Formula Crisis Brings Foreign Competition To Complacent U.S. Industry

Bubs Australia and Kendamil are heading to American store shelves after Abbott Nutrition’s plant shutdown and recall exacerbated a baby formula shortage.

Foreign-made baby formula will soon arrive on American store shelves, thanks to President Joe Biden’s “Operation Fly Formula” operation.

Biden tapped presidential war powers to airlift foreign formula amid a widespread shortage caused in large part by the February shutdown of an unsanitary Abbott Nutrition factory in Michigan.

Abbott controls nearly half the formula market, with three other companies dominating the rest, but they’re about to get fresh competition from abroad. Federally chartered planes are bringing millions of bottles of Bubs Australia and Kendamil, a popular brand from the United Kingdom.

Kendamil co-founder Will McMahon told HuffPost the Fly Formula mission will essentially jumpstart the company’s long-planned entrance into the U.S. market.

“We certainly are here to stay in the U.S.,” McMahon said

Kendamil will appear on Target store shelves in the coming weeks. McMahon expects the product to win full approval from the U.S. Food and Drug Administration before the November expiration of a temporary waiver related to the shortage.

The FDA has been vetting Kendamil for five years, McMahon said — a process that includes clinical trials designed to demonstrate that babies grow normally while the formula is their sole source of nutrition for a period of at least 15 weeks.

The rigorous process required for new formula products is a major reason for the industry’s extreme consolidation, which explains why a single plant shutdown caused such a bad shortage. Some 70% of formula products were out of stock in mid-May, according to the retail analysis firm Datasembly.

“This is a great entry point for this company,” said Tinglong Dai, a professor of operations management and business analytics at Johns Hopkins University Carey Business School, referring to Kendamil.

The foreign shipments will have a limited effect on the general availability of formula, Dai said. The root of the problem, however, is that the FDA had not paid close enough attention to formula plants already producing products in the U.S.

“I love to see some serious foreign competition,” Dai said. “But I would also like to see the FDA will pay serious attention to safety.”

FDA inspectors in January and February found decrepit conditions at the Abbott plant in Michigan ― several months after four babies fell seriously ill from bacterial infections after consuming formula made there. Investigators found that the company for years failed to maintain its manufacturing equipment.

In a consent decree with the FDA and the Justice Department, Abbott agreed to hire outside experts to make sure the plant follows laws governing formula production. The company has stressed that the dangerous cronobacter sakazakii bacteria found at its plant was different than strains that sickened the four infants, two of whom died.

Members of Congress have harshly criticized the company as well as the FDA for failing to investigate the illnesses more quickly. FDA Commissioner Robert Califf has not explained why inspectors didn’t enter the plant until January, after receiving a whistleblower complaint about conditions at the factory in the fall.

Biden said Wednesday that he didn’t learn about the formula shortage until last month, when it became a crisis.

“I became aware of this problem sometime in — after April — in early April, about how intense it was,” Biden said.

In addition to Kendamil, Biden’s airlift will import several million units of Bubs Australia formula. CEO Kristy Carr said Thursday her company also has been seeking FDA approval for U.S. distribution.

“We knew that our products already met the FDA nutritional requirements, so we would make contact with your sales, with the administration, and with the FDA,” Carr said while participating virtually at an event with Biden at the White House.

Abbott was the only major formula manufacturer that didn’t participate in the White House event. Spokespeople for the White House and the company refused to say whether the firm had been invited.

Abbott Nutrition is a big player in baby formula. But the product is just one line of business for parent company Abbott Laboratories, which told investors last month that despite the factory shutdown, the revenue loss was more than offset by higher sales of COVID-19 tests.

Congress enacted strict rules for formula manufacturing after babies suffered malnutrition caused by substandard formula in the late 1970s. Last year, the FDA prompted the recall of several formulas imported through a third-party website because they lacked sufficient iron. Kendamil products met the iron requirement, but were apparently included in the recall because they hadn’t been through the FDA’s market notification process.

Kendamil is well known in Europe, since royal baby Prince Louis is reportedly fond of it. McMahon boasted that his company’s formulas are made with locally sourced ingredients and whole milk fats instead of palm oil.

“We get thousands of inquiries every month from us parents who want to get their hands on this product,” McMahon said. “And that was even before the shortage.”

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