By Tennille Tracy
Capitol Hill lawmakers will soon be wrestling over the future of
one of the nation's biggest food-assistance programs, and the
makers of infant formula are among the unlikely players in the
middle of the scrum.
The law authorizing the $6 billion-a-year WIC program, which
provides food vouchers to pregnant or postpartum women and their
young children, is up for renewal this year. One of the largest
formula makers has suggested the program's eligibility should be
tightened, noting that it has up to 20% more recipients than the
government intended. Much like the government's separate food-stamp
program, WIC expanded during the recession--reaching a peak of 9.2
million participants in 2010--and has since contracted to about 8.3
million women and children.
That overall growth in the program has made it a money-losing
venture for makers of infant formula, the program's largest single
expense, because the companies essentially make no profit off
formula sold to states as part of WIC. The largest supplier in the
U.S., Mead Johnson Nutrition Co., maker of Enfamil, is making the
rounds on Capitol Hill, calling on lawmakers to change some of the
eligibility requirements, thereby limiting or even shrinking the
pool of recipients.
"We are uniquely vested in this program and, as the biggest
contributor of infant formula to the [WIC] program, we see it as
our duty to help put it on a sustainable path to continue serving
the millions of people who truly need it," said Audrae Erickson,
head of Mead Johnson's Washington, D.C., office.
Providing benefits to more than half of all babies in the U.S.,
the Special Supplemental Nutrition Program for Women, Infants and
Children is the third-largest food assistance program behind food
stamps and school lunches. It provides vouchers for a variety of
foods for mothers and their children up to age 5, including eggs,
cheese and bread, and accounts for well over half of all infant
formula sold in the U.S. Like food stamps, WIC is federally funded
but administered by the states.
Fierce bidding for those state contracts has led the three
biggest formula makers to offer steadily deeper discounts--on
average 92% below wholesale prices--eroding profits on WIC sales.
But winning a state's contract makes a formula maker the dominant
player on a state's grocery store shelves, where the companies try
to make up for their money-losing WIC sales.
The discounts have amounted to more than $28 billion since 1997,
according to one formula maker's estimate. The nation's other big
formula makers are Abbott Laboratories, maker of Similac, and
Nestlé SA, maker of Gerber Good Start.
To qualify for WIC vouchers, recipients have to make less than
185% of the poverty level--or $44,100 for a family of four. But
people automatically qualify for WIC if they also participate in
Medicaid, the health program for the poor, where eligibility is set
by the states. A Wall Street Journal analysis of Medicaid benefits
showed that 36 states provide benefits to infants whose families'
incomes exceed WIC requirements.
Under the state of Iowa's Medicaid eligibility threshold, for
example, a family of four making $89,400 could qualify for WIC
benefits. Recipients also have to be nutritionally at risk.
Mead Johnson, based in Illinois, has been urging lawmakers to
look closely at these income thresholds. A study commissioned by
the company found that as many as one-fifth of WIC recipients make
more money than the program's threshold, while the U.S. Agriculture
Department puts the figure at 1.5% of recipients.
To help make its argument, Mead Johnson has hired a lobbying
firm run by Blanche Lincoln, a former Democratic senator from
Arkansas who played a key role in reauthorizing the WIC program in
2010 as the chairwoman of the Senate Agriculture Committee.
Republicans say it is too early to talk about specific changes
to the law but note that all components of the program are up for
review.
"The focus will remain on preserving the intent of these
programs, which is to ensure low-income children--and, in this
case, mothers and infants in need--receive supplemental assistance
to help protect against inadequate nutrition," said Senate
Agriculture Committee Chairman Pat Roberts (R., Kan.), who has a
lead role in renewing the WIC law.
Meantime, advocates for the poor say the formula company is
overstating the problem.
"We're talking about a really tiny window of people who make
more than the WIC income threshold," said Douglas Greenaway,
president of the National WIC Association, a nonprofit advocacy
group. "I think this is really an effort to put a chink in the
armor of the program."
Write to Tennille Tracy at tennille.tracy@wsj.com
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