![]() Infant Formula Market Is Highly Concentrated Why do formula manufacturers give WIC such large rebates? What are the impacts of sole-source contracts on infant formula manufacturers? A recent study by ERS researchers helps answer these questions. ![]() In other words, WIC paid only 15 percent of the wholesale price for formula. ERS estimated that among contracts in effect in December 2008, rebates averaged about 85 percent of the wholesale price (see box, 'Rebates Allow More People To Participate in WIC'). In exchange for this exclusive sales arrangement, the manufacturer provides the WIC State agency with a rebate for each can of formula purchased through the program. As a result, WIC participants can only redeem their WIC voucher for formula made by the manufacturer that holds the contract for that State. Each State awards a sole-source contract to a formula manufacturer to provide its product to WIC participants. USDA's Special Supplemental Nutrition Program for Women, Infants, and Children-commonly known as WIC-is the largest purchaser of infant formula in the United States. Most of the increase in market share is the direct effect of recipients purchasing the new WIC brand, but spillover effects also boost sales of the brand to non-WIC customers. When a State switches its WIC contract to a different manufacturer, the market share of the new brand increases dramatically. ERS estimates that 57-68 percent of all infant formula sold in the United States in 2004-06 was purchased through WIC.
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