Formula Makers Could Gain From Welfare Reform

Infant formula manufacturers stand to reap a windfall - critics say as much as $1 billion - under Republican legislation to replace a federal nutrition program for low-income pregnant women and children with a block grant to the states.

At issue is a decision by the House Economic and Educational Opportunities Committee to turn WIC the Women, Infants and Children supplemental feeding program - over to the states as part of the GOP’s plan to overhaul the welfare system.

The legislation permits states to set their own nutritional standards and repeals a 1989 law requiring competitive bidding for infant formula purchases. The bill goes to the House floor next week.

A $3.5 billion program, WIC serves almost 7 million pregnant and nursing women, infants and children by providing vouchers for the purchase of infant formula, milk, cheese, eggs, breakfast cereals, juices and dried beans.

Before 1989, only about half the states were using competitive bidding for their infant formula purchases. The switch to the costcontainment program has saved millions of dollars and allowed WIC to expand, according to the Agriculture Department.

Last year, USDA said, competitive bidding saved $1.1 billion and allowed states to provide food and formula to an estimated 1.6 million women and children who otherwise would not have been served.

Although states could continue to use competitive bidding under the legislation, a USDA official and other critics say some states may bow to pressure from the powerful pharmaceutical industry and decide not to follow federal cost-containment procedures.

In a statement released late Wednesday, one of the three largest formula manufacturers, the Ross Products Division of Abbott Laboratories, said the company “will continue to support the (WIC) program whether operated by the federal government or state governments.”

Republican Rep. Tim Hutchinson of Arkansas said the intent of the bill is to give states maximum flexibility, and that they could still use competitive bidding if they chose.

He also notes that states would have an incentive to hold down formula costs because federal spending on the block grant is fixed for each of the next five years. It grows from $4.6 billion in 1996 to $5.3 billion in 2000.

Ellen Haas, USDA undersecretary for food and consumer services, said some states will be efficient managers of WIC under a block grant, but others will have different priorities and “industry has the opportunity to influence decisions much more.”