State agencies that administer the Women, Infants and Children nutrition assistance program snag major rebates from infant formula makers through single-supplier contracts, and the savings allow them to stretch WIC dollars to help more families. But the state-level market domination that companies get through the system can put formula supplies at risk in the case of contamination incidents, the Federal Trade Commission concludes in a new report.
The infant formula manufacturers with single-supplier WIC contracts hold an average of 84% of the formula market share in 30 states analyzed by USDA's Economic Research Service in 2011, effectively shutting out most of their competition in those markets. In essence, the nation has as many as 50 “individual state infant formula markets each dominated by a single manufacturer that far exceeds the share of any manufacturer in the nationwide market,” the report says.
This system, developed in the late ‘80s, is beneficial to states in some ways. Large rebates offered by companies through the contract bidding process reduce the costs states face when administering the program, allowing them to reach more participants, according to the report, which concluded 2 million more participants were able to participate in WIC in 2016 than originally expected due to the money saved under the single-supplier system.
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But states’ heavy reliance on specific sellers leaves them vulnerable to supply shocks, especially those linked to contaminant outbreaks, the report says.
“By rendering each state dependent on a single manufacturer for the vast majority of its infant formula supply, single-supplier contracts can make it more likely that a lone contaminant outbreak or incident will have cascading and outsized effects leading to serious supply disruptions,” the report says.
In a joint statement separate from the report, FTC Chair Lina Khan and commissioners Kelly Slaughter and Alvaro Beodya emphasized they “unequivocally support” WIC's mission. They added that policymakers should “carefully balance” their recommendations “against other priorities beyond the scope of FTC's authority.”
“It is essential,” they wrote of the program.
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