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ByHeart CEO discusses solutions to the fragile baby formula supply chain

ELISSA NADWORNY, HOST:

By now, you're probably aware of the baby formula shortage that's resulted in empty grocery shelves and anxious parents across the country. But that may be changing soon. Earlier today, Abbott Nutrition, one of the few baby formula manufacturers in the U.S. and the company whose voluntary recall in February contributed to the shortage, said that it's restarting formula production at one of its plants. They expect formula from the plant will be available later this month.

In response, a Food and Drug Administration spokesperson told NPR that in light of previous contamination concerns at that plant, the agency will, quote, "work diligently to ensure the safe resumption of production of infant formula at Abbott Nutrition's Sturgis, Mich., facility," unquote. Still, many parents are struggling now. And this past Wednesday, a group of baby formula manufacturers met with President Biden to discuss the shortage and how to fix it.

Joining us now is one of the people who was in that meeting, Ron Belldegrun, CEO of ByHeart, a company that manufactures baby formula. Welcome.

RON BELLDEGRUN: Thanks for having me, Elissa.

NADWORNY: So you were on the call between President Biden and other baby formula manufacturers. What stood out to you?

BELLDEGRUN: Look. I think the administration's efforts are commendable, you know, as a short-term solution to a very pressing issue, and that is that we have babies across the country without sole-source nutrition. So, you know, some of those policies that they've enacted, like import, will help get formula into the hands of babies quickly. But we also need sustainable solutions. You know, this is far too fragile a supply chain. You know, we all live in the United States. We should ensure we're never in a position again where one company has a recall, and 40% of babies are without sole-source nutrition. And so in our view, the only salve is really to invest in new domestic infrastructure.

NADWORNY: President Biden said he didn't know about the baby formula shortage until April, but industry executives have said they anticipated that this would be a dire shortage back in February, when there was the voluntary recall of baby formula from a major manufacturer, Abbott. What was your reaction to the president's remarks?

BELLDEGRUN: Look, I won't speak directly for, you know, the president or, you know, the administration specifically, but this was a surprise to a lot of people and a lot of parents. One of the biggest misconceptions of this space is that you would actually think there's a lot of choice. And any stakeholder would think that there's dozens of companies that are supporting this most important foundational food. But the reality is 90% of that shelf is from three brands that have dominated for decades. And every single new entrant in the last few decades has taken the same path, and that is to outsource to the one and only contract manufacturer in the country, utilize an expedited kind of generic path to market, which only really allows for incremental change based on old recipes and does not contribute new clinical research or new manufacturing because it's sort of all outsourced. So it's a much more fragile supply chain than I think a lot of people thought.

NADWORNY: So only five companies in the U.S. that make formula - I mean, that seems really small, right? Like, what needs to be done in order to support more businesses entering this industry so that we don't have another shortage?

BELLDEGRUN: That's the perfect question, Elissa. You know, this is sole-source nutrition for babies. You know, quite literally, this one product sustains life for the majority of parents across the country that formula feed at some point in the first year of life. And so it's appropriately the most highly regulated food in the world, right? This is the only food that requires clinical studies, you know, FDA registration. We talked also about, you know, the supply chain bottleneck is a huge deterrent to new entrants - right? - because, you know, as I shared our own experience, you're sitting at a point in time and saying, hey, either I go and I effectively outsource to the one and only contract manufacturer, but then I need to rely on, you know, old recipes and old clinical research. And I can't - you know, it's sort of very restrictive to innovation.

Or you need to go out and acquire manufacturing facilities and, you know, do all internal R and D and run major clinical trials. So the barriers to entry in this category are enormous. And so for this to really be - you know, for the U.S. to really never again find ourselves in this situation, we need to incent more companies to do the work that we have done. And that was to forgo the outsource route and instead invest in manufacturing and clinical research. And that's important not just for shoring up a supply chain but also for advancing this really critical nutrition.

NADWORNY: Yeah. I understand this story is also personal. You're the father of a newborn. Is that right?

BELLDEGRUN: Absolutely. I have a 2 1/2-year-old, Zella (ph), and now a seven-day-old baby...

NADWORNY: Wow.

BELLDEGRUN: ...Abner (ph). So my wife and I are very much in it. And actually, my co-founder and sister, Mia, the same - I mean, she's had three babies in the time that we've been building this company. And actually, her youngest is currently drinking ByHeart. She's 10 months old. And so, you know, Mia and I are very much feeling the anxiety of the situation, not just as founders of ByHeart but as parents ourselves.

NADWORNY: So I know a lot of parents are struggling with this problem right now, I mean, going to the grocery stores and not having anything on the shelves. What needs to happen right now?

BELLDEGRUN: You know, there's many millions of bottles that are on their way to the U.S. But, you know, we need more support from state and federal officials. We're really working to rally an entire ecosystem behind us. We need more emergency authorizations for the five manufacturers to expand into more facilities. And so I think there needs to be continued investment behind, you know, the five that are currently in the market so they can continue to expand production as they are all, you know - as you - as we heard at the roundtable, everyone is working extremely hard to do. But we need more of that because that will be the quickest solution. And then, as I said, longer term, we need to incent new companies to come in and continue to build manufacturing and conduct clinical research here in the U.S.

NADWORNY: That was Ron Belldegrun, CEO of ByHeart, which manufactures baby formula. Thank you so much for joining us.

BELLDEGRUN: Thanks for having me. Transcript provided by NPR, Copyright NPR.