Booker, Warren Blast Baby Formula Company For ‘Preventable’ Shortage

NEW JERSEY — In the year leading up to the U.S. infant formula shortage, Abbott Nutrition – one of the largest producers of formula in the nation – spent nearly $1 billion on “handouts to shareholders and executives,” according to Sen. Cory Booker. Now, he and Sen. Elizabeth Warren of Massachusetts are accusing the company of “prioritizing profit over safety” – and contributing to a crisis that shouldn’t have existed in the first place.

Parents across the nation continue to grapple with a frustrating – and at times “terrifying” – lack of baby formula. Read More: Baby Formula Shortages Worsen; FDA Working 'Around The Clock'

The shortage has also led to high prices.

In Booker’s home state of New Jersey, Gov. Phil Murphy declared a state of emergency earlier this week in an attempt to limit price gouging. Read More: Baby Formula Shortage Prompts NJ State Of Emergency

The Garden State has been among the most heavily affected states in the shortage, according to Datasembly. While out-of-stock rates have increased by 31 percent from November to April, New Jersey is among seven states with an out-of-stock rate higher than 40 percent.

Many experts are blaming supply chain issues, inflation and a recent recall and temporary shutdown at Abbott’s plant in Sturgis, Michigan for the shortages.

But some elected officials and pundits, including Booker and Warren, have pointed the finger at a severe corporate concentration in the marketplace that began long before the current crisis.

“The infant formula industry has reached an alarming level of corporate concentration with four companies – Abbott Nutrition, Mead Johnson, Gerber and Perrigo – controlling nearly 90% of the infant formula market,” Booker, Warren and six other senators wrote in a letter to the U.S. Department of Agriculture on May 13.

Abbott – which makes Similac, Alimentum and EleCare – controls around 40 percent of the infant formula market, the senators wrote.

“This level of concentration has created a fragile system unable to adequately respond to shocks in the supply chain,” the lawmakers alleged. Read More: These U.S. Senators Want To Trustbust Baby Formula Makers Over Shortage

On Wednesday, Booker and Warren sent a letter to Abbott CEO Robert Ford, blasting the corporation’s “iron grip on the market,” which they said has been boosted by over $4 million in lobbying in 2020 alone – and over $95 million since 1998.

In their letter, the senators asked Ford to disclose information about the company’s actions and investments leading up to the shortage.

They wrote:

“As the largest infant formula manufacturer in the United States, with roughly 40% of the market share in an industry dominated by just three companies, Abbott holds disproportionate responsibility for this current crisis. Abbott has repeatedly and brazenly violated safety rules and ignored warnings from the Food and Drug Administration (FDA), leading to a massive recall, temporary closure of its Sturgis, Michigan plant, and an unprecedented shortage in infant formula – even as your stockholders and executives raked in profits. We are seeking information on how your company has profited from this crisis American families are facing and how you will ensure that it is not repeated.”

Booker and Warren continued:

“The current infant formula shortage is both heartbreaking and preventable. Abbott Laboratories has been cutting corners on equipment and safety protocols for years, padding your profits while putting toddlers, children and adults reliant on your products at risk. Between September 2019 and September 2021, Abbott Nutrition (the arm of your company manufacturing infant formula) received 17 consumer complaints regarding their infant formula products. Additionally, your company found Cronobacter in five environmental samples from January 2019 to August 2021.”

Citing a whistleblower complaint, the senators accused Abbott of trying to cut costs with subpar “clean-in-place” procedures, including the failure to train or hire adequate staff to keep their Sturgis, Michigan site sanitary, failure to undertake “reasonable measures” to correct deficient training protocols, and falsifying records to cover up breaches.

“Even after these problems were discovered by the Food and Drug Administration in inspections last fall and earlier this year, your company failed to act,” Booker and Warren alleged.

The senators added:

“Furthermore, a highly consolidated market has insulated your company from the consequences of its failures, exacerbating your company’s inability to resume safe production and ensuring that any shortage would quickly spiral out of control … This corporate concentration, combined with decades of inactivity by regulators, allowed your company to skate by with subpar safety protocols, knowing that consumers did not have the option to easily switch to a competitor.”

Meanwhile, Abbott continues to rake in record profits, Booker and Warren said.

“In the second quarter of 2021, Abbott Laboratories doubled its profits from the year before,” they wrote. “Rather than investing in safety or training, Abbott Laboratories used their increased profits to spend over $800 million to purchase over 6.5 million shares of its stock in buybacks in 2021, and raised your compensation from approximately $20.5 million in 2020 to nearly $25 million in 2021 – over 250 times that of the average Abbott employee.”

“Your company had a choice, and rather than prioritizing public health and ensuring that the nation’s families had a safe and plentiful infant formula supply, you cut corners, reaped billions in profits for shareholders and executives,” the lawmakers said.

• See related article: Mom Files Similac Lawsuit Over Infant Death In Morristown
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On Monday, Abbott announced that it has reached a consent decree with the U.S. Food and Drug Administration to restart operations at its Sturgis plant. Once the FDA confirms the initial requirements for start-up have been met, Abbott could restart the site within two weeks. The company would begin production of EleCare, Alimentum and metabolic formulas first, and then begin production of Similac and other formulas.

From the time Abbott restarts the site, it will take six to eight weeks before product is available on shelves, the company said.

“Our number one priority is getting infants and families the high-quality formulas they need, and this is a major step toward re-opening our Sturgis facility so we can ease the nationwide formula shortage,” Ford said.

“We look forward to working with the FDA to quickly and safely re-open the facility,” Ford continued. “We know millions of parents and caregivers depend on us and we're deeply sorry that our voluntary recall worsened the nationwide formula shortage.”

“We will work hard to re-earn the trust that moms, dads and caregivers have placed in our formulas for more than 50 years,” Ford said.

According to Abbott’s first quarter 2022 results, which were released on April 20, the company saw a strong financial performance despite the recall at its Sturgis plant due to its “diversified business model,” including global COVID-19 testing-related sales of $3.3 billion in the first quarter.

Abbott reported:

“Worldwide Nutrition sales decreased 7 percent on a reported basis and 4.4 percent on an organic basis in the first quarter. During the quarter, sales were negatively impacted by a voluntary recall of certain powder formulas manufactured at one of Abbott's U.S. plants. Excluding the U.S. sales associated with these products in the current and prior years, worldwide Nutrition sales increased 5 percent on a reported basis and 8 percent on an organic basis in the first quarter.”

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