Shortage raises concern over cargo theft, FDA’s lack of supply chain visibility tools
The Food and Drug Administration on Thursday announced that an emergency shipment of baby formula equivalent to 5 million 8-ounce bottles — more than triple the amount delivered this week on the first two Operation Fly Formula flights — is being readied in Europe.
The news follows completion of a FedEx delivery for the government, the FDA informing a second foreign manufacturer it could also use new regulatory flexibility to import infant formula and lawmakers seeking answers on how to alleviate the nation’s baby formula shortage.
About 500,000 additional cans of specialized formula manufactured by Danone’s Nutricia unit will soon arrive in the U.S. to help fill the gap in domestic supplies of formula caused by global sourcing constraints and a major recall. The Neocate amino acid-based formula products, some of which are already manufactured for the U.S. market, are made in facilities in the United Kingdom and Germany, the FDA said. Neocate does not use cow’s milk, which many babies are allergic to.
Government officials didn’t provide details on how the Danone baby formula will be transported, but it is likely to require multiple flights by all-cargo aircraft.
The specialized medical formula is expected to be distributed through direct ordering, hospitals, health care professionals, pharmacies, health care product distributors and government food programs to ensure they get to the infants who depend on the products.
The FDA said it has worked with Nutricia for several months to boost production and identify additional sources of infant formula products in the future.
On Wednesday, a FedEx Express cargo jet landed at Washington Dulles International Airport with a second Operation Fly Formula shipment. FedEx said an MD-11 freighter delivered 100,000 pounds of Nestle’s Gerber Good Start Extensive HA from Ramstein Air Force Base in Germany, enough to make 1 million 8-ounce bottles of infant formula. FedEx Express trucks transported the 114 pallets to a Nestle distribution center in Pennsylvania.
First lady Jill Biden and Surgeon General Vivek Murthy were at Dulles to greet the shipment and underscore the administration’s focus on helping families get needed baby food. The immediate priority is on hard-to-find specialty formulas for babies with cow’s milk allergies and other conditions.
“We have made tremendous progress, including notable steps in just the past week, which will allow us to immediately begin bringing specialty and infant formula products into the U.S. as quickly as possible,” FDA Commissioner Robert Califf said in a statement. “We continue to work closely with our U.S. government partners and domestic and international manufacturers to identify additional formula product that will be available to parents and caregivers in the weeks and months ahead. It is our goal to ensure that hospitals, specialty pharmacies, and retail store shelves will begin seeing adequate supplies again in the coming weeks.”
The Biden administration has implemented a series of stopgap measures to overcome the recent shortfall in formula inventories that has frustrated parents. Operation Fly Formula launched last week, with the first shipment arriving Sunday in Indianapolis aboard a U.S. Air
Force cargo aircraft. The departments of Agriculture and Health and Human Services are identifying available stocks of overseas formula and submitting transportation requests to the Defense Department, which selects airlines from a list of prearranged contractors to carry out the move. President Joe Biden also invoked the Defense Production Act, allowing him to direct suppliers to prioritize the allocation of key ingredients and packing materials to formula makers.
The FDA is part of HHS.
In the past three weeks, increased production by Reckitt and Gerber, the other dominant U.S. manufacturers, has compensated for the lost Abbott Laboratories (NYSE: ABT) output and improved in-stock rates.
CargoNet, which manages a national cargo theft database and secure information-sharing system to help law enforcement and businesses with prevention and loss recovery, warned that truckloads of infant formula are at an elevated risk of theft over the coming Memorial Day weekend, a prime target period for criminals. Theft activity during the first quarter of the year was more than 15% higher than pre-pandemic levels, according to CargoNet’s latest report.
“The COVID-19 pandemic has caused shortages and price inflation of specific goods and we think the items most affected — like infant formula and computer electronics — are the items most at-risk this holiday” instead of traditional targets like household goods and food and beverage products, CargoNet said.
Formula supplies were impacted for many months because of COVID-related supply chain backlogs, but the situation reached crisis level in mid-February when Abbott Nutrition recalled formula and shut down its main plant in Sturgis, Michigan, after inspectors found extensive bacterial contamination and unsanitary conditions. Two children who consumed an Abbott formula died and two more were hospitalized, although investigators have not found a direct connection between the specific type of bacteria in the plant and the deaths.
The war in Ukraine has also disrupted the supply of sunflower oil, an ingredient in many formulas.
Abbott Nutrition dominates the market for many of the hypoallergenic amino acid-based formulas for babies with allergies or other medical conditions and unique specialty metabolic formulas for low-birthweight infants or those with serious medical conditions.
FDA cuts through more red tape
The FDA has taken several steps since March to augment domestic supplies from overseas by increasing regulatory flexibility. The process for reviewing import entries of certain products from foreign facilities with favorable inspection records, for example, has been streamlined. Last week it issued guidelines that will allow major formula manufacturers to safely import formulas not currently being produced for the U.S. market. And it gave domestic companies that produce exports more freedom to switch production for U.S. sale.
On Tuesday, the FDA said it would exercise more enforcement discretion to enable the U.K.’s Kendal Nutricare to export formula to the U.S. The company initially estimates 2 million cans of its Kendamil brand will start reaching stores in early June. Kendal currently has more than 40,000 cans in stock for immediate dispatch. HHS has initiated conversations to evaluate options for getting the products to the U.S. as quickly as possible.
The agency similarly relaxed its posture to facilitate the Danone Nutricia shipment.
The FDA said it had reviewed Kendal’s microbiological testing, labeling, production procedures and inspection history and has no concerns about safety or nutrition. The statement appears to bolster arguments that existing rules acted as an indirect trade barrier for foreign-made formulas and had little relation to health and safety.
Switzerland-based Nestle has also submitted its first request for enforcement discretion to import Nestle NAN Supreme Pro Stage 1, which it produces in Germany for the Australian market, Scott Fitz, vice president of technical and production for the Gerber Products subsidiary, told members of Congress on Wednesday.
In another example of new flexibility, the FDA said it would allow Abbott Nutrition to release about 300,000 cans of EleCare amino acid-based infant formula previously produced at the Sturgis facility to families needing urgent supplies of the specialty formula on a case-by-case basis. The products will undergo enhanced testing for contamination before release.
Although some EleCare production was included in Abbott Nutrition’s infant formula recall, the EleCare products that will be released were in different lots, have never been distributed and have been maintained in storage under control by Abbott Nutrition. They have been on hold due to concerns that they were produced under unsanitary conditions.
Abbott has informed the FDA that EleCare will be the first formula produced at the Sturgis facility when it restarts production, and other specialty hypoallergenic formulas will closely follow.
In a Washington Post op-ed on Sunday, Abbott Laboratories (NYSE: ABT) Chairman and Chief Executive Robert Ford said the plant is expected to restart the first week of June. It could take up to two months before products reach store shelves. The reopening was made possible by Abbott’s agreement with the government to correct quality control procedures without admitting guilt.
“When we are operating our Michigan facility at full capacity, we will more than double our current production of powdered infant formula for the United States. By the end of June, we will be supplying more formula to Americans than we were in January before the recall,” Ford said.
Abbott has been shipping millions of cans from its Cootehill, Ireland, facility this spring. The company is relying on nearly 50 cargo flights per week coming into 12 airports across the country, Christopher Calamari, president of Abbott Nutrition North America, testified. Six to eight flights per day, on average, each carrying about 132,000 cans are landing in the U.S., and each batch of infant formula undergoes quality checks before heading to stores.
“This year, we will more than double the amount of Similac Advance powder formula we’re bringing in from Ireland,” Calamari said.
Congress seeks FDA reforms
Members of the House Energy and Commerce Committee scolded regulators and industry executives for the baby formula shortages. The Biden administration came under fire for not acting with urgency until media coverage put the issue in the public eye. FDA
Commissioner Califf acknowledged that the agency was slow to respond after consumers and a whistleblower raised red flags about quality control at the Abbott formula plant. In October, a former employee sent the FDA a report describing alleged data falsification, lax sanitation and release of untested products, but officials didn’t receive it until early February. Califf blamed a lack of staff in the mailroom because of COVID for the oversight.
Industry shortages are primarily the result of just-in-time distribution, market concentration, a lack of redundancy and contingency planning, and sole-source contracting, he said.
More formula has been produced and sold in the most recent four-week period than before the recall, said Califf, who blamed reports of high stockout rates issued by some suppliers based on imprecise metrics, and repeated by news outlets, for motivating people to stockpile supplies, creating artificial shortages. More reliable data shows stock levels are down 20% in mid-May compared to a 10% outage before the Abbott recall, he added.
Califf testified that the FDA lacks the authority and resources to track and respond to supply chain issues for infant formula and medical foods, although it has requested such power since 2020.
“FDA developed this legislative proposal because we were well aware that the U.S. infant formula supply chain was dominated by a small number of actors with only a handful of manufacturing facilities — making it at high risk for disruption by any single event or stressor. Even without the authorities to compel submission of supply chain data, FDA took numerous steps to request this data and shore up supply to the extent we received cooperation from firms,” he said.
The FDA is exploring additional mechanisms to incentivize companies to make their supply chain infrastructure more resilient.
Calamari said Abbott plans to expand its capacity and redundancy so no production of critical products like EleCare is ever interrupted again.
In addition to adding shifts and unlimited overtime to run its plants 24/7, Reckitt, the second-largest formula maker in the U.S. behind Abbott, has cut its time to market by 40% by having trucks ready for loading the instant they roll out of the production facility, said Robert Cleveland, senior vice president North America and Europe for the Mead Johnson Nutrition subsidiary.
The manufacturer is also working with retailers to ensure that trucks carrying infant formula are unloaded first and is reducing the number of stock-keeping units to simplify its supply chain and maximize production efficiency.
Califf also decried the FDA’s lack of data and technology tools that could provide advance warning of potential disruptions.
“The industry has sophisticated supply chain data enabling modeling and predictive analytics for the individual manufacturers and suppliers, but there is no data system to combine the information into a composite picture that would enable an understanding of the resiliency of the entire system to stresses, disruptions and changes in demand,” he said.
“We need a sustainable mechanism for infant formula supply chain monitoring to allow us to better identify and address existing and future potential supply chain disruptions. A dynamic, interconnected supply chain monitoring platform and robust data sets are necessary to enable the agency to be most effective in monitoring food supply chains, managing risks, and identifying and quickly addressing supply chain disruptions to reduce impacts on consumers.
“Until regulatory agencies have digital access to critical supply chain information and the personnel to do the work, we’ll continue to react to supply chain disruptions rather than intervening to prevent them.”
Califf, who worked as a Google executive for five years, said the industry has mostly opposed an early warning system, but said “there’s no reason that we don’t put together a national system to enable us to do stress testing on the supply chain for critical products just like we have for banks.”
The commissioner noted the FDA’s review responsibilities increased as the supply of sunflower oil decreased because manufacturers are looking for ways to reformulate products. And the recent actions to increase imports will also increase the FDA’s workload because staff must review applications and collaborate with the food safety specialists to ensure products introduced meet safety and nutrition criteria.
Energy and Commerce Chairman Dave Pallone, D-New Jersey, said underfunding of FDA food safety programs also explains why the FDA didn’t react quickly enough.
“Additional legislation will be necessary to improve transparency and reporting requirements, and to empower FDA to set limits more quickly on contamination,” he said.
“Industry must also do its part to ensure robust internal controls are in place and are being followed to prevent contaminated products from ever reaching a single child. Put simply, it shouldn’t take the direct intervention of FDA and the president to keep infant formula on the shelves. The manufacturers have to take responsibility.”
BY: Tawny
This article was written by Eric Kulisch and found on
Published On: May 27th, 2022 / Categories: Uncategorized / Tags: , , , /