The Biden administration is flying on baby formula. Here’s why the shortage happened.

Baby formula shortages have escalated in recent months from a product recall to a national crisis, prompting emergency responses from business leaders and White House officials.

As of early May, 43% of US baby formula was out of stock, according to the data firm. data assembly.

To help make up the shortfall, the Biden administration on Sunday began shipping tens of thousands of pounds of baby formula from abroad in what it calls “Operation Fly Formula.” A day earlier, Robert Ford, CEO of Abbott Nutrition, the nation’s largest producer of baby formula, issued an apology in a Washington Post op-ed.

The emergency came on the heels of the voluntary closure in February of an Abbott factory in Sturgis, Michigan, where the company produces major brands of powdered formula such as Similac and EleCare. The closure took effect when four infants became ill with a bacterial illness after ingesting formula produced at the facility and two of the infants died. It’s not clear if the bacteria that sickened the children came from baby formula produced at the Michigan factory, but a a Food and Drug Administration inspection of the facility discovered that it did not have adequate sanitation.

The root causes of the desperate situation extend well beyond the past few months, supply chain experts told ABC News. Pandemic-induced supply chain disruptions led to empty store shelves, rigid international trade barriers prevented imports and market concentration left few alternative suppliers, they said.

“In the scenario where you have a manufacturing problem that happened at an Abbott facility in Michigan, those kinds of things happen all the time,” said Nada Sanders, a professor of supply chain management at the D. ‘Amore-McKim of Northeastern University. ABC News. “Ultimately, we have very, very weak supply chains.”

Many families rely on infant formula for some of their sustenance early in a child’s life. Nearly 20% of babies consume infant formula before they are two days old, the Centers for Disease Control and Prevention said in a 2020 report. More than half of babies receive complementary nutrition in addition to breastfeeding for the first three months, according to the report. Some babies require formula to meet specific nutritional needs.

As with a host of products, from computer chips to wood, the pandemic has snarled the baby formula supply chain. Shortages of labor and raw materials have slowed production and hampered distribution, Sanders said. The outage weakens the supply chain’s ability to respond to sudden ups and downs in customer demand, he added.

“All of this is ultimately tied to the COVID pandemic and actually two and a half years of supply chain disruptions and delays of every possible kind,” Sanders said.

Even amid widespread supply chain disruptions brought on by the coronavirus, few products have faced the crisis-level shortages seen with baby formula in recent weeks, said Sanders and Scott Lincicome, an economist at the Libertarian think tank. Cat Institute.

One reason the baby formula market has proven especially susceptible to shortages is trade barriers and public health regulations that prevent a large influx of products from abroad, Lincicome said. The United States imposes high tariffs on baby formula. In addition, the FDA requires foreign manufacturers to comply with nutritional and labeling requirements.

In turn, 98% of the infant formula consumed in the US is produced in the country. When the Abbott factory closed, the market lacked an international supply to fill the gap. Last week, the FDA Announced “greater flexibilities” for importing baby formula in an effort to alleviate shortages.

But supply problems are not limited to foreign growers, Sanders and Lincicome said. They pointed to a key problem hampering the domestic baby formula industry’s ability to respond: business concentration. Abbott, the largest producer, accounts for about 48% of the US formula market. In total, four companies—Abbott, Nestlé USA, Perrigo, and Mead Johnson Nutrition—control about 90% of the market.

Some critics, including Lincicome, have attributed the small number of market players in large part to a federal nutrition program for women, infants and children, known as WIC, which helps low-income families buy baby formula. About half of the baby formula purchased in the US goes through WIC, and about 1.2 million babies get formula through the program. That scale gives WIC considerable market power, Lincicome said.

WIC uses a system where each state chooses a single company to be the sole provider of baby formula for all residents enrolled in the program. That approach lowers the price WIC pays for baby formula, lowering the cost to taxpayers, Lincicome said. But the sheer size of each state contract prevents small businesses from winning a bid and gaining a foothold, she added.

In response to the crisis, President Biden signed a measure Saturday that allows families enrolled in WIC to purchase formula beyond what the program normally allows in emergency situations.

“Combine the trade wall with internal concentration,” Lincicome said. “You have a situation where you end up having some players in a closed market and when one of those players goes down, the other handful of players that are left can’t fill in the gaps.”

He added: “And it lacks access to global markets that could fill that gap in the short term.”

Last week, Abbott and the FDA reached an agreement for the company to reopen the Michigan factory, which should eventually return the U.S. supply of baby formula to normal, Sanders said. She predicted that it would take three months to fully alleviate the shortage; Lincicome estimated eight weeks.

“Hopefully, Abbott will be able to get their production out and get everything running smoothly and what customers take is replenished at the right cadence,” Sanders said. “It means there are no hits.”