US Formula Industry Gets FTC's Antitrust Attention

Chairwoman Lina Khan was careful to note FTC isn’t investigating Abbott Nutrition’s manufacturing practices, its recall of products and shutdown of a plant and the supply shortage that followed.

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The Federal Trade Commission wants to know whether the US infant formula supply shortage is a result of an anticompetitive market as well as whether consumers have encountered unfair or deceptive businesses trying to buy formula.

Chairwoman Lina Khan was careful to explain in a 24 May announcement that the FTC isn’t investigating manufacturing practices which led to potential bacterial contamination of formula made at an Abbott Nutrition facility, a widespread recall of products made there, the shutdown of the plant and the supply shortage that followed.

Release Of EleCare,
Import of Kendalmil Coming 

A release of around 300,000 bottles of Abbott’s Nutrition EleCare amino acid-based formulas was one piece of formula supply news the FDA announced on 24 May.

While the EleCare formulas are available through a change in a recent consent decree Abbott Laboratories Ltd. entered with the FDA to move toward restarting production at its Sturgis, MI, plant, the agency also announced Kendamil brand formula made in the UK has been approved for US sales under the temporary enforcement discretion the FDA announced on 16 May.

The FDA said it is not objecting to Abbott Nutrition, after conducting enhanced microbiological testing, releasing EleCare formula previously produced at the Sturgis facility to consumers needing urgent, life-sustaining supplies of the specialty formula on a case-by-case basis. The bottles of formula are in different lots from recalled EleCare lots and have been stored by Abbott Nutrition.

Abbott has advised the FDA that EleCare will be the first formula made when production restarts in Sturgis and other specialty metabolic formulas will follow. The consent decree requires the Abbott Park, IL-based firm to retain an independent expert to review the facility’s operations to ensure compliance with FDA regulations before resuming production there.

UK firm Kendal Nutricare got the FDA’s go ahead to import its formula to the US due to “increased flexibilities” in manufacturing allowed under the enforcement discretion the agency announced in response to a widespread shortage of formula supply that followed the closing of Abbott Nutrition’s plant. It expects Kendal, based in Cumbria County in northern England, to initially ship around 2m cans of Kendamil formula which will reach US stores beginning in June.

The FDA, meanwhile, announced additional supplies of formula from two sources as it responds to the shortage (see box). 

"While the [FTC] does not regulate the safety or manufacturing of the impacted products, it can take steps to address any anticompetitive, unfair, or deceptive acts or practices that have contributed to or are worsening this problem. The FTC can also examine the infant formula industry to identify the factors that created such a fragile market, where a single disruption at a single plant can jeopardize supply,” Khan said in a statement.

The FTC’s inquiry, though, has a common goal with the Food and Drug Administration’s investigation of the Abbott Nutrition plant and the supply shortage.

“Learning from this experience can help determine how we can minimize the risk of similar shortages in the markets for other life-sustaining products,” Khan said.

A request for information through comments to a public docket seeks input to help the FTC examine the pattern of mergers and acquisitions in the formula market to better understand market concentration; how it developed; and how that information should inform future merger reviews.

Comments also could indicate whether “FTC itself or state or federal agencies may have inadvertently taken steps that contributed to fragile supply chains in the market for these crucial products,” the agency stated.

In addition to whether mergers and acquisitions have limited the number of formula suppliers, investment and total manufacturing capacity, the list of questions the FTC published covers instances of consumers attempting to purchase formula experiencing fraud, deception or scams; retailers’ knowledge of extremely large purchases of formula for the purpose of long-term stockpiling or resale; and whether regulatory barriers prevent foreign companies from entering the US formula market.

Comments to the docket – FTC-2022-0031 – should be submitted before 25 June.

Formula Market Reaches FTC’s Antitrust Radar

Khan was expected to prioritize antitrust enforcement to prevent large corporations from unfairly dominating markets, with a focus on big tech, when she was appointed commission chair in 2021. (Also see "‘Revolutionaries’ At FTC Could Give Businesses ‘Very Rough Ride,’ Former Agency Chairman Says" - HBW Insight, 15 Jul, 2021.)

The FTC and the Department of Justice in January issued a request for information seeking public comment on how they can modernize enforcement of antitrust laws in mergers. The request includes eight pages of questions on a broad set of topics with a particular focus on the technology sector, but also extending to pharma. (Also see "Merger Enforcement: FTC And Justice Department Casting Wide Net In Considering Changes" - Pink Sheet, 18 Jan, 2022.)

Khan announced the request noting that global deal-making in 2021 soared to $5.8 trillion, the highest level ever recorded, with the FTC and DOJ receiving more than double the number of merger filings than in any of the past five years.

It’s likely, though, that without Abbott Nutrition’s manufacturing problems and the resulting recall and shortage in the marketplace, the US formula industry wouldn’t be on the FTC’s anti-trust radar.

In response to the shortage, the FDA released guidance for temporary enforcement discretion on 16 May to boost formula supply, including allowing imports. (Also see "Urged By US FDA To Boost Infant Formula Supply, Additional Providers Still Must Wait For Approval" - HBW Insight, 20 May, 2022.)

It detailed safety requirements and approvals needed for companies interested in providing formula under the enforcement discretion in a 20 May webinar. (Also see "Urged By US FDA To Boost Infant Formula Supply, Additional Providers Still Must Wait For Approval" - HBW Insight, 20 May, 2022.)

President Biden deemed the Defense Production Act applicable to manufacturing formula products on 18 May, the same the House passed a bill to add $28m to the FDA’s FY2022 budget to “be available to address the current shortage of FDA-regulated infant formula and certain medical foods” and prevent future shortages, including preventing imports of fraudulent products. (Also see "Biden Mandates Prioritizing Supplies For Infant Formula Production Over All Other Uses" - HBW Insight, 18 May, 2022.)