US infant formula crisis sparks debate over market reforms

After five years of talks with US regulators, British infant formula maker Kendal Nutricare finally began shipping to the US this month – but only after a national shortage forced Washington to approve emergency airlifts by foreign suppliers.

The crisis erupted in February when a safety scandal broke out Abbott Laboratories To close a plant in Michigan was saving 15 per cent of US formula. It worsened amid supply chain strains linked to Covid-19 and the war in Ukraine, and a panic buying spree after stores including Walmart, Kroger and CVS began rationing sales.

With shortages persisting despite increased production at other US factories and temporary approval of foreign supplies, Abbott, a $180 billion medical and healthcare company, faces a political storm. Meanwhile, calls are growing for a change in the US formula sector dominated by Abbott and Reckitt Benckiser With 80% of the market share.

Experts warn that reform will be difficult due to the market power of the two groups, a government scheme to help low-income families that benefits them, the sector’s need for high regulatory standards, and the high cost of setting up new stations. However, they say, public outcry can provide a once-in-a-generation opportunity to promote change.

“This crisis is primarily related to the 40-50 years of a system that ended up becoming market focus,” said Stephen Abrams, a professor at the University of Texas who specializes in neonatal care.

“We need to open up the market and make sure there are many factories and companies that make formula in the United States. I also hope that importing these foreign infant formulas will become permanent, as more competition boosts the supply chain and potentially lowers prices.”

The US government is reviewing options, including attracting new entrants, easing restrictions on imports – which only make up 2 percent of the market – and attracting more investment from Nestlé and Perigo, the number three and four US players.

Congress held public hearings in May, with Abbott and US regulators criticized for not reacting too soon to prevent a crisis that has hit poor households the most with their inability to buy in large quantities. Lawmakers have also criticized the monopolistic nature of the US formula market and are urging tougher measures to open up the market.

“The shortage of infant formula is partly due to a lack of competition,” said US Senator Elizabeth Warren. “While Abbott reaped huge profits in this highly cohesive industry, its executives ignored safety warnings and offered billions to investors.”

The growing demand for infant formula and government support for the sector led to a jump in profit margins, which rose to 14.2 percent this year from 11.6 percent in 2021, according to a report by ibis World.

Reckitt has also been drawn into the crisis by its plan to sell its Mead Johnson formula business, likely to a private equity buyer. Democratic lawmakers including Warren last week Urging the largest antitrust enforcers in the United States Jonathan Kanter to scrutinize any deal, warning it could lead to a “shallow off-market” increase.

So far, seven foreign suppliers have been given permission to import the formula under the Biden administration’s Fly Formula process, including newcomers Kendal and Bubs, an Australian company. Dozens of others, including Fonterra, the world’s largest dairy exporter, and New Zealand rival A2 have also applied for approval.

Average availability of infant formula products in the United States by state, June 1-25, 2022 (%)

But the waivers allowing them to ship to the United States are only temporary and organizers insisted they will expire on November 14, a move that could force mothers to return their babies to the formula provided by Abbott. Bubs and Kendal are lobbying the U.S. Food and Drug Administration to grant full approval to their formula after years of application processes.

“The US market has always been quite concentrated structurally, and one of the reasons for that focus is that there are very high barriers to entry,” said Will McMahon, Kendal’s commercial director.

Newcomers have to prove “from scratch” that their products are safe, including through an animal study and a human clinical study according to the regulator’s specific requirements, even if it’s already approved for sale elsewhere, he said.

“With any new ingredients you use, you need to demonstrate that they are generally recognized as safe,” he added. “It’s hard to believe, but because we use natural milk fat instead of palm oil, the FDA asked us to show them that whole milk is ‘generally accepted as safe’.”

United Airlines crew members remove pallets of Kendamil infant formula from a passenger flight from London Heathrow, delivered as part of Operation Fly Formula, at Dulles International Airport in Chantilly, Virginia, June 17, 2022.
United Airlines crew unloads pallets of Kendamil infant formula from a passenger flight from London Heathrow at Dulles International Airport in Chantilly, Virginia © Jim Lo Scalzo / EPA-EFE / Shutterstock

To stimulate competition and make the United States less dependent on the domestic formula, some lawmakers have proposed suspending tariffs on formula imports. Between 2012 and 2021, four-fifths of the imported formula experienced a median effective fee rate of 25.1 percent, according to the Congressional Research Service. paper.

Abbott and Rickett say that market structure is not to blame for the supply crunch and that they are doing everything they can to mitigate it.

Robert Cleveland, Reckitt’s head of infant formula for North America and Europe, said the company increased shipments 30 percent by dispatching all of its inventory and operating its U.S. factories around the clock.

“There are absolutely no barriers to entering the US market,” he said. “As long as you can meet the FDA’s formula requirements and subject your brand to safety and quality requirements, then you can enter the US market.”

“The real problem with the market is that it’s too big and being able to make infant formula, which is close to pharmaceutical-grade manufacturing, on a large scale is very difficult,” Cleveland said.

Experts say relaxing US safety regulations is unlikely to be politically acceptable after the Abbott plant’s pollution problems. Two children died after ingesting formula from the Michigan facility, although an FDA investigation was not able to “rule or rule out a definitive link” to the product. The Food and Drug Administration said last week that a third death in January was being investigated.

Food and Drug Administration Commissioner Robert Califf told lawmakers in May that conditions at the Abbott plant were “grossly unhygienic” and described bacteria growing from multiple locations in the facility, and from leaky roofs and stagnant water. He acknowledged that the agency’s response to the crisis had been “too slow,” noting that last year’s whistleblower report highlighting food safety violations had been lost in the FDA’s internal position.

Abbott CEO Robert Ford has apologized for the lack of formula and vowed to fix it. The company said a comprehensive review of available data indicates that the formula produced at the Michigan facility is unlikely to be the source of infection in the reported deaths.

Abbott’s problems have halved its US market share to 20 percent, according to research by Barclays. But most analysts expect the company to regain its lost share within a year unless a definitive link is established between its formula and deaths or regulatory reform encourages competition.

Ian Simpson, an analyst at Barclays, said Abbott and Reckitt’s market dominance made the tempting competition a tough challenge.

“It’s not clear to me that there is an easy way to deal with that because it’s hard to make money as a number three or four player,” he said.

“Nestlé has been losing ground in the US market for a decade and it does not appear that the other big global player Danone is interested in investing in the US market or buying the Reckitt Med Johnson business in the US.”

Abbott Laboratories facility in Sturgis, Michigan
Abbott Laboratories facility in Sturgis, Michigan © Eric Cox/Reuters

He said some specialty providers have recently entered the US market, including ByHeart and Bobbie, but that it’s hard to compete with bulk producers Reckitt and Abbott.

“It is very expensive to operate these factories to the required regulatory standards and then you also have to convince consumers to buy your brand over another well-established one. It takes a long time to gain popularity and build trust with consumers,” Simpson said.

Some families who switched from Abbott during the crisis may stick with the alternatives, Bernstein analyst Lee Humbright told me. But families with children in the future will likely return to Abbott when it fixed supply chain problems due to a government subsidy scheme for low-income families that “establishes monopolies and binaries at the state level.”

The WIC program covers about half of retail sales of infant formula in the United States and is dominated by Abbott and Reckitt because they can offer major discounts to states on bulk purchases that small providers cannot afford. Analysts say the contracts enable them to secure the largest shelf space in retail outlets and are a major disincentive for other operators to invest in the US market.

“Even if families had some doubts about an Abbott product, if it was the only product available under the local WIC system, you would buy Abbott,” Humbright said. “In many ways, the state is Abbott’s best friend as the company works to regain market share.”

However, he added, with politicians “spinning, finger-pointing, and calling for changes in regulatory oversight,” the biggest risk for Abbott and Rickett was the government’s redesign of the WIC program to encourage competition.

telugu kamapichachi videos videosarabic.com desisexinthecity.com indian big boobs porn noodporn.com bengali xxx vidio www/xvideos.com indianpornvideos.me hot indian hidden sex aunty milf fransizporno.com desi pakistani chat room www xvideos com mob freeindianporn3.com kochikame porn kannada college girl sex indianxxxsex.mobi southsexvideos local xxx gekso.org www.znxx www telugusex mobi bananocams.com andhra sexy video download dell g3 15 sobazo.com split ac kannadasxe dirtyindianporn.info girl from back desilade onlyindianporn2.com real sex scandal video sex hindi muvi desisexclips.mobi sagar sexy spygasm gold-indian.mobi south indian film tamil aunties sex apacams.com handicapt tamanna hot naked rawindianporn.mobi kerala mom sex