Project: Creating a WIC Infant Formula Rebate Data Set and Researching Infant Formula Manufacturers' Rebate Bidding Strategies
Award Year: 2008
Amount of award, fiscal 2006: $34,946.00 fiscal 2008: $30,000.00
Institution: South Dakota State University
Principal Investigator: David Davis
Status: Completed
Detailed Objective: Over half of all infant formula sold in the United States is purchased through the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). Typically, WIC State agencies get significant discounts in the form of rebates from manufacturers for each can of infant formula purchased through the program. Infant formula manufacturers bid on the right to be the exclusive provider of infant formula to a State WIC agency, with bids in the form of the rebate that manufacturers return to the State agency. Given that rebates returned about $1.6 billion to government coffers in 2004, understanding the process that generates rebates is of substantial public interest. This project will examine patterns and trends in the WIC infant formula rebate auctions. In the past, rebate bids have routinely approached 95 percent of the wholesale price of formula, suggesting that the program has been extremely successful in reducing the cost of infant formula to the WIC program. However, recent research suggests that rebate levels may be falling. This project will conduct a more in-depth analysis by extending the available data set and using econometric methods to examine the bidding strategies of the infant formula manufacturers.
Topic: Program Operations, WIC
Davis, D. “Bidding for WIC Infant Formula Contracts: Do Non-WIC Customers Subsidize WIC Customers?,” American Journal of Agricultural Economics, Vol. 94, Issue 1, January 2012.