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A Formula for Shortages

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eye on the news

A Formula for Shortages

The FDA has made critical mistakes in regulating the manufacturing of infant formula that it should ameliorate as quickly as possible. May 17, 2022
Health Care
Covid-19
Economy, finance, and budgets

Parents of young infants have become alarmed by an ongoing shortage of baby formula—an essential food for non-breastfed infants under six months of age and some infants and children with medical needs. The shortage, which began unfolding in late summer 2021, worsened with Abbott Nutrition’s recall on February 17 of three brands of formula possibly contaminated by Cronobacter bacteria. The tale of this crisis, however, goes beyond contaminated infant formula and the FDA’s efforts to enforce its food-safety regulations and includes the FDA’s mismanagement of its efforts to combat the infant-formula shortage.

The Food and Drug Administration’s March 18 report of inspections over six weeks of Abbott Nutrition’s facility in Sturgis, Michigan, noted findings of Cronobacter both in the processing environment and in finished formula. Surprisingly, the report, signed by a dozen FDA officials, noted that “Between 9/25/19 and 2/20/22, [Abbott Nutrition’s] environmental samples and finished product testing confirmed the presence of Cronobacter,” suggesting that the problem was long-standing and known to Abbot officials. Yet an FDA inspection of the same plant in September 2021 did not mention Cronobacter, though it noted violative practices including a failure to maintain the building in a clean and sanitary condition and lack of proper hand-washing. The FDA has stated that it inspects infant-formula manufacturing facilities annually, but during the Covid-19 pandemic, it limited its inspections to mission-critical work. Thus, some of the long delay between the initial testing that found the presence of Cronobacter in 2019 and the recall may be due indirectly to Covid, which slowed FDA inspections.

The federal Centers for Disease Control and Prevention, which closed its investigation May 12, reported that four infants with Cronobacter infections consumed formula made in the Sturgis facility before they got sick and that these infections may have contributed to deaths of two of these infants. Of these infants, the CDC received three reports between September 2021 and January 2022; one case was identified after February 16. Abbott Nutrition disputes some of these findings, including the link between consumption of its products and the Cronobacter infections, and also noted that the recall has worsened the industry-wide shortage. Abbott states that “subject to FDA approval” it could restart its Sturgis, Michigan, site “within two weeks.” As Politico reported in April, the recall occurred months after a whistleblower complained to the FDA, alleging lax cleaning practices and purposefully falsified records by Abbott.

The shortage of infant formula differs from the shortages of such goods as lumber, toilet paper, and microchips that Americans have experienced during the Covid pandemic for an important reason: the FDA tightly regulates manufacturing of infant formula. Agency regulations require infant-formula manufacturers to register new products and submit data about them 90 days before marketing. These requirements likely help to promote the safety and nutritional content of infant formula, the sole source of nutrition for young non-breastfed infants—but they also raise costs to manufacturers considering production increases and hinder market entry by firms interested in launching new products in these sectors. The FDA’s rules therefore limit the response of private firms to shortages, which, in less regulated markets, are typically self-limiting, as shortage-driven increases in scarcity lead to price increases that provide greater incentives for current and potential producers to boost production.

Unfortunately, the FDA’s announced steps to “address and alleviate supply issues” have been underwhelming. The agency’s focus on “supply issues” is well-intentioned but misplaced: shortages are periods of excess demand at current prices, not merely periods of “supply issues.” In his famous research on famines, Nobel laureate Amartya Sen noted that food shortages arise not only from disruptions to supply but also from panic buying and hoarding. Surely, parents of young infants have good reason these days to stockpile and hoard formula.

The FDA has provided very little reason to reduce stockpiling. Its website lists no actions to increase supply before February 2022, though the percentage of products that were out of stock was growing for months before the Abbott recall in that month. The FDA’s February 28 communications did not inspire confidence, and its May 10 announcement also missed the mark. On May 10, the agency stated that “infant formula manufacturers [other than Abbott Nutrition] are meeting or exceeding capacity levels to meet current demand. Notably, more infant formula was purchased in the month of April than in the month prior to the recall.”

Even the FDA’s March 16 guidance to industry does not convey an understanding of the shortage of product available to the public. It states that FDA is “aware that a voluntary recall and facility shutdown conducted by Abbott Nutrition in 2022 has created a supply disruption.” But it makes no mention of increases in out-of-stock rates since late summer and early fall of 2021, and it does not discuss increases in demand due to panic-buying.

Absent is any quantitative information about the severity of the supply shortfall, production increases by various producers in recent weeks, or projections of future production increases in the coming weeks. The statement that more infant formula was purchased in April than in the month prior to the recall won’t help, since it could mean that panicky consumers have been snapping up all existing inventory. Where consumers want quantitative data about expected market conditions before reducing their stockpiling of infant formula, the FDA has instead provided generalities.

Late yesterday afternoon, the FDA posted a new guidance document that illustrates the inadequacy of its approach. The guidance describes the information that an infant-formula manufacturer should provide to the agency if the manufacturer wishes to have the FDA consider the exercise of enforcement discretion relating to the importation into the U.S. of infant formula that is safe and nutritionally adequate but that may not comply with all FDA statutory and regulatory requirements. The guidance explains that the FDA plans to exercise this enforcement discretion only for six months, but it does not address why the agency expects that providing six months of enforcement discretion to foreign makers of infant formula should be enough to resolve shortages in the U.S. Specifically, the guidance is silent on why some foreign manufacturers, after seeing what documentation is required to take advantage of this fleeting opportunity to sell infant formula to the U.S., may simply choose to decline.

Repeatedly, the FDA has asked citizens to trust its approach rather than providing meaningful data about the shortage. Its recent announcement mentions a “21 Forward food-supply chain continuity system” that can be combined with external data to provide information about the status of infant-formula supply. Inexplicably, this system, which the agency says was developed to understand “how COVID-19 is currently impacting supply chains,” is apparently not described in any detail on the FDA’s website, raising questions about its practical utility. In addition, the “21 Forward” system surely fails to meet applicable standards for federal information quality, which stipulate that agencies disseminating influential information should provide enough transparency to facilitate its reproducibility. Of course, the FDA might have simply asked the handful of registered manufacturers of infant formula for their recent production volumes and plans, even though it may lack explicit legislative authority to collect such information. But since the FDA has not disclosed the data that it is using to respond to the shortage, it’s unclear why its actions merit a reduction of stockpiling.

Legal obstacles may limit the FDA’s release of certain detailed data about the shortage’s severity. The agency’s interpretation of the Freedom of Information Act provides broad exemptions to protect commercial interests and does not generally disclose “lot size, units sold, or future business plans.” This interpretation is consistent with a 2004 guide to the Freedom of Information Act issued by the Department of Justice that precludes disclosure of the “type and volume of sales.”

But such obstacles should not prevent the FDA from doing something useful. The agency could describe publicly the kind of data it is using to address the shortage. It could provide a broad market-level summary of such data in a way that masks information from individual firms. It could say whether it has access to data that goes beyond the out-of-stock rates provided publicly by Datasembly. It could say that, indeed, it has data on the weekly volume of products sold by product and by manufacturer, and on distributors’ inventories and weekly orders placed. It could even, after careful deliberation, reveal some aggregate data, such as the range of values for the percentage change in the total volume of orders placed or volume shipped for all manufacturers.

The FDA has experience with shortages of other products subject to similar regulations, but that experience is no model for responding to this shortage. Agency data indicate that the number of unresolved shortages of pharmaceutical products is high—and growing. Last week, it reached 131, including 125 drugs and six biologic products. That’s up from 125 two months ago. These are the highest numbers of drug shortages in ten years; they approach the all-time weekly highs of 2012. They include some critical but obscure products, such as an iodine-based agent used for most imaging related to surgical procedures. The shortages have occurred even though the FDA requires drug manufacturers to alert the agency in advance of pending supply issues. By comparison, food shortages, even during the pre-vaccination stage of the Covid pandemic, were limited, and occurred disproportionately among specialty products like bread flour, as Americans began regularly to work from home.

The vulnerability of the U.S. infant-formula supply should have been clear early in the pandemic, since only a handful of firms produce formula for the U.S. Yet the FDA’s response to the shortage indicates that it took no anticipatory steps. The agency recently said that it is expediting the necessary certificates to allow for flexibility in the movement of already-permitted products from abroad into the U.S. and offering a streamlined import-entry review process for formula coming from foreign facilities with favorable inspection records. This is a welcome move, but it should have been made a long time ago. Imports into the U.S. of formula brands that might already be approved and deemed safe in, say, the United Kingdom or France—and the competition that would ensue—would unleash market forces to help resolve the shortage.

What is to be done now? With congressional hearings pending, the FDA should focus its efforts on excess demand and not merely on supply disruptions. It should accept that stockpiling and hoarding by panicked consumers can worsen shortages, and it should release information to soothe the fears driving such behavior. It should provide greater transparency in what information it sees and can act on in responding to shortages. In addition, it should go beyond its March 16 guidance to industry. Following multiple executive orders (including by Presidents Reagan and Obama), it should urgently conduct a retrospective review of existing regulation of infant-formula manufacturing and distribution. Immediately after completing this review and an appropriate retrospective analysis, it should revise or eliminate regulations that reduce competition and resilience in U.S. infant-formula markets without achieving meaningful gains in food safety and infant nutrition. Just as good nutrition and food safety are critical to infant growth and development, so, too, is good regulatory policy critical to competitive and resilient markets.

Photo: AlasdairJames/iStock

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