The baby formula shortage that highlighted the worst of the supply chain crisis emerged as one of the top stories of 2022. It also led to an independent review that calls for no less than the dissolution of the U.S. Food and Drug Administration (FDA) into two separate regulatory agencies.
In March, baby formula started disappearing from store shelves. This tragic cautionary tale spun out of a perfect storm that hit the most vulnerable Americans.
Infant formula shortages bottomed out on May 22—hitting a nationwide out-of-stock rate of 70%—and lingered through June. By comparison, the average out-of-stock rate—in the before times—hovered around 10% per The Wall Street Journal. And while the supply chain breakdown, which had just started to recover, took most of the blame, the underlying causes were much more complicated than that.
Other factors at work
- Recall and drop in production. Just two months earlier—in late February—an FDA recall forced Abbott Labs to close its Sturgis, Michigan plant. The agency issued the recall after investigators discovered a possible bacterial contamination of multiple brands, according to The Atlantic. However, debate persists about the causal connection between the Sturgis plant and the nine reported infant deaths attributed to tainted formula. Finally, an October 2021 whistleblower report alleged “lax cleaning practices, improper training of employees, falsified records, and efforts by officials at the plant in 2019 to keep FDA inspectors from learning about serious issues related to the plant’s system for checking for bacterial contaminants in the formula.” Abbott produced more than 40% of all baby formula sold in the United States at the time. And its Sturgis plant handled most of that production.
- Imports dry up. An underreported provision of the 2020 United States–Mexico–Canada Agreement made it tougher to import infant formula from Canada. According to the Cato Institute, those new restrictions were apparently stringent enough to prevent any Canadian formula imports in 2021. Cato reports, “The United States subjects infant formula to tariffs up to 17.5% and tariff-rate quotas (TRQs).” To make matters worse, the FDA still prohibits the commercial import and sale of formula from the Europe Union.
- Market concentration. As reported during and after the crisis, four companies account for 90% of U.S. formula sales. “When Abbott halted production, that whole market was disrupted. And the result was desperate parents around the country couldn’t feed their babies,” Rakeen Mabud, chief economist for the Groundwork Collaborative, told The Guardian. “We don’t have a resilient supply chain, not for baby formula and not for a whole host of other goods.” In response, FDA Commissioner Robert Califf vowed his agency would look more closely at the industry’s market concentration.
Commissioner initiated independent review
In July, Califf made good on that promise and asked the Reagan-Udall Foundation to evaluate the FDA’s Human Foods Program. This indepdenent review included the Office of Food Policy and Response (OFPR), the Center for Food Safety and Applied Nutrition (CFSAN), and parts of the Office of Regulatory Affairs (ORA).
On Dec. 6, the foundation released that report, which pointed to some significant problems and pushed for substantial changes. The most dramatic recommendation involves splitting the FDA into two separate entities: a Federal Food Administration and a Federal Drug Administration.
- Clarify the culture. The report’s authors suggest the agency lacks a “clear vision and mission” while struggling with competing interests and priorities. And maybe its most damning revelation? The insistence that the Human Foods Program lacks “a strong, supportive leader and, when the situation requires, an ultimate decision-maker.” As a result, the report says the agency should establish a clear mission with transparent operations.
- Scrap the structure. The Human Foods Program is so convoluted that the foundation dedicated an entire section to the agency’s labyrinthian org chart. The agency must focus more prominently on nutrition, the report says, with the creation of a Center of Nutrition. The report also recommends the launch of a commissioner-level Foods Advisory Committee.
- Ramp up its resources. Not surprisingly, the report also found that the FDA’s Human Foods Program is woefully underfunded. “Congressional appropriations, the primary source of funding for the Human Foods Program, have not kept pace with the needs of the Human Foods Program,” the report reads. “This is further exacerbated by the imbalanced availability of user fee programs across the Agency. While other FDA programs effectively utilize industry user fee funding, there is a near absence of such funding for the Foods Program. Agencywide, industry user fees account for 46% of FDA’s overall budget. The Foods Program receives about 1% of its budget in user fees, in contrast to other FDA programs such as tobacco (at 100%) and human drugs (66%).”
Most importantly, the report’s authors want to see the agency better exercise the authority it already has. And that includes leveraging its authority under the Food Safety Modernization Act (FSMA) to collect user fees, re-examine GRAS designations, and start using its mandatory recall authority more often.
Report draws mixed reviews
While Califf promised to decide what to do “after reviewing the report and consulting with stakeholders both externally and internally,” the industry lauded the findings.
But industry trade groups, such as the Consumer Brands Association, argued the agency could do even more.
“While the Reagan-Udall recommendations offer a much-needed first step toward FDA modernization, this is not the only step we need to bring the agency up to the speed of the consumer,” Roberta Wagner, vice president of regulatory and technical affairs, said in a press release. “We believe both policy reform and key structural and governance changes are needed to reframe and modernize FDA’s food program.”
“The Human Foods Program and team have strengths but need additional enhancements,” FMI President and CEO Leslie G. Sarasin said in a statement. “FDA was effective in quickly and efficiently providing labeling flexibilities early in the pandemic that addressed our industry’s concerns. The agency has also increased publication of post-investigation reports that assist the industry in understanding how to mitigate newly identified hazards. Additionally, FDA staff are frequently and readily available to industry—even after business hours—in the event of a food safety issue or concern, which is critically important when challenges arise and must be addressed promptly.”
What brands can do now
While the future of the FDA remains cloudy, changes are inevitably coming. And those changes will include a greater focus on digital records, a more robust audit program, and a renewed push for consumer safety.
But the regulatory apparatus moves slowly. And you can’t wait for the next outbreak, the latest report, or the newest Congress to act. Instead, you must take a proactive approach to enforce safety standards on the plant floor, to manage suppliers, and to prepare for recalls. And working with partners like TraceGains can help your brand not only survive the next crisis, but thrive in a constantly changing global marketplace.