The baby-formula crisis has been in the works for decades

For families that need to go to work and keep their kids fed, the primary safety net is maintained by private-sector food and pharmaceutical conglomerates. The Special Supplemental Nutrition Program for Women, Infants, and Children, or WIC, provides about half of all American newborns with nutritional aid through a federal program, but is administered by the states, which sign individual deals with manufacturers for the exclusive rights to provide formula to a state’s benefit recipients. This program has been very effective at getting formula to low-income families, but it also exacerbates problems within the formula market.

Because of WIC’s scale, its exclusive statewide contracts encourage consolidation, according to Brian Dittmeier, the senior director of public policy at the National WIC Association, an organization that advocates on behalf of WIC recipients and the program’s workers. Manufacturers struggle to compete in markets where they don’t have a WIC contract, even for products that are not covered by the program’s rebates. A recent analysis of retailer sales data from 2006 to 2015 found that when a manufacturer won a new WIC contract, its sales of eligible formula shot up more than 300 percent in that state. And the researchers found what they called a “spillover” effect—sales of the manufacturer’s non-rebated products also jumped significantly.

Over time, these exclusive contracts have been won by a shrinking number of ever larger manufacturers. In 2015, Abbott, the company whose plant closure triggered current shortages, held WIC contracts in 23 states. Now the number is at least 31.