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Baby formula

Credit: Unsplash/CC0 Public Domain

According to a recent study published last month, the 2022 infant formula crisis highlighted the precarious balance between regulation, competition and safety.

gave the study “Navigating the challenges of building a more flexible infant formula industry” was published in Applied economic perspective and policy, Journal of the Agricultural and Applied Economics Association. Takes a closer look at the article Market and Factors Contributed to Historical Shortage of Infant Formula in 2022

Study co-author Trey Malone, assistant professor of agricultural economics and agribusiness with the University of Arkansas System Division of Agriculture, said the article “suggests a strategic rethinking of policies to promote a more competitive and accessible market.” presents.”

The aim is to ensure nutritional security of children.

“Our It’s been an enlightening journey, highlighting the delicate balance between regulation, market competition, and ensuring the availability of essential nutrients for infants,” said Malone, who conducts research for the Arkansas Agricultural Experiment Station. Do, the research arm of the Division of Agriculture. “This article is an excellent place to start for those interested in the complexities and policy implications of the infant formula market.”

Unraveling the crisis

Years of decline Malone says increased breastfeeding, market concentration and regulations on importing infant formula were components of the crisis. The final disaster was a potential Cronobacter contamination that led to a voluntary production shutdown at one of the largest infant formula production facilities in the United States. The national out-of-stock rate for infant formula, which was already at 15% due to supply chain issues from the pandemic, increased to 74% by the end of May 2022.

The article states that the crisis highlighted the existence of high market concentration in the infant formula market. Market concentration has been a feature of infant formula production since the 1980s, with two firms, Abbott and Recett, holding at least 50% of the market.

“A central problem in the infant formula industry is the lack of competition in the market and overly stringent regulations,” Malone said.

The regulatory framework for infant formula in the United States was created by the Federal Food, Drug, and Cosmetics Act and the Infant Formula Act of 1980, with amendments in 1986. The laws established standards for nutritional content and labeling, giving the Food and Drug Administration authority over the manufacture of infant formula. However, the FDA has regulations that limit imports of infant formula approved by “equivalent competent regulators in Europe” and other Organization for Economic Cooperation and Development countries.

Comparing import trends across 171 countries, economists ranked the United States 147th in the amount of infant formula imported between 2017 and 2019.

Another key component in the infant formula market is the Special Supplemental Nutrition Program for Women, Infants and Children, also known as WIC. This program provides free infant formula to low-income families. States, or a coalition of states, award WIC infant formula contracts to the manufacturer that collects the highest rebate level. This is known as a competitive sole source contract. Economists say the practice received considerable attention during the 2022 infant formula shortage “due to concerns that it hinders competition.”

“Previous research has consistently shown that changing a state’s contract brand changes market share substantially,” the article noted.

Even the companies that make baby formula samples of “medical detailing”. The article was declared globally unique. “Medical detailing,” the article explains, is a process in which manufacturers market directly to hospitals. .

“The U.S. Government Accountability Office GAO identified medical profiling as a potential barrier to entry in part because it can be prohibitively expensive for non-pharmaceutical or medical companies,” the article states. “This practice is quite unique to the US market as most countries regulate the marketing of infant formula in response to the 1980 World Health Organization WHO International Code of Marketing of Breast Milk Substitutes, which includes infant formula. . The Code specifically discourages the promotion of breast milk substitutes. Health Care Sector.”

A series of trades

Jackie Yenerle, lead author of the article and assistant professor of agricultural and resource economics at the University of Tennessee Institute of Agriculture, noted that her assessment of infant formula supply shortages identified a series of trade-offs.

“Our article provides a discussion of the potential trade-offs associated with making permanent changes to three policies and programs that currently affect infant formula. : import tariffs, Food and Drug Administration regulation, and WIC,” Yeneral said.

Suspending tariffs or relaxing U.S. Food and Drug Administration standards may increase the supply of infant formula but may increase the risk of contamination. Alternatively, increased consumer choice may cause the government to modify WIC to increase costs.

Striking the right balance between these trade agreements can help strengthen the infant formula industry.

“Our work is focused on analyzing policy responses and proposing ways to build a more resilient industry,” Malone said.

Other co-authors of the study include Andrew Muhammad, professor and Blassingham Chair of Excellence, and Karen Lewis DeLong, associate professor of agricultural and resource economics, both with the University of Tennessee Institute of Agriculture.

More information:
Jackie General et al, Navigating the Challenges of Building a More Resilient Infant Formula Industry, Applied economic perspective and policy (2024). DOI: 10.1002/aepp.13416

Provided by the University of Arkansas System Division of Agriculture

Reference: Agricultural Economists Think Food to Improve Infant Formula Supply (2024, February 22) Accessed February 22, 2024 at https://phys.org/news/2024-02-agricultural-economists-food-thought Retrieved from -baby.html

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