Wednesday, Joe Biden invoked the Defense Production Act to alleviate a critical national shortage of, of all things, baby formula. Under the Defense Production Act, suppliers to baby formula manufacturers must fill orders from those companies before those of other customers. A second part of the order establishes a ridiculous program called “Operation Fly Formula,” which sounds like a 1970s sci-fi thriller movie title, that allows government agencies to apply to use commercial aircraft owned by the Department of Defense to pick up loads of formula and fly them to the US where something happens to get them on grocery shelves. The “presidential” order is available at whitehouse.gov.
I’m taking two new steps to increase baby formula supply:
– Invoking the Defense Production Act to increase domestic production
– Launching Operation Fly Formula to use federal planes to fly formula in from abroad
We’re making sure safe formula gets to all who need it. pic.twitter.com/lnkxsaCY6T
— President Biden (@POTUS) May 18, 2022
I’m sure this will be regurgitated in campaign ads this fall, and there will be the usual quisling chorus on the right singing, “we need to praise him when he does the right thing,” but this is just another ineffectual and meaningless act by an ineffectual and meaningless president.
The questions that need to be asked are 1) how did this happen and b) what, if any, impact will this order have on the situation?
This whole fiasco in February when the Food and Drug Administration investigated a severe bacterial infection that appeared in four infants after they ingested baby formula made by an Abbott Laboratories plant in Michigan. The FDA proclaimed the plant showed signs of contamination and shut it down. Abbott Laboratories ordered a recall of formula manufactured in that plant. There are two important pieces of information to keep in mind here: “four cases,” and the bacteria from those cases do not match the bacteria in the Michigan plant.
- Genetic sequencing on the two available samples from ill infants did not match strains of Cronobacter in our plant. Samples from ill infants did not match each other, meaning there was no connection between the two cases.
- In all four cases, the state, FDA, and/or CDC tested samples of the Abbott formula that was used by the child. In all four cases, all unopened containers tested negative.
- Open containers from the homes of the infants were also tested in three of the four cases; two of the three tested negative. The one positive was from an open container from the home of the infant, and it tested positive for two different strains of Cronobacter sakazakii, one of which matched the strain that caused the infant’s infection, and the other matched a strain found on a bottle of distilled water in the home used to mix the formula. Again, neither strain matched strains found in our plant.
- The infants consumed four different types of our formula made over the course of nearly a year and the illnesses took place over several months in three different states.
None of this is refuted by the FDA, and, based on what is known about the incident, someone at FDA should be fired. This kind of science-and-logic-free decision-making gave us the COVID shutdown and stay-at-home orders. It will not stop until the people making the decisions feel personal pain and humiliation for their actions.
On Monday, the FDA approved the plant to reopen after keeping it shut down for longer than Putin has been in Ukraine. The first product will come out of the newly approved facility around the end of June.
The proximate cause of the baby formula shortage was some FDA bureaucrat out to show someone who was boss. A manufacturing plant was shuttered. Product from that plant was pulled from the market. The cause is not some mysterious “supply chain disruption,” the problem is an overly powerful federal agency acting without a whit of evidence. No amount of bumf from Joey SoftServe’s office will produce a single molecule of baby formula because the problem is not a lack of ingredients for the manufacturers; the problem is the lack of inventory and production capacity.
As to the use of “commercial” aircraft owned by DoD, as best I can determine, there are about 50 of those. Of that number, about 11 would be helpful. Those are the military version of the Boeing 737. I gotta tell you, those aircraft aren’t going to move enough baby formula to justify the expense.
The bottom line is that this order does nothing at all other than allow the White House to claim it did something.
According to the Wall Street, this kind of vulnerability has been created by the government and the manufacturers (the article is not paywalled, you can thank me any time).
Last year Abbott accounted for 42% of the U.S. formula market, about 95% of which is produced domestically. There are only four major manufacturers of formula in the U.S. today: Mead Johnson, Abbott, Nestle, and Perrigo. One reason the market is so concentrated is tariffs up to 17.5% on imports, which protect domestic producers from foreign competition. Non-trade barriers such as FDA labeling and ingredient requirements also limit imports even during shortages.
Just a note on this article, it blames Trump for “imposing quotas and tariffs on Canadian imports in the USMCA trade deal.” This issue was never about restricting Canadian imports; it was about making Canada remove its tariffs and open its markets to US dairy products. This is one of those “wet streets cause rain” stories Michael Crichton warned about.
The left is busily blaming a monopoly or cartel of baby formula manufacturers, but the government’s distortion of the markets has created a more significant problem.
Further limiting competition is the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) for low-income mothers. By the Department of Agriculture’s estimate, WIC accounted for between 57% and 68% of all infant formula sold in the U.S. Under the welfare program, each state awards an exclusive formula contract to a manufacturer.
Companies compete for the contracts by offering states huge rebates on the formula women can buy. The rebates equal about 85% of the wholesale cost, according to a 2011 USDA study. Women can only use WIC vouchers to purchase formula from the winning manufacturer. These rebates reduce state spending, but there’s no such thing as free baby formula.
Why would manufacturers give states an enormous discount? Because the contracts effectively give them a state monopoly. Stores give WIC brands more shelf space. Physicians may also be more likely to recommend WIC brands. After 30 states switched their WIC contracts between 2005 and 2008, the new provider’s market share increased on average by 84 percentage points.
This is a logical and foreseeable outcome. If WIC users can only use Brand A, grocery stores will stock more of it because most parents will buy it, regardless of income, and it simplifies their ordering and warehousing processes if they only carry a single brand.
Rahm Emanuel is famous for saying, “You never want a serious crisis to go to waste.” It doesn’t always mean what we would hope. This crisis should have opened our eyes to the dangers of consolidation of means of producing a crucial foodstuff, that is, baby formula, in the hands of a very few companies who have very, very few manufacturing facilities. When the loss of one factory can create a national shortage, something is seriously wrong. This crisis should have caused us to look at tariffs that keep out foreign baby formula. It should have provoked an examination of how WIC regulations create monopolies that reinforce the power of the large producers. None of that is going to happen. The only possible crisis this could have solved is that of Joe Biden’s septic tank-level job approval rating. By waiting months to make this crisis worth his time or effort to address, he’s managed to waste it.