Booker, Warren Question Abbott CEO on Stock Buybacks, CEO Pay, and Years of Failures Leading To Infant Formula Shortage

 

Booker, Warren Question Abbott CEO on Stock Buybacks, CEO Pay, and Years of Failures Leading To Infant Formula Shortage

“Abbott has repeatedly and brazenly violated safety rules and ignored warnings from the FDA, leading to a massive recall, temporary closure of its Sturgis, Michigan plant, and an unprecedented shortage in infant formula – even as your stockholders and executives raked in profits.”

“This corporate concentration, combined with decades of inactivity by regulators, allowed your company to skate by with subpar safety protocols, knowing that consumers did not have the option to easily switch to a competitor.”

Text of Letter (PDF)

Washington, D.C. – Today, U.S. Senators Cory Booker (D-NJ) and Elizabeth Warren (D-MA) sent a letter to Robert B. Ford, Chairman of the Board and Chief Executive Officer of Abbott Laboratories, requesting information on the company’s actions and investments leading up to the 2022 infant formula shortage. In the letter, the senators request information regarding failures in the infant formula market, including corporate consolidation and lack of oversight that enabled Abbott to repeatedly and brazenly violate safety rules and ignore warnings from the Food and Drug Administration (FDA) – all while raking in massive profits and spending nearly $1 billion on handouts to shareholders and executives in 2021.

“The infant formula shortage is putting children across our nation at risk,” said Senator Booker. “Our most vulnerable people relying on programs such as the Special Supplemental Nutrition Program for Women, Infants, and Children are especially impacted. With Abbott Laboratories being one of four infant formula manufacturers that control nearly 90 percent of the market, this has led to a fragile system that fails to respond to supply chain disruptions adequately. This is yet another example of how the hyper-consolidation we see across the food system hurts American families.”

“Companies like Abbott that dominate the market and regulators that have failed to step up are responsible for the infant formula shortage that American families are facing. Abbott was raking in massive profits and handing out billions to shareholders and executives while repeatedly and brazenly ignoring warnings and violating safety rules, putting millions at risk. Regulators need to do their jobs, now,” said Senator Warren.

On February 17, 2022, Abbott and the FDA announced a recall of Similac, Alimentu, and EleCare – three different types of formula – and shut down its Sturgis, Michigan facility after reports that two infants were hospitalized and two died as a result of illness from formula contaminated by Cronobacter bacteria. This led to retailers rationing formula, as the nationwide out-of-stock rate for infant formula has climbed to 43%, and 8 states report rates of over 50%. Families are traveling long distances to find formula and often paying exorbitant prices when they are able to find it. In some cases, parents reported paying six times the retail cost to secure the necessary formula for their children. For the 1.2 million infants who rely on the United States Department of Agriculture’s Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) for formula, the search is especially difficult. This is particularly the case for those families living in states like Massachusetts, where the state WIC program holds an exclusive contract with Abbott.

For years, Abbott has been cutting corners on equipment and safety protocols. Between September 2019 and September 2021, Abbott Nutrition received 17 consumer complaints regarding their infant formula products. Additionally, Abbott found Cronobacter in five environmental samples from January 2019 to August 2021. According to a whistleblower complaint, Abbott’s cost-cutting measures included subpar clean-in-place procedures, such as the failure to train or hire adequate staff to keep their Sturgis site sanitary, failure to undertake “reasonable measures” to correct deficient training protocols, and falsifying records to cover up breaches.

“Furthermore, a highly consolidated market has insulated your company from the consequences of its failures, exacerbating your company’s inability to resume safe production and ensuring that any shortage would quickly spiral out of control. Your company’s ‘iron grip on the market,’ which has been boosted by over $4 million in lobbying in 2020 alone, and over $95 million since 1998, has effectively reduced competition and restricted the infant formula market to just four companies – Abbott, Reckitt Benckiser, Nestle, and Perrigo, which together account for 89% of U.S. infant formula sales,” wrote the lawmakers.

Even as Abbott has ignored warnings from whistleblowers, parents, and the FDA, the company has continued to rake in record profits. In the second quarter of 2021, Abbott doubled its profits from the year before. Rather than investing in safety or training, Abbott used its increased profits to spend over $800 million to purchase more than 6.5 million shares of its stock in buybacks in 2021, and raised CEO compensation from approximately $20.5 million in 2020 to nearly $25 million in 2021, over 250 times that of the average Abbott employee.

As American families struggle with the shortage of essential formula for babies, children, and adults, Senator Booker has worked to find a solution to the crisis and ensure those responsible are held accountable:

  • On May 13, 2022, Senator Booker joined colleagues in a letter to the Infant Nutrition Council of America to push for member organizations to step up manufacturing and end the shortage.
  • On May 13, 2022, Senator Booker led colleagues in a letter to the Department of Agriculture urging the agency to address extremely high levels of corporate consolidation in the infant formula marketplace.
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