Baby formula shortage hearing spotlights Abbott plant conditions, FDA oversight

Yahoo Finance’s Anjalee Khemlani joins the Live show to discuss the latest on the baby formula shortage.

Video transcript

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JARED BLIKRE: Welcome back. The Senate Health Education Labor And Pensions Committee, they're gearing up for around of hearings to examine the ongoing baby formula shortage here in the US. This comes after yesterday's House Committee hearing on the same matter. Here to break it all down for us and provide more insights is Yahoo Finance's Anjalee Khemlani. So tell, us spill all the details once again.

ANJALEE KHEMLANI: What's the tea? So really, when we're talking about this, we have to keep a focus on the FDA and what they're doing. And that's really the focus of today's Senate hearing. And it's vastly different from yesterday's. What we got yesterday was really a good look all around at the market, including from the companies, the formula makers. And that was really the key difference between what happened.

We got the timeline details of how we went from just an inspection and then a whistleblower complaint to this full blown crisis of the formula shortage. So that's really one of the things that the Senate HELP Committee is looking at today, is really what the FDA can do to get even more formula on the shelf.

We got some clarity from Abbott on the timeline, looking at mid-July, really, as when we're going to get their product back on the shelf. And some really shocking details from that whistleblower report and from the inspection from the FDA, things that really shaped up to essentially a neglected plant, just micro bacteria and stuff growing.

- Weren't there leaks?

ANJALEE KHEMLANI: Leaks, a leaky roof, puddles on the floor.

JARED BLIKRE: Terrible.

ANJALEE KHEMLANI: It was really shocking.

JARED BLIKRE: It's like "The Jungle," Upton Sinclair stuff there.

ANJALEE KHEMLANI: Absolutely.

- Well, that speaks not just to perhaps negligence on the part of Abbott, but it also speaks to the lack of oversight on the part of the FDA and why it took babies getting sick, and in some cases dying, in order for them to figure this out. Don't they do regular inspections of these places?

ANJALEE KHEMLANI: They do. And they did have one in September. And that's what really came to light. And lawmakers did question the company officials, specifically Abbott, about why it took a whistleblower complaint to get this additional FDA inspection, to get all the details out, and why the company wasn't made aware of this through their own internal processes. And so that's one of the things, of course, they have to address.

We also learned how much this has really shifted the market, quite honestly, because the panic and the crisis has given really other competitors a leg up. Reckitt Benckiser, for example, has really produced more, 30% more product is what they've upped, and that has resulted in them moving their market share from 34% to now 56%.

So that's really a surprise, Nestlé, one of the largest formula makers in the world, inching up from 8% to 9% in the market. And talking about being able to bring in more. And so to your point about oversight, the FDA needs more oversight, needs more even technology. We heard Dr. Robert Califf, the commissioner, talk a lot about his time at Google, and how that translates into the need for more technology being brought in, to get real time updates, more alerts, and requiring these companies to really give the FDA and the agencies more information in order to prevent this from ever happening in the future.

Also, one point to point out. We know that Women Infants and Children, those beneficiaries, make up half the market right now. And that's another area where the government needs to focus in terms of what they can do to expand the market, diversify the market, and ensure that this doesn't become a single point of failure almost like it did this time.

- Well, jeez. Whenever these things happen, it's always from rhetoric at these hearings, and pounding the table on the part of members of Congress to actual action is the question. What's going to happen?

ANJALEE KHEMLANI: We already saw some action, right? We already did see the expansion of the WIC beneficiaries, them being able to use different formulas. And the FDA expanding imports, right? We're seeing that Operation Fly Formula as well as just general imports from abroad.

And so that is one step. But really, you kept hearing this phrase over and over again yesterday, that you need to put the food back in the Food and Drug Administration. And that's really something that's been lagging in resources for some time. So it really is just a years long build up of a problem that now is finally getting attention, unfortunately through the route that it did.

But to your point, Julie, I mean, hopefully we see some motion.

- It's so interesting during this period of time, from semiconductors, to baby formula, just the supply chain cracks in the system. It's fascinating, and hopefully we fix them. Thanks so much, Anjalee, we appreciate it.