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THE SECRET FORMULA

When my wife and I were planning to have a second child, we didn't give much thought to what we would feed him or her--we naively thought that would be the least of our worries. Instead, we've found ourselves embroiled in a daily battle with corporate America over the most seemingly benign of products: baby formula.

Formula began to loom large as soon as Deb gave birth to not one baby, but two--identical twins Lora Meredith and Elizabeth Casey. And as if this weren't enough of a cosmic joke on us, the girls promptly developed the classic symptoms of colic. They didn't sleep. They cried all the time. They writhed in agony after breast-feeding. They left us looking like extras in Night of the Living Dead.

Within weeks our doctor determined that the girls' problems were caused by a difficulty in digesting milk products, and he advised us to stop breast-feeding and start filling them up with soy-based infant formula. Isomil, the brand he suggested, cost about $1.50 per thirteen-ounce can of concentrate, and since Lora and Elizabeth went through up to four cans a day, the expenses added up fast. Still, the Isomil caused the colic to subside to some degree, and we were able to make ends meet thanks to our neighborhood King Soopers' policy of giving slight discounts on purchases of a 24-can case--which we were going through in less than a week.

When the babies were three months old, however, cans of Isomil leapt from $1.50 to $2.29, not only at King Soopers, but at Safeway and Albertsons as well--and Toys R Us, which previously had stocked Isomil, abruptly stopped doing so. Deb was determined to discover the reasons for these changes, but after making a rash of phone calls, she was more confused than ever. Managers at local supermarkets told her that area stores had been using formula as a loss leader--an item priced below cost in order to attract customers to the store--and that all of the stores had (coincidentally?) decided at exactly the same time to raise their prices by exactly the same amount. A King Soopers manager did offer to order us a supply of formula at wholesale prices, but he said the minimum we could buy was a pallet's worth, at a cost of somewhere between $500 and $1,000. Don't think so.

Deb found prices closer to $1.50 a can at discount stores such as Target, Wal-Mart, K mart and Walgreen, but ran into another obstacle: These stores all limited purchases of any brand of formula to six cans, which we were going through in a day and a half. After speaking with a representative of Isomil's manufacturer (Ross Laboratories of Columbus, Ohio) and learning that the company had not ordered retailers to impose such a limit on formula, she called local stores to request an exception to their rules on limits. The answer for the most part was no. At a Littleton Target, for example, she was told that she couldn't buy more than six cans at a time even if she had quintuplets. By the time she was asked by a clerk at a Littleton Wal-Mart to show him photos of the girls in order to prove that she wasn't lying about our reasons for wanting formula, she was at her wit's end. A manager there finally agreed to sell her a case of the precious stuff, and suggested that if she asked for him by name in the future, he might do so once more.

We've never seen him again.
A few weeks later, a manager at a south Denver Wal-Mart stopped me after I'd purchased the maximum number of cans and said, his voice dripping with suspicion, "Now you know you can't buy any more of those today, don't you?" That did it: We had to know why formula purchases were being limited. We asked every store employee we could find for more information, and finally received some from an elderly Wal-Mart worker. "It's the black market," he said. "There's a black market in baby formula."

Because I'd never seen trench-coated men peddling baby formula from the trunks of their cars, I found this explanation a bit hard to swallow. But to my surprise, I heard the same story from other local store managers. Although spokespersons from area Targets and K marts offered no specifics, they confirmed that this was a problem, and a Wal-Mart manager said, "Up in the mountains, where there aren't many competitive stores, you can probably get an arm and a leg for it."

Also agreeing were representatives from Target corporate headquarters in Minneapolis and Wal-Mart's base of operations in Bentonville, Arkansas, as well as Brenda Burris, director of public affairs for Ross Laboratories. "We have heard of cases like that," Burris said. "Mom-and-pop organizations were coming in and buying the stuff and then reselling it at a higher price. That's all out of our control, though." She added that she had no explanation as to why Denver supermarkets raised Isomil prices by more than 50 percent last year, claiming that Ross had imposed what Burris called "a very small, one-digit price increase" in 1993.

That same year, though, Ross's parent company, Abbott Laboratories, settled federal antitrust allegations from 27 drugstore and food chains, as well as charges of bid-rigging filed in Florida, for what Jerome Hoffman, chief of the Florida attorney general's antitrust division, estimates at $240 million. Moreover, the Wall Street Journal reports that antitrust actions filed in 1992 by the Federal Trade Commission and nine state-court lawsuits associated with possible baby-formula price-fixing are still pending against Abbott. There's no telling if any revelations will come out of the actions, but an interesting fact emerged from the Florida case: According to an investigation overseen by Hoffman, only 16 cents of every dollar charged for baby formula by Abbott in 1991 went to production and transportation costs.

In replying to questions about these matters, Burris refused to comment beyond a statement that the company had done nothing wrong--which leaves Deb and me exactly where we started. While our babies are not sucking down as much Isomil as they were a few months back, they continue to consume prodigious amounts. And while we occasionally succeed in convincing store managers to sell us cases of formula, we've also been forced to recruit relatives and babysitters to purchase the stuff for us. We've not yet resorted to sneaking back into stores to buy more formula after we've already bought our limit, but that's not beyond the realm of possibility. And if we get caught in the act, we'll offer this explanation: We're not black marketeers! We're just trying to feed our children!

They'll probably believe us. If we have photos of our daughters, that is.


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