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⚠ The Buyer That Bids the Price DownLow threat

Abbott Laboratories (ABT) — threat to the moat

Under WIC, US states buy infant formula by competitive bidding, and the FTC has investigated the bids Abbott participates in.

A brand's pricing power is weakest when the buyer runs an auction. Under the WIC program, Abbott's 10-K says, "all states must have a cost containment program for infant formula" and states "obtain rebates from manufacturers of infant formula whose products are used in the program" through competitive bidding1.

Abbott gross revenues subject to rebates and allowances, 2025 (%)Subject to rebates — 44%Not subject — 56%Abbott Form 10-K FY2025, critical accounting policies
Nearly half of gross revenue is rebated.

A WIC contract is all or nothing for a state's participants, so winning matters more than margin. Abbott has received information requests from the Federal Trade Commission "in connection with its investigation of companies who participate in bids for WIC infant formula contracts"2.

The rebates are large. Abbott says 44 percent of its consolidated gross revenues were subject to rebates and allowances in 2025, with most of them in nutrition and diabetes care3.

The federal government is also a direct buyer. The DOJ's 2026 complaint alleged that Abbott "caused government programs to purchase powder infant formula" made at Sturgis that did not meet requirements4.

Government buyers also brought the largest formula bill. Abbott recorded a $385 million legal reserve in the second quarter of 2026 for an agreed-in-principle settlement5, and the DOJ settlement that followed covered formula sold between 1 January 2018 and 31 December 20226.

What would change the picture is the FTC. A finding or settlement over WIC bidding that changed how states award formula contracts would reach the part of Abbott's nutrition business where price is set by auction.

References
  1. ReportedUnder the WIC program, Abbott's 10-K says, "all states must have a cost containment program for infant formula" and states "obtain rebates from manufacturers of infant formula whose products are used in the program" through competitive bidding.
    Abbott Laboratories Form 10-K for 2025 (year ended 31 December 2025) - Item 1A risk factors, competition, regulation and legal proceedings. — FY2025 · publ. 20 February 2026 · source ↗
  2. ReportedAbbott has received information requests from the Federal Trade Commission "in connection with its investigation of companies who participate in bids for WIC infant formula contracts".
    Abbott Laboratories Form 10-K for 2025 (year ended 31 December 2025) - Item 1A risk factors, competition, regulation and legal proceedings. — FY2025 · publ. 20 February 2026 · source ↗
  3. ReportedAbbott says 44 percent of its consolidated gross revenues were subject to rebates and allowances in 2025, with most of them in nutrition and diabetes care.
    Abbott Laboratories Form 10-K for 2025 (year ended 31 December 2025) - consolidated financial statements: income, taxes, cash flow, dividends, repurchases, debt, goodwill and the critical accounting policy on rebates. — FY2025 · publ. 20 February 2026 · source ↗
  4. ReportedThe DOJ's 2026 complaint alleged that Abbott "caused government programs to purchase powder infant formula" made at Sturgis that did not meet requirements.
    US Department of Justice release, September 2026 - Abbott agrees to pay $384,999,040 to resolve False Claims Act allegations over powder infant formula made at Sturgis, Michigan and Casa Grande, Arizona between 1 January 2018 and 31 December 2022; complaint in intervention filed 13 November 2025. — September 2026 · publ. September 2026 · source ↗
  5. ReportedAbbott recorded a $385 million legal reserve in the second quarter of 2026 for an agreed-in-principle settlement, and the DOJ settlement that followed covered formula sold between 1 January 2018 and 31 December 2022.
    Abbott Laboratories second-quarter 2026 earnings release, Form 8-K exhibit 99.1 - sales by segment and business, comparable growth, income statement, specified items, guidance and the 410th consecutive quarterly dividend - total sales, income statement, specified items, tax rate, guidance and the dividend. — Q2 2026 · publ. 16 July 2026 · source ↗
  6. ReportedAbbott recorded a $385 million legal reserve in the second quarter of 2026 for an agreed-in-principle settlement, and the DOJ settlement that followed covered formula sold between 1 January 2018 and 31 December 2022.
    US Department of Justice release, September 2026 - Abbott agrees to pay $384,999,040 to resolve False Claims Act allegations over powder infant formula made at Sturgis, Michigan and Casa Grande, Arizona between 1 January 2018 and 31 December 2022; complaint in intervention filed 13 November 2025. — September 2026 · publ. September 2026 · source ↗
Sources
Generated October 6, 2026