Topic:
NUTRITION; WOMEN; GOVERNMENT PURCHASING; INFANTS; BIDS AND BIDDING;
Location:
NUTRITION;

OLR Research Report


January 31, 2007

 

2007-R-0136

WIC PROGRAM INFANT FORMULA SUPPLIER SELECTION

By: Saul Spigel, Chief Analyst

You asked (1) what criteria the Department of Public Health (DPH) uses to select infant formula suppliers for the federal Women, Infant and Children's (WIC) nutrition program, (2) whether the General Assembly can establish quality standards for formula selection and, if so, when they might begin to affect WIC formula selection, and (3) whether any national organizations assess infant formula quality and, if so, how Nestle Good Start rates.

SUMMARY

Federal WIC regulations require states to use a competitive bid process to select a single manufacturer to supply milk- and soy-based infant formula. Cost is the principal selection criteria in this process, but the selected manufacturer must certify that its formula meets Food and Drug Administration (FDA) standards. One of Nestle's products was selected in 2006 as the standard formula for Connecticut's WIC program. The FDA recently warned Nestle that one of its other products, Good Start with Iron, did not meet FDA standards. This formula has not been approved for use in Connecticut's WIC program since October 1, 2006.

Current law contains no quality standards for WIC products. DPH's agreement with Nestle runs through September 30, 2009, but the state can cancel it with or without cause with 90 days' notice. Thus, any standards the legislature enacts could potentially affect the agreement within 90 days, depending on how the law was written. DPH might have difficulty finding an alternate supplier in that timeframe, especially at the same cost. Alternatively, the legislature could require DPH to adopt standards by regulation, which would provide a longer lead time for any change.

We checked the websites of the American Academy of Pediatrics, American Association of Family Physicians, and American Dietetic Association. None compares infant formula brands or makes brand recommendations. Nor could we find any comparisons or recommendations in magazines like Consumers' Reports.

WIC INFANT FORMULA SELECTION CRITERIA AND PROCESS

Under the WIC program, states must use a competitive bid process to select a single manufacturer to supply infant formula that WIC participants can buy without a medical prescription (they can buy a variety of other formulas with a medical prescription). This formula is called the state's “contract brand infant formula.” While the selection process mainly looks at cost, contract brand infant formula must meet certain quality criteria.

Federal Quality Criteria

Federal WIC regulations require by definition that contract brand formula meet FDA specifications. The FDA specifications establish minimum amounts of 29 nutrients and maximum amounts for nine of them. In addition, the WIC regulations specifically require contract brand infant formula to be fortified with a minimum amount of iron (21 CFR 107 and 7 CFR 246.10(c)(1)(i)).

Nestle Good Start and FDA Specifications. If an infant formula does not meet FDA specifications, the FDA considers it an “adulterated product” (unless it is exempt because it is a special formula designed for infants with inborn metabolic disorders or low birth weight). If the FDA discovers a formula is “adulterated,” it can require the manufacturer to comply with its specifications, including issuing an injunction or recalling the product.

The FDA issued a warning letter to Nestle on November 27, 2006 concerning its Good Start infant formula with iron. The letter indicated that FDA investigators had found the formula deficient in calcium and phosphorus and the product erroneously labeled about the level of these nutrients. Consequently, FDA said, the product was adulterated and misbranded.

The warning letter gave Nestle 15 working days to notify FDA of the steps it had or would take to correct the violations and prevent their recurrence. A Nestle statement on December 14 stated that the company performed its own tests on samples from the same batch of formula and found they contained the proper levels of all required nutrients, including the two flagged by the FDA. We asked the FDA on January 23 about the status of this issue but have not yet received a response.

Federal Cost Criteria

Cost is the main criterion for selecting contract brand formula. WIC regulations require states continuously to operate a cost containment system for selecting formula. States can choose between two purchasing systems that provide for the purchase of milk- and soy-based formula. They can use a “single-supplier competitive system” that seeks bids from formula manufacturers to supply formula and provide rebates. Or, with federal approval, they can use an alternative system that provides equal or greater savings than the single-supplier system.

Under either system, states must award contracts to the responsive and responsible bidder offering the lowest total monthly net price or the highest monthly rebate for a standardized number of units of formula. The regulations set out formulas states must use to calculate costs and rebates (7 CFR 246.16a).

Connecticut Selection Process and Contract

In 2006, a multistate bid process selected Nestle Good Start Supreme with DHA and ARA (two nutritive supplements) as the contract brand formula for Connecticut's WIC program and programs in the other New England states (except Vermont) and three tribal organizations. Nestle's bid did not include Good Start with Iron, the formula the FDA cited. As of October 1, 2006, Good Start with Iron was no longer approved for use in Connecticut's WIC program, according to John Frassinelli, the state WIC program director in a December 14, 2006 memo to local WIC coordinators and staff.

The multistate group bid as a single entity, each bid aggregated costs for all programs, and each program is a signatory to the agreement. It used the single-supplier competitive system bid process and the lowest total monthly net price criterion to select a manufacturer. The bid document required bidders to certify that their products complied with applicable federal regulations. The award decision was based entirely on

cost. Three manufacturers (Nestle, Mead Johnson & Co., and Ross Products Division) submitted bids; Nestle's was 30% ($500,000) less than the next closest bidder.

The agreement runs from October 1, 2006 through September 30, 2009. It can be extended for two consecutive one-year periods. It permits any state to cancel, with or without cause, by giving the manufacturer 90 days notice. The agreement contains no requirements related to product quality.

LEGISLATIVE OPTIONS

Since the state can cancel its agreement with Nestle with 90 days' notice, the legislature could act to impose quality standards that quickly eliminate Nestle's ability to continue as the WIC formula supplier. But it is not clear that DPH could assure an alternate supply of formula to WIC participants within this timeframe. And, given Nestle's low bid, the price for alternate formula would probably be higher. As an alternative, the legislature could require DPH to prepare for the next bid solicitation in spring 2009.

DPH staff indicate the agency could (1) enter a temporary contract with another manufacture until a new bid process selects a new provider or (2) provide infant formula to WIC clients at full retail price for a period of time. The first option would require changing infants' formulas; the second may not be viable due to funding limits.

Connecticut's current statutes governing WIC are minimal. They authorize DPH to administer the program, adopt regulations, and fine vendors (retailers) who violate the regulations up to $2,500 or disqualify them from participation (CGS 19a-59c and 59d). The regulations deal mainly with participant and vendor eligibility and local WIC agencies. They do not treat food quality or contracts with food manufacturers (Conn. Agency Reg., 19a-59c-1 to -6).

The legislature could enact legislation or require DPH regulations to:

1. address food quality, specifically requiring food and products purveyed through WIC to meet applicable FDA standards, or

2. require DPH agreements with food manufacturers to contain provisions concerning food quality standards and consequences for a manufacturer's failure to maintain those standards, including monetary penalties or contract termination.

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