How We Got Here: America’s Baby Formula Shortage

CHRISTIANE AMANPOUR: Now, in the United States, baby formula is the latest casualty in the American supply chain issue. With President Biden announcing new measures to increase production. Emily Oster is an economics professor and the best- selling author of parenting and pregnancy books. She joins Michel Martin to discuss what’s at stake with the current formula shortage.

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MICHEL MARTIN, CONTRIBUTOR: Thanks, Christiane. Professor Emily Oster, thanks so much for talking with us.

EMILY OSTER, PROFESSOR OF ECONOMICS, BROWN UNIVERSITY: Thank you for having me.

MARTIN: It’s really hard to describe for people who haven’t been through this experience. Just how terrifying this is for parents, especially mothers who are trying to figure — I’ll just say parents and caregivers in general, who are trying to figure out how to feed their babies. So, I just want to start by asking, have we ever experienced something like this before, to your knowledge?

OSTER: Not to my knowledge. And I think that what you say about the stress of this puts on parents, it’s really extreme. And if you think about it, about 75 percent of babies in the U.S. are fed on formula at some point in their first year. And for those babies, there is no substitute. So, this isn’t a shortage of other kinds of foods where we would be able to substitute. For these babies, this is the only food they’re consuming. And the fear that comes from parents, that I hear from parents around, you know, is my baby going to die? Are they going to not have anything to eat? I think that’s just very extreme and unprecedented.

MARTIN: Again, it’s hard to describe for people who have not been through this experience. Like, why some of the suggestions that people think they’re making helpfully are ridiculous. Like, some people say things like, oh, just breastfeed, or just this, or just that. You know, why do so many instances in the United States use formula at some point? I mean, is this cultural? Is it because so many women have to go back to work because our maternity leave policies are so stingy? What’s your take on that?

OSTER: So, I think there’s a lot of different reasons. If we look at the data on breastfeeding, about 90 percent of U.S. mothers actually start breastfeeding in — or attempt breastfeeding for some period. But we don’t see the continuation at those levels, you know, even three or six months. So, a lot of babies are using formula in conjunction with breastfeeding. So, some formula, some breastfeeding, some of that is because people are working, some of that is because that’s what works for their family. And I think part of what’s so challenging about these discussions is that actually, these are both great options for feeding your baby. And it should not be the case that choosing to feed your baby with formula, for whatever reason, it should not be the case that that then mean that you can’t feed your baby at all. And so, in some sense, the idea, well why don’t you just breastfeed? In addition to being completely impossible, it’s not — if you have a five-month-old baby you cannot just start breastfeeding them. Then, in addition to that not being feasible, it also isn’t really something that we should be trying to regulate in that way.

MARTIN: Well, also — but you also point out that there are — if you adopt a baby, you can’t just start breastfeeding if you are — you say, like, in a household where there are — there’s more than one parent. You may have some health condition. If you are a breast cancer survivor, for example. If you have some health condition that makes it dangerous for you to breastfeed. Also, some babies have difficulty digesting breast milk, you know, for whatever reason or they have some sort of allergies or it’s just — it’s a fact that there are numerous conditions that people have. I think this is a shock to some people to find out that a disruption — this kind of any disruption causes such havoc. So, what is the — what’s sort of the economics around infant formula? How many companies make it? Why is it that there are so few, do you know?

OSTER: Yes, so there’s a few different things going on. So, one is that there’s a small number of formula makers in the U.S., there’s sort of four big ones. And that has meant that the industry is very concentrated. The other thing is that there aren’t that many locations where these are produced. So, even independent of there being not very many companies, there aren’t that very many plants. And that is because for good reason. The FDA has very strong regulations about safety and cleanliness in those plants. But by extension, the need for that regulation means that if something goes wrong, as happened at the starting plant and you cut down that supply, that can have much larger impact on the market than it would in a market that was less concentrated either in terms of farm or plants. So, there’s a sort of a little bit of a — of a kind of perfect storm of, sort of what happened in this particular case. But I think it has highlighted some broader issues about the way that this operates which I think we will be revisiting down the line to make sure that this doesn’t happen again.

MARTIN: We were talking sort of supply chain disruptions but I can’t help but notice there’s no infant formula shortage in Canada. And there’s no infant formula shortage in Mexico. Why is that?

OSTER: I think the supply chain has — the supply chain shortage didn’t — have interacted but are certainly not the sufficient single cause for this issue.

MARTIN: It’s also the case that some people are more affected by this and others. I mean, you’ve already shared with us that the majority of infants in the United States use formula at some point in their development. But some families are more affected by this than others. And that’s families who depend on the programs of — for low-income families, right. And why is that?

OSTER: Yes, so there’s actually two groups that were more heavily affected. So, one is families who rely on specialized formula, which are made in even smaller number of plants that a lot of it was made in this one plant that was shut down. But there’s also families on WIC. And WIC serves about half of the infants in the U.S. and it purchases about 40 — a bit over 40 percent of the formula. So, there’s huge share of the formula sales and the U.S. And until, like, a week or so ago, WIC has rules on which formula — formulations can be purchased. So, you cannot just buy any formula. You have to buy the formula that is approved under the WIC plan. But that meant that that group of mothers, that group of families with even more constraints than others in terms of their ability to substitute and the shortages were then felt much more strongly in that group. So, within the last week or so, they relaxed those rules so WIC now covers any kind of formula which is a step forward. But it’s also why, again, this was sort of the problem here that — the issues were falling more lower- income population.

MARTIN: Can you talk a little bit of that, though? You said 40 percent of the formula is purchased by families using WIC, why is that? Do we know why that is?

OSTER: I mean, WIC covers a large share of families and, you know, the formula is a big part of what WIC covers. And if you look at the demographics of breastfeeding, that’s also a demographic less likely to be exclusively breastfeeding. And so, sort of putting all those things together, it’s not too surprising that a number of these are large.

MARTIN: So, the President, as we are speaking now, President Biden has invoked the Defense Production Act as a way to address this shortage. Is that — what does that do?

OSTER: So, that’s going to open up some possibilities for how they can source materials and how quickly production can be implemented. I am not sure that we have a large number of specifics about exactly in what way that is going to speed this up and exactly how much, and exactly what’s going to happen. They have some additional plans. And it’s something called Operation Fly Formula which is going to use commercial flights to take formula that — would be FDA approved from Europe and fly to the U.S. Again, I don’t think we have a huge number of details about how that would work. All of these things are likely to make some difference and hopefully lower the amount of time that will continue to feel a shortage for.

MARTIN: So, we’ve called you to talk about, sort of, the economics of this, if you will, but you can’t escape the politics of the moment. I mean, Republicans are seizing on this as an example of another quality-of-life issue where they say the Biden Administration has been asleep at the switch. You know, is that a fair criticism?

OSTER: You know, I’m not sure that the problems that — I’m not sure, the answer to that question. I think that when we come back to look at what happens here, there’s going to be a lot of blame to be spread around in various ways. And I don’t think that the last few months have — probably not been managed in the way that they could have been. On the other hand, some of the issues that have resulted in this were true — have been true, for a long time. So, I think to put this at the feet of the Biden Administration is almost certainly overstating their role. But I think it’s something we’ll find out later.

MARTIN: But the FDA — look, there are data analysis companies that sort of look at things like inventory. And they were reporting, say, Datasembly for example, is a company that has come to the four because a lot of their information about inventory, retail inventory is something that we’re all looking at now. And they say that some of these supply shortage disruptions around in this category started appearing last July. And if that’s the case, and, of course, then there was this the plant shut down, which I think it was in February. Yes.

MARTIN: If that’s the case, why couldn’t this have been anticipated?

OSTER: There’s absolutely no question it couldn’t have been anticipated. We have a quite good tracking on things like this. So, things like the IRI data will tell you, you know, what share in stock in this category. So, there’s no question we had that data and we’re undoubtedly not using it the way that we could’ve. As you said, there are shortages that started as early as last summer, and they, kind of, gotten worse and the shutdown of the plant could have been anticipated that hat would make things worse. I think some of — the general issue is that this relates to what I think is an, sort of, under support as a society for the issues that face — new mothers that face new parents that were not thinking enough about the support that that group needs. That’s been true for decades. We don’t have paternity leave — maternity leave. We don’t have, you know, good parental leave options. So, there’s a lot of things that go on in this phase of which these feels like an example.

MARTIN: So, talk a little bit, if you would, about what you think this says about the broader economy if we can sort of talk about it that way. Does this infant formula crisis — because that’s what it is, if you’re the mother — a parent of an infant or caregiver of an infant and you can’t get food to your baby, does it — saying something broader that we should talk about?

OSTER: So, I think I see this from the standpoint of, you know, what are the supports for providing for new parents. And we can look to our peer countries. So, for example, to Western Europe where we can ask, how is what we’re doing different from those places? And it’s different in quite a lot of ways. So, in some way, they get talked about it a lot. Like, are we providing parental leave? Are we providing, sort of, child tax credit type support? And then it is also different in some of the other more intimate ways that parents are not provided support. So, for example, in Europe, there are widespread home visiting programs. We send people home or they send people home, and then somebody comes to your house and they — that’s an opportunity to see, you know, how is it going with feeding? Do you need this kind of support? Are there other things that you — other kinds of help that you need? We don’t do anything like that in the U.S. And I think if we did more of those general supports, then we might be in a position to have more attention paid to questions. Like, OK. Well, I’m struggling to get formula. You know, in this moment, one of the things that happened is that there’s a formula shortage and no communication was put out about what people should do. There was no effort to tell people, OK. If you’re struggling to find formula, you know, first step, get a different formulation of — or a different brand. All the ingredients are very similar. Second step, you know, call your pediatrician. Third step, do this. None of that was provided. People were just told, you know, well, we’re were working on it. We’re going to work on fixing it. But for the parent, who, in the moment, can’t find food for their kid, they don’t know what to do. And so, I think we are not helping parents. And we are not helping parents on so many different levels. This is one of them. But it’s is exposed some broader issues in this phase.

MARTIN: So, you wrote about, you know, what parents should do. So, for people who are, you know, in this situation right now, like, what are some of the things that people could be doing right now?

OSTER: So, I think — you know, there are two different groups. I think — so, for families that are relying on, sort of, specialized formulas, the first step is your pediatrician. And hopefully, at this point, the health unit services has tried to figure out how to get that formula to the people that need it. For people who are using — who do not have special needs who are using, you know, just general kinds of formula, I think the main thing to say is that because of all these FDA regulations, which we talked about earlier, there’s sort of central ingredients in formulas are very, very similar. So, you undoubtedly have a preferred brand, a preferred formulation. But if you’re using Similac and what — get Enfamil or Gerber, they’re really, really similar. And so, the main thing is to substitute to one of those as your, kind of, first step. If you can’t find anything like that, that’s again when you call your pediatrician. I think a lot of pediatrician offices are now stocking some formula for these kinds of situations. What people shouldn’t do is either stockpile themselves, because that is contributing to other people not being able to get formula or try to make your own. So, homemade formula is not a good option. Cow milk is not a substitute for formulas. There’s a lot of vitamins and ingredients in formula that are not part of regular cow’s milk or regular goats’ milk or the other things that people read on the Internet that you can substitute with.

OSTER: You — have you heard reports of people trying to do this, trying to make their own formula? Are these recipes are circulating? And would you just tell us why you know, like, that’s such a bad idea? I just want to clarify, like, why your — you were very — you look — you’ve expressed this very strongly and your writings about this.

OSTER: Yes, so cow’s milk is the basis for many formulas but there are a large number of additional ingredients which cow’s milk does not provide the full nutrient set that infants need. There are a large number of vitamins, the ingredients for formulas include whey protein and just a ton of vitamin ad ins and other sources of fat and protein. The nutrient — macronutrient mix is completely different than, sort of, standard cow’s milk even though that’s the basis. The other issue in making your own formula is that you don’t actually know enough about where these ingredients come from. And so, a homemade formula where you’re getting some whey protein in some cad level oil and some vegetable oil, there’s much more likely a chance that that’s going to end up making your baby sick and being contaminated in some way. And so, that’s — that is not a good option.

MARTIN: So, before I let you go, Professor Oster, what are some of the things that we should be thinking about in the wake of this? I mean, some of these are just obviously big picture issues around the way our culture and our, sort of, political system supports young families, you just sort of shared those things. It occurs to me that part of the reason there’s so little activism around this is at this stage of your life, you’re exhausted. And you don’t have time to be going to meetings and you’re not writing letters and you’re — you know, some people are. But you know, I’m sorry, it’s just an exhausting period of life. But let’s assume that you have some capacity once this crisis has abated somewhat which, you know, we hope that it will. What are some of the things that you think people should be thinking about in the wake of this?

OSTER: So, I think that this is an opportunity to revisit the way that this industry is structured. And I think that’s what we will see. So, I think some of the steps that the White House is taking now are about fixing the immediate problem. But then I think there will be a kind of broader step act — to ask, OK. You know, is there a way that this industry should be structured that would have less of this kind of centralization either in plants or in firms that would allow us to be more flexible to sort of not have this not happen again? And that’s going to be a praising — postmortem, I would guess.

MARTIN: Emily Oster, thank you so much for talking with us today.

OSTER: Thank you for having me.