Financial documents and testimonials from whistleblowers highlighted by The Guardian Friday show that US infant formula producer Abbott used the huge windfall profits it racked up between 2019 and 2021 to enrich shareholders, even amid a deadly bacteria outbreak that has sparked national outrage and contributed to a shortage of preparations.
“Abbott detected bacteria eight times as its net profits soared 94% between 2019 and 2021,” The Guardianby Tom Perkins reported. “And just when its tainted formula would have started to sicken a number of babies, with two deaths reported, the company increased dividends to shareholders by more than 25% while announcing a one-year stock buyback program. worth $5 billion.”
“Abbott chose to spend billions buying back its own stock instead of investing in critical upgrades.”
Rakeen Mabud, chief economist of Groundwork Collaborative, told the paper that “Abbott has chosen to put shareholders first by issuing billions of dollars in stock buybacks instead of making productive investments.”
“It’s important that we have high standards for something as vital as infant formula,” Mabud added.
In late February, Abbott recalled much of its Similac PM 60/40 powder formula made at a plant in Sturgis, Michigan, after an infant who consumed the product died of a Cronobacter infection. According to the Centers for Disease Control and Prevention, at least four infants fell ill after consuming Abbott formula produced at the Sturgis facility, which has since been temporarily closed.
Abbott, who faced a Justice Department complaint and the scrutiny of federal regulators, insists that “there is no conclusive evidence to link Abbott’s formulas to these childhood illnesses.” A blower deposit dated October 19, 2021 suggests the bacteria outbreak was caused by equipment at the Sturgis plant that was “failing and in need of repair.”
“A number of product flow hoses were pricking and leaving pinholes,” the complaint states. “This allowed bacteria to enter the system, and sometimes the bacteria were not properly cleaned out during clean-in-place (“CIP”) washes. This, in turn, caused the product in the pipes to pick up bacteria that was trapped in the defective areas of the pipe.”
A footnote to the whistleblower document states that “the Complainant was told by an operator that Sturgis site management knew of the failed equipment between five and seven years from the [bacteria outbreak] occurring.”
The outbreak at the Sturgis plant – the largest infant formula plant in the United States – has exacerbated a national shortage of infant formula and, according to experts and progressive critics, has highlighted the dangers of business consolidation.
Abbott produces 43% of all infant formula in the United States, and four companies, including Abbott, control approximately 90% of the national infant formula market. Concentrated industry has lobbies aggressively to weaken bacteria testing standards.
Earlier this week, Sen. Ron Wyden (D-Ore.)—the chairman of the Senate Finance Committee—spear an investigation into Abbott’s tax practices, specifically “whether the company used its windfall from Republican tax cuts in 2017 to enrich executives and shareholders, rather than to provide security for the manufacture that produces infant formula”.
“I have long feared that the fallout from the sweeping tax cuts for mega-corporations enacted by the Republican Tax Act of 2017 would be used to line the pockets of corporate executives and wealthy shareholders,” Wyden wrote in a statement. letter to Abbott’s CEO on Wednesday.
“It appears my concerns have been validated in this case,” the senator added, “because Abbott chose to spend billions buying back its own stock instead of investing in critical upgrades to a critical plant in feeding infants in our country”.