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Impact of the WIC Program on the Infant Formula Market

Author

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  • Betson, David

Abstract

Since 1972, the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) has provided free infant formula to low-income families. Today, infant formula purchases through the WIC program account for roughly half of all infant formula purchased in the United States. Beginning in the late 1980s, WIC agencies, in an effort to contain rising program costs, secured rebates from formula manufacturers through sole-source contracts for the infant formula they purchase. During 1980-2002, infant formula did not substantively change but real wholesale prices nearly doubled. This research examines the impact of providing free formula through the WIC program and its use of sole-source contracts to control program costs on the wholesale price of infant formula. The findings show that providing free formula to low-income families is the primary factor in the growth in real wholesale prices of formula and that sole-source contracts not only have reduced the cost of formula to the Government but also have retarded wholesale price growth.

Suggested Citation

  • Betson, David, 2009. "Impact of the WIC Program on the Infant Formula Market," Contractor and Cooperator Reports 292071, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uerscc:292071
    DOI: 10.22004/ag.econ.292071
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    Citations

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    Cited by:

    1. Katherine Meckel, 2020. "Is the Cure Worse Than the Disease? Unintended Effects of Payment Reform in a Quantity-Based Transfer Program," American Economic Review, American Economic Association, vol. 110(6), pages 1821-1865, June.
    2. Oliveira, Victor & Frazao, Elizabeth & Smallwood, David M., 2011. "The Infant Formula Market: Consequences of a Change in the WIC Contract Brand," Economic Research Report 118020, United States Department of Agriculture, Economic Research Service.
    3. David E. Davis, 2012. "Bidding for WIC Infant Formula Contracts: Do Non-WIC Customers Subsidize WIC Customers?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(1), pages 80-96.
    4. Oliveira, Victor & Frazao, Elizabeth, 2015. "The WIC Program: Background, Trends, and Economic Issues, 2015 Edition," Economic Information Bulletin 197543, United States Department of Agriculture, Economic Research Service.
    5. Tina L. Saitone & Richard J. Sexton & Richard J. Volpe, 2015. "A Wicked Problem? Cost Containment in the Women, Infants and Children Program," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 37(3), pages 378-402.
    6. Oliveira, Victor & Frazao, Elizabeth & Smallwood, David, 2013. "Trends in Infant Formula Rebate Contracts: Implications for the WIC Program," Economic Information Bulletin 161130, United States Department of Agriculture, Economic Research Service.
    7. Saitone, Tina L. & Sexton, Richard J. & Volpe, Richard J., III, 2012. "Markups and Promotional Patterns of California WIC-Authorized Foods," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124927, Agricultural and Applied Economics Association.

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