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Manufacturers’ Bids for WIC Infant Formula Rebate Contracts, 2003-2013

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  • Oliveira, Victor
  • Davis, David

Abstract

The U.S. Department of Agriculture’s Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) is the major purchaser of infant formula in the United States, and its mandatory rebate program saved WIC $1.9 billion in FY 2013. WIC State agencies are required by law to have competitively bid infant formula rebate contracts with infant formula manufacturers. Contracts are awarded to the manufacturer offering the WIC State agency the lowest net price (as determined by the manufacturer’s wholesale price minus the rebate). This study examines both the winning and losing bids from the infant formula manufacturers for State agency contracts awarded from 2003 to 2013. Only three infant formula manufacturers bid on rebate contracts during this period, and bids varied greatly across the contracts. In general, there was a large disparity in the winning real net price bid and the next closest contender. Results from this study suggest that infant formula manufacturers aggressively compete for WIC contracts. In recent years, rebates have been large (over 90 percent of the wholesale price), every contract has received multiple bids, and contracts have turned over regularly among firms.

Suggested Citation

  • Oliveira, Victor & Davis, David, 2015. "Manufacturers’ Bids for WIC Infant Formula Rebate Contracts, 2003-2013," Economic Information Bulletin 206808, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uersib:206808
    DOI: 10.22004/ag.econ.206808
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    References listed on IDEAS

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    1. Oliveira, Victor & Davis, David E., 2006. "Recent Trends and Economic Issues in the WIC Infant Formula Rebate Program," MPRA Paper 6657, University Library of Munich, Germany.
    2. David Davis, 2014. "Buyer Alliances as Countervailing Power in WIC Infant-Formula Auctions," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 45(2), pages 121-138, September.
    3. 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.
    4. Unknown, 2014. "Department Publications 2013," Publications Lists 206935, University of Minnesota, Department of Applied Economics.
    5. Oliveira, Victor & Frazao, Elizabeth & Smallwood, David M., 2010. "Rising Infant Formula Costs to the WIC Program: Recent Trends in Rebates and Wholesale Prices," Economic Research Report 59384, United States Department of Agriculture, Economic Research Service.
    6. Oliveira, Victor & Racine, Elizabeth & Olmsted, Jennifer & Ghelfi, Linda M., 2002. "The Wic Program: Background, Trends, And Issues," Food Assistance and Nutrition Research Reports 33847, United States Department of Agriculture, Economic Research Service.
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