No, Biden Has Not Fixed the Baby-Formula Shortage

T he baby-formula shortage that captured national attention over the summer is still ongoing, despite the Biden administration’s actions aimed at alleviating it. Nearly a year after the first rumblings of a shortage began, families are still having a hard time finding formula. How families are dealing with it has become a question on official government surveys.

The Census Bureau’s Household Pulse Survey asked Americans whether they were affected by the shortage and, if so, how they are obtaining formula. The survey was conducted between September 14 and September 26 and was based on responses from 51,000 households. It found that of the approximately 4.1 million Americans with infants who currently need formula, 1.3 million had difficulty obtaining it in the previous seven days.

Looking at the 7 million households with babies under the age of one, about half have been affected by the formula shortage. The most common ways to deal with the shortage were obtaining formula from a different store than usual and changing to a different brand. Many also report increasing breastfeeding and buying formula online. Nearly 300,000 Americans have watered down formula or made their own to cope with the shortage, which pediatricians strongly discourage.

Not all women can increase breastfeeding, and the online-purchase option isn’t as simple as it sounds. Many online scammers have sought to take advantage of the shortage and have stolen money from parents in the process. Switching to a different brand isn’t an option for all babies, either, with some needing particular types of formula for their nutritional needs.

Even having to go to a different store, which is little more than inconvenient, is a problem that parents should not have to deal with. Grocery stores are fully capable of stocking thousands of other products without months-long shortages.

The problem with baby formula is the government. Due to the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), which is supposed to be for people in poverty, over half of all baby formula consumed in the United States is ultimately purchased by the federal government. Formula purchased under that program is governed by single-producer contracts that are negotiated at the state level.

This program replaces price-sensitive consumers with price-insensitive ones and encourages reliance on a small handful of brands, which contributes to industry consolidation. That virtually guarantees that price signals and ordinary market-clearing mechanisms that prevent shortages will not work in the market for baby formula. These problems are well known and acknowledged by the USDA, the federal department that oversees WIC.

Even with WIC, the shortage has still hit poorer families harder than wealthier ones. According to the Census Bureau survey, families making under $75,000 are twice as likely to have had difficulty finding baby formula as families making over $75,000.

On top of the problems with WIC, the FDA imposes strict regulations on baby formula, and protectionist trade policies make it nearly impossible to import. Few companies want to do business in such a restrictive market, and the few that do don’t make a lot of money, since WIC sales are usually not profitable. That further increases baby-formula prices for non-WIC sales, which companies use to compensate for their WIC losses.

We know global supply-chain problems are not the cause for the shortage because other developed countries are producing baby formula just fine. President Biden’s response, however, was to abuse the Defense Production Act and order businesses to prioritize supply shipments for baby-formula manufacturers. That order came in May and, predictably, has not eliminated the shortage.

Part of the answer should be allowing manufacturers in other developed countries with high health standards to sell their baby formula in the U.S. market. Increased competition would drive down prices, and allowing more producers would increase market flexibility by making Americans less dependent on the two major firms that dominate this market right now.

Instead, the White House has opted for militarizing formula delivery and patting itself on the back with a press release every time a cargo plane carrying formula lands in the U.S. The most recent announcement is from October 5, touting the 26th “Operation Fly Formula mission” that delivered the equivalent of 1.4 million 8-ounce bottles of Nestlé formula from the Netherlands. According to feeding recommendations, that shipment will feed 560,000 eight-pound babies — for one day.

Fortunately, the FDA is considering allowing foreign producers to compete in the U.S. market in the long term. But, as is normal with the FDA, the process is plodding along, and manufacturers don’t yet have the certainty needed to make large investments in the U.S. market. Foreign manufacturers’ emergency permission to sell in the U.S. has been extended through January 6, 2023, by which point the FDA will decide whether to allow them to stay. “The agency says it doesn’t plan to object to the continued marketing of overseas baby formula through October 2025 while the companies work to achieve regulatory compliance,” reports the Wall Street Journal.

This process is for products that are already fully approved and used by millions of people in places such as Europe and Australia. One of the most significant burdens foreign manufacturers must clear is not related to the contents of the formula at all, but rather U.S. product-labeling standards. And countless parents buy foreign-made formula on the black market anyway.

The White House’s response to the baby-formula shortage was calibrated to appear as though the administration was Doing Something rather than actually addressing the problems that led to the shortage. Months later, the shortage remains. The FDA’s move toward allowing more foreign manufacturers to sell in the U.S. is correct, but it has gone too slowly and is yet to be finalized. In the meantime, millions of families have had to work around a market that the government has broken and seems largely uninterested in fixing.