Abbott Spent $5B On Stock Buybacks Instead Of Fixing Its Baby Formula Factory

The fear of not knowing where your child’s next meal comes from is something that no parent should face. But, because of a recall of Abbott Laboratories’ ABT Similac and other popular baby formula brands, stores throughout the nation are limiting how much formula parents can buy. 

What Happened: Formula produced at Abbott’s Sturgis, Michigan plant was recalled in February after unsafe bacteria was found in batches of the product, which led to infections that killed two babies. Abbott responded by shutting down the factory to fix the problem with the drying process that led to the bacteria contaminating the formula. 

Why It Matters: Because Abbott is such a major baby formula producer, the recall and plant shutdown have led to a nationwide shortage. According to a recent CNBC article, the out-of-stock rate of baby formula is around 40%. 

A whistleblower sent FDA officials documents in October 2021 showing Abbott was aware of production problems at its Sturgis plant, according to an April article from Food Safety News. Some problems outlined by the whistleblower include falsification of documents and releasing untested formula. 

According to the whistleblower, Abbott employees also celebrated after the company was able to hide its production problems that led to the bacteria from FDA officials in an audit.

While more information is likely to be available, it looks as if Abbott was aware of production problems long before the February recall. Moe Tkacik, a former Wall Street Journal reported, pointed out on Twitter that Abbott has bought more than $5 billion of its own stock since 2019.

So, the origin of the baby formula pocalypse was Abbott management's refusal to repair dilapidated and failure-prone drying machines turning the plant into proverbial petri dishes for cronobacter, because...

They needed that $5.73 billion for stock buybacks, obvs pic.twitter.com/GBmn3n4SWn

— moe tkacik (@moetkacik) May 11, 2022

Rep. Rosa DeLauro (D-CT) called out the FDA saying that the agency dragged its feet on the issue. She also called out Abbott for selling contaminated products. 

The bottom line is Abbott, the FDA or a combination of the two can be blamed, but parents just want to know that they will be able to buy food for their babies and small children. Abbott and the FDA have made this vital task unnecessarily difficult for hundreds of thousands of parents.

Disclosure: The Author Owns Shares of Abbott Laboratories In A Managed Account

Photo: Courtesy of Unsplash