How the baby formula shortage financially strains U.S. families
The national shortage of baby formula in the U.S. that began in February of 2022 cast an urgent spotlight on the difficulties parents can face in meeting basic nutritional needs of their babies.
Strains on formula supply chains induced by the COVID pandemic were greatly exacerbated by a voluntary formula recall by Abbott Nutrition and the months-long closure of a major formula production facility in Sturgis, Michigan. The crisis not only raised questions about the regulation and market structure of the formula industry but also prompted calls for broader reliance on breastmilk and to increase supports available to breastfeeding parents, especially given the gap between recommendations and practice.
For example, less than a quarter of U.S. infants meet the American Academy of Pediatrics’ recommendation of exclusive breastfeeding for the first 6 months of life.
However, the narrow focus on the supply of infant formula, or on specific AAP recommendations, does not shed light on the full scope of economic tradeoffs families face when deciding how to best ensure nutritional health of their infant.
Deficiencies in early nutrition can have long-term consequences
Nevertheless, some recent evidence from the United Kingdom shows that breastfeeding improves cognitive development among infants of mothers with lower levels of education. Food security during children’s earliest years of development matters to subsequent infant health risks with early nutritional deficiencies and malnutrition potentially having irreversible, lifelong consequences for children’s subsequent neurodevelopment and cognitive functioning. Human milk naturally provides many important macro- and micronutrients; infant formula is designed to mimic human milk to provide these nutrients
Many mothers in the United States start to breastfeed but the share of infants receiving breastmilk decreases markedly over time and varies widely across family socioeconomic characteristics
A majority of mothers, about 84 percent, report ever breastfeeding in the most recent survey data available. However, few are able to adhere to the AAP guidelines, with only about a quarter of mothers reporting exclusive breastfeeding through 6 months (see chart). Higher levels of poverty are associated with lower rates of breastfeeding: About 40 percent of mothers living below the poverty level report any breastfeeding at 6 months.
In contrast, about 70 percent of mothers whose income is greater than six times the poverty level report some breastfeeding at 6 months, according to CDC data. Mothers who are younger, have lower levels of education, or are unmarried also report lower shares of infants receiving any breastmilk at 6 months.
Financial and social support for breastfeeding is mixed, and uneven, in the U.S.
While breastfeeding predominated in the 19th century, infant feeding practices changed dramatically between the 1880s and the 1940s in the United States towards a broad acceptance of medically-directed artificial infant feeding.
Breastfeeding rates reached their lowest point in the 1970s and rates have been rising since then; however, this means that many women do not have mothers or relatives who they can turn to for breastfeeding advice as people did back in the 18th and 19th centuries for example. Breastfeeding support, counseling and equipment are covered under many health insurance plans but even for women with a primary care physician or pediatrician, the supply of skilled lactation consultants is low.
Formula may be costly, but breastfeeding is not “free”
Advocates for breastfeeding cite the high cost of formula, with saving of up to $1,500 in direct infant formula costs. This line of argument does not consider the opportunity costs of breastfeeding, including the potential direct loss of wages from taking breaks to express breast milk at work, the time investment required to breastfeed and/or pump milk, and breastfeeding supplies, including special storage bags or clean, food-grade containers to store pumped milk, nursing bras, etc.
For the first few weeks, infants breastfeed 8-12 times per day. Assuming an infant breastfeeds for 20-40 minutes per feed, the time cost of breastfeeding for a lactating parent making federal minimum wage would be between $588-$1,176 in the first month alone.
Many mothers in the U.S. are faced with difficult decisions between breastfeeding and paid work
Provisions from the 2010 Patient Protection and Affordable Care Act amended Section 7 of Fair Labor Standards Act (FLSA) that requires employers to provide “reasonable break time” and “a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public” for employees to express breast milk excludes an estimated 9 million workers of childbearing age who are exempt from Section 7 of the FLSA, which includes the majority of salaried employees.
Formula can play an important role in supporting infant nutrition, but availability and cost is vulnerable to shocks
A recent Econofact podcast examined the supply side factors that contributed to the infant formula shortage, including market consolidation (four producers – Abbott, Mead-Johnson, Perrigo, and Nestlé – control approximately 90 percent of the formula market), high tariffs on imported formula leading to a reliance on domestic producers, and ongoing supply chain issues due to COVID-19. These factors contributed to increasing formula prices and out of stock percentages prior the shutdown of Abbott’s Sturgis, Michigan plant in February 2022, which substantially exacerbated these issues.
The shutdown of the Sturgis plant demonstrated the fragility of the formula market to supply shocks: formula prices increased by an average of 11 percent between March 2021 and May 2022 and shortages spiked to over 74 percent nationwide at the end of May 2022, with ten states having shortage levels of 90 percent or greater.
At the same time, the industry’s profit margin increased by 2.6 percentage points. To address the shortage, Congress passed legislation to temporarily suspend tariffs on infant formula and more recently, legislation to suspend tariffs on formula based power used in the manufacturing of formula in the U.S. Both expire on December 31, 2022. The long-term welfare implications of the Cronobacter contamination and the infant formula shortage remain unknown. The Cronobacter sakazakii bacteria that led to the Sturgis plant shutdown is one of the few organisms that can survive in powdered formula and can cause severe meningitis. Because there is currently no comprehensive mechanism for detecting or investigating Cronobacter infections, infant formula production remains vulnerable to future outbreaks and shutdowns.
The shortage also had negative implications for infant’s health as some families turned to rationing supplies or creating homemade formula to deal with the crisis.
The federally funded Women, Infant and Children (WIC) program can play a role in the supply and availability of formula in different states and in influencing infant feeding decisions for low-income families
WIC is one of the most successful early intervention nutritional supports with high take up and demonstrated benefits to infants and young children. Breastfeeding promotion is a central goal of the WIC program, with state and local agencies required to create procedures to ensure breastfeeding support for beneficiaries, staff trained on breastfeeding promotion, and more generous food packages offered to fully or partially breastfeeding moms.
The White House recently announced testing of telehealth initiatives to provide virtual breastfeeding support and one-on-one counseling through the WIC program. However, breastfeeding rates among WIC participants remain below the national average, with participants citing lack of support at home, need to return to work, and lack of time as barriers to breastfeeding. As such, approximately half of all infant formula sold in the U.S. is purchased with WIC benefits. WIC has sole source contracts with formula manufacturers receiving rebates that reduce costs, which allows WIC to serve more eligible families but also limits the types of formula beneficiaries can obtain.
In response to the supply crisis, Congress passed legislation that waives restrictions on the type of formula WIC recipients can purchase and on the maximum monthly allowance for formula during a product recall or supply chain crisis.
What this Means
Infants who do not consume the necessary micronutrients early in life may face risks to healthy development.
While the nutritional value of breastmilk is high and mothers seem to have internalized the “breast is best” mantra, this recommendation is wildly in conflict with policy support available for mothers (and, families more broadly), and also not aligned with industry drivers for the production and marketing of infant formula.
Many working families do not have paid parental leave, protections for lactating parents to express milk at work is limited, and availability of lactation consultants and cost coverage for breastfeeding supports (e.g., pumps) is far from universal. Even though over 90 percent of births occur in hospitals, birthing hospitals offer mixed support for breastfeeding. Infant feeding choices are particularly constrained for low-income mothers who work in jobs where they are unable to pump, which may explain some of the stark inequities in breastfeeding rates by race and socioeconomic status.
A majority of U.S. babies rely to some extent on formula to meet their nutritional needs and, as the recent crisis highlighted, further action is necessary to ensure the safety of the product and the resiliency of the market to future supply shocks.