Tip of the Week
Posting again since we have had another week of 1Q22 and Year End Results. We have added more transcripts from the earnings calls to the database. To find your companies of interest search the Company Catalogue and enter Transcript in the search box on the upper right to see the latest that have been included in the database.
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