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Rising Infant Formula Costs to the WIC Program: Recent Trends in Rebates and Wholesale Prices

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  • Oliveira, Victor
  • Frazao, Elizabeth
  • Smallwood, David M.

Abstract

The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) provides participating infants with free infant formula. This study estimated that between 57 and 68 percent of all infant formula sold in the United States was purchased through WIC, based on 2004-06 data, and that formula costs to the WIC program have increased. Typically, WIC State agencies receive substantial rebates from manufacturers for each can of formula provided through the program. Each WIC State agency, or group of agencies, awards a contract to the manufacturer offering the lowest net wholesale price, defined as the difference between the manufacturer’s wholesale price and the State agency’s rebate. After adjusting for inflation, net wholesale prices increased by an average 73 percent for 26 fluid ounces of reconstituted formula between States’ contracts in effect in December 2008 and the States’ previous contracts. Most (72 percent) of the increase in real net wholesale prices was due to higher wholesale prices, the rest (28 percent) was due to lower rebates. As a result of the increase in real net wholesale prices, WIC paid about $127 million more for infant formula over the course of a year.

Suggested Citation

  • 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.
    • Handle: RePEc:ags:uersrr:59384
    DOI: 10.22004/ag.econ.59384
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    References listed on IDEAS

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    1. repec:mpr:mprres:4560 is not listed on IDEAS
    2. Committee to Review the WIC Food Packages of which Barbara L. Devaney is a member, "undated". "WIC Food Packages: Time for a Change," Mathematica Policy Research Reports 989d259284974842a250546c8, Mathematica Policy Research.
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    Cited by:

    1. 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.
    2. Onur Altindag & Theodore J. Joyce & Julie A. Reeder, 2015. "Effects of Peer Counseling to Support Breastfeeding: Assessing the External Validity of a Randomized Field Experiment," NBER Working Papers 21013, National Bureau of Economic Research, Inc.
    3. 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.
    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. 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.
    6. Levedahl, J. William & Reed, Albert J., 2012. "Net Taxpayer Cost of WIC Infant Formula," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124073, Agricultural and Applied Economics Association.
    7. Volpe, Richard & Saitone, Tina & Sexton, Richard, 2014. "Cost Containment in the WIC Program: Vendor Peer Groups and Reimbursement Rates," Economic Research Report 183224, United States Department of Agriculture, Economic Research Service.
    8. Rui Huang & Jeffrey Perloff, 2014. "WIC Contract Spillover Effects," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(1), pages 49-71, February.
    9. 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.
    10. 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.
    11. 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.
    12. 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.
    13. McLaughlin, Patrick W. & Saitone, Tina L. & Sexton, Richard J., 2013. "Non-Price Competition and the California WIC Program," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150783, Agricultural and Applied Economics Association.
    14. Rojas Christian A. & Wei Hongli, 2019. "Spillover Mechanisms in the WIC Infant Formula Rebate Program," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 17(2), pages 1-14, November.

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