At the request of U.S. Sen. Deb Fischer (R-NE) and eight of her Republican colleagues, the Government Accountability Office (GAO) recently confirmed that it will investigate the impact sole-source contracts in the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) program may have had on recent baby formula shortages.
Sen. Fischer and her colleagues told the GAO that the temporary shut-down earlier this year of the Abbott Laboratories baby-formula manufacturing plant in Sturgis, Mich., “led to foreseeable shortages of certain infant formula products for WIC participants, but also affects non-WIC formula buyers, retailers and grocers,” according to an Oct. 3 letter they sent to U.S. Comptroller General Gene Dodaro.
“Because the infant formula shortage required a federal response from both Congress and the administration, an evaluation of WIC sole-source contracting and its impact on all market participants is warranted,” the senators wrote.
According to their letter, states in 1989 were required to pursue cost containment systems under the Child Nutrition and WIC Reauthorization Act to address the high cost of infant formula under WIC.
As a result, all states pursued sole-source contracts with infant formula manufacturers, which send rebates to the WIC state agencies. The rebates have saved the WIC program between $1 billion to $2 billion annually, according to the senators’ letter.
“While these savings have allowed the WIC program to stretch funding farther, some stakeholders have expressed concerns with unintended consequences these contracts have on the market,” wrote Sen. Fischer and her colleagues, who included U.S. Sens. Shelly Moore Capito (R-WV), Susan Collins (R-ME), and Thom Tillis (R-NC).
The senators requested that the GAO analysis address several questions, including how the price of infant formula changed for both WIC and non-WIC customers following the introduction of sole-source rebates, and how sole-source contracting and minimum infant formula stocking requirements have impacted independent and small retailers, among others.
Sen. Fischer and her colleagues also want the GAO to recommend any legislative or regulatory changes that could improve sole-source contracting.