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

Victor Oliveira, Elizabeth Frazao and David Smallwood

No 59384, Economic Research Report from United States Department of Agriculture, Economic Research Service

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.

Keywords: Agricultural; and; Food; Policy (search for similar items in EconPapers)
Pages: 46
Date: 2010-02
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DOI: 10.22004/ag.econ.59384

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