Summary
The Department of Agriculture's Food and Nutrition Service (FNS) provided about $3 billion to state agencies in fiscal year 2001 for food assistance, including infant formula, through its Special Supplemental Nutrition Program for Women, Infants and Children (WIC). Most infants receiving formula are given a milk- or soy-based standard formula. To stretch program dollars, each state WIC agency contracts with a single company for purchases of that company's standard formula for which they receive rebates. These rebates totaled $1.4 billion in fiscal year 2001. Rebates do not apply to other companies' brands of standard formula (noncontract standard formula) or to nonstandard formulas designed to meet special medical or dietary conditions. GAO was directed to examine the extent that WIC agencies have restricted the use of noncontract standard formula to lower cost of the WIC program.
As of February 2002, all 51 of the state WIC agencies included in our survey had policies to restrict the use of noncontract standard formula. Three of the 51 agencies prohibited the use of this formula entirely. The other 48 agencies restricted its use to specific situations, such as if medically prescribed or if needed for religious reasons. Seven of these 48 agencies also set percentage limits, such as 4 percent of all standard formula issued, on the use of noncontract standard formula. In fiscal year 2002, 3.3 percent of the infants using formula in the WIC program received a noncontract standard formula, while 90.3 percent received the contract brand. The remaining 6.4 percent received a medically prescribed nonstandard formula for special medical or dietary needs. There were wide variations between WIC agencies in the percentage of infants who received noncontract standard formula, ranging from a low of zero, for the 3 agencies that prohibited its use, to 10.5 percent. Likewise, the percentage of infants receiving medically prescribed nonstandard formula ranged from 0.2 percent to 27.7 percent. FNS has not routinely collected from WIC agencies the data that would allow it to monitor the effectiveness of these agencies in restricting the use of either noncontract standard or nonstandard infant formula. Buying noncontract standard formula brands cost the WIC program an estimated $50.9 million in foregone rebates in fiscal year 2002. Although it may be neither feasible nor desirable to prohibit all purchases of noncontract standard formula, rebates would have increased by $13.8 million if every state had a noncontract standard formula usage rate no higher than the average of 3.3 percent reported across all agencies.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change
from "In process" to "Implemented" or "Not implemented" based on our follow up work.
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Recommendations for Executive Action
Recommendation: To effectively monitor the economical purchase of infant formula, the Secretary of Agriculture should direct the Administrator of the Food and Nutrition Service to require that WIC agencies develop and regularly submit data on their use of noncontract standard infant formula.
Agency Affected: Department of Agriculture
Status: Implemented
Comments: USDA's Food and Nutrition Service (FNS) now collects WIC state agency data on the amounts and types of all infant formula provided, including data on each agency's use of noncontract standard infant formula. This information is collected in state agency management information systems and reported to FNS biennially.
Recommendation: Additionally, the Administrator should require that WIC agencies develop and regularly submit data on their use of nonstandard formula.
Agency Affected: Department of Agriculture
Status: Implemented
Comments: USDA's Food and Nutrition Service (FNS) now collects WIC state agency data on the amounts and types of all infant formula provided, including data on each agency's use of nonstandard infant formula. This information is collected in state agency management information systems and reported to FNS biennially.
Recommendation: To effectively monitor the economical purchase of infant formula, the Secretary of Agriculture should direct the Administrator of the Food and Nutrition Service to work with WIC agencies with above-average usage rates of noncontract standard formula to implement the best policies and practices for reducing the level of use.
Agency Affected: Department of Agriculture
Status: Implemented
Comments: USDA's Food and Nutrition Service (FNS) now collects WIC state agency data on the amounts and types of all infant formula provided, including data on each agency's use of nonstandard and noncontract standard infant formula. This information is collected in state agency management information systems and reported to FNS biennially. FNS found 3 agencies had above-average use on noncontract standard formula. FNS is working with these WIC state agencies to develop policies and practices to reduce their use of noncontract standard formula and to provide training to local agencies on the issuance of this formula.
Recommendation: Additionally, the Administrator should work with WIC agencies with above-average use of nonstandard formula to implement the best policies and practices for reducing nonstandard formula use.
Agency Affected: Department of Agriculture
Status: Implemented
Comments: USDA's Food and Nutrition Service (FNS) now collects WIC state agency data on the amounts and types of all infant formula provided, including data on each agency's use of nonstandard and noncontract standard infant formula. This information is collected in state agency management information systems and reported to FNS biennially. FNS found 3 agencies had above-average use on nonstandard formula. FNS is working with these WIC state agencies to develop policies and practices to reduce their use of nonstandard formula and to provide training to local agencies on the issuance of this formula.
