Therefore, all brands of  standard formula are nutritionally identical. The approach used by 48 WIC agencies in February  2002 was to adopt the restrictions contained in federal regulation, which  limit the use of noncontract standard formula to certain specific  situations, such as if medically prescribed or if needed for religious  reasons. By comparison, 90.3 percent of all  infants received contract standard formula, while 6.4 percent received  nonstandard formulas, which are special formulas for infants who cannot  use standard formula. Agencies Showed Variation in Both Noncontract Standard and Nonstandard Formula Use

The percentage of WIC infants receiving noncontract standard formula in  February 2002 ranged from a low of zero to a high of 10.5 percent, as  reported by the 45 agencies that provided this information. Some state agencies may have  medical or dietary religious reasons for not entirely prohibiting the use of  noncontract standard formula. These rebates could have  been used to provide additional program benefits to women, infants, and  children. In fiscal year 2001, FNS received $1.4 billion in rebates  from the use of contract standard formula by infants participating in the  WIC program. FNS is not routinely collecting from WIC agencies the data that would  allow it to monitor the effectiveness of WIC agencies in restricting the use  of noncontract standard or nonstandard infant formula. Agency Comments

We provided a draft of this report to the Department of Agriculture. All  51 WIC agencies receiving our survey responded. To determine whether WIC agencies restricted the use of noncontract  standard formula, we primarily relied on the answers to a survey question  which asked what the WIC agency’s current policy was on the use of  noncontract standard formula, and we also obtained copies of the WIC  agencies’ policies pertaining to the use of noncontract standard formula. Computations made to estimate the rebate  dollars foregone by each of 19 WIC agencies with noncontract standard  use in excess of the 3.3 percent average for all agencies that reported data  in February 2002, are as follows: (1) we multiplied the total infants  receiving formula by 0.033 to obtain the number of infants required to  attain a 3.3 percent noncontract standard formula usage rate, (2) we  subtracted the number of infants required to attain a 3.3 percent  noncontract standard formula usage rate from the total infants that  received such formula to obtain the number of infants receiving  noncontract standard formula in excess of the 3.3 percent rate, and (3) we  multiplied the number of infants receiving noncontract standard formula  in excess of 3.3 percent by the average monthly rebate received per infant  using contract standard formula to obtain the number of rebate dollars  foregone.
Why GAO Did This Study

The Department of Agriculture's Food and Nutrition Service (FNS) provided about $3 billion to state agencies in fiscal year 2001 for food assistance, including infant formula, through its Special Supplemental Nutrition Program for Women, Infants and Children (WIC). Most infants receiving formula are given a milk- or soy-based standard formula. To stretch program dollars, each state WIC agency contracts with a single company for purchases of that company's standard formula for which they receive rebates. These rebates totaled $1.4 billion in fiscal year 2001. Rebates do not apply to other companies' brands of standard formula (noncontract standard formula) or to nonstandard formulas designed to meet special medical or dietary conditions. GAO was directed to examine the extent that WIC agencies have restricted the use of noncontract standard formula to lower cost of the WIC program.

What GAO Found

As of February 2002, all 51 of the state WIC agencies included in our survey had policies to restrict the use of noncontract standard formula. Three of the 51 agencies prohibited the use of this formula entirely. The other 48 agencies restricted its use to specific situations, such as if medically prescribed or if needed for religious reasons. Seven of these 48 agencies also set percentage limits, such as 4 percent of all standard formula issued, on the use of noncontract standard formula. In fiscal year 2002, 3.3 percent of the infants using formula in the WIC program received a noncontract standard formula, while 90.3 percent received the contract brand. The remaining 6.4 percent received a medically prescribed nonstandard formula for special medical or dietary needs. There were wide variations between WIC agencies in the percentage of infants who received noncontract standard formula, ranging from a low of zero, for the 3 agencies that prohibited its use, to 10.5 percent. Likewise, the percentage of infants receiving medically prescribed nonstandard formula ranged from 0.2 percent to 27.7 percent. FNS has not routinely collected from WIC agencies the data that would allow it to monitor the effectiveness of these agencies in restricting the use of either noncontract standard or nonstandard infant formula. Buying noncontract standard formula brands cost the WIC program an estimated $50.9 million in foregone rebates in fiscal year 2002. Although it may be neither feasible nor desirable to prohibit all purchases of noncontract standard formula, rebates would have increased by $13.8 million if every state had a noncontract standard formula usage rate no higher than the average of 3.3 percent reported across all agencies.