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

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.