Baby formula crisis: Dem lawmaker questions Abbott on how it spent savings from GOP tax cuts

Sen. Ron Wyden says Abbott spent billions buying back its own stock instead of investing in its now-shuttered facility

Democratic Sen. Ron Wyden is demanding answers from the nation's largest baby formula manufacturer over its business practices while suggesting the GOP tax cuts could have contributed to the ongoing infant formula shortages in the U.S.

In a letter to Abbott Laboratories CEO Robert Ford dated Wednesday, Wyden accused the company of spending savings from the 2017 Tax Cuts and Jobs Act on stock buybacks rather than investing more to maintain and upgrade its Sturgis, Michigan, facility, which was shut down in February amid a U.S. Food and Drug Administration investigation over concerns of bacterial contamination at the plant.

Ron Wyden

Senator Ron Wyden (D-OR) questions a witness before the Senate Finance Committee during a hearing on February 12, 2020, in Washington, DC.  (Sarah Silbiger/Getty Images / Getty Images)

"I have long been concerned that windfalls from sweeping tax cuts for mega-corporations enacted by the 2017 Republican tax law would be used for padding the pockets of corporate executives and wealthy shareholders," wrote Wyden, who is chair of the Senate Finance Committee. "It appears my concerns have been validated in this case, as Abbott chose spending billions on buying back its own stock instead of investing in critical upgrades to a plant essential to feeding our nation’s infants."

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The senator from Oregon made several requests for information and documentation from Abbott, asking for details explaining "the methods deployed by Abbott to pay a stunningly low effective tax rate that has averaged just under 12% over the last three years," and how much the company has spent buying back its own stock since tax reform passed under President Trump.

Abbott Nutrition formula

A general view of the Abbott Healthcare Nutrition plant. (Photo by Niall Carson/PA Images via Getty Images / Getty Images)

Ticker Security Last Change Change %
ABT ABBOTT LABORATORIES 110.22 +1.57 +1.45%

Wyden also asked Ford when his company first became aware of the "safety issues" flagged by the FDA at the Sturgis plant, and how much money Abbott plans to "commit to investing" in the facility "so that it can reopen and operate safely for years to come."

Abbott shut down its Sturgis plant and issued recalls of certain products following four complaints that babies who consumed formula manufactured at the plant became sick from bacterial infections. Two of the infants died.

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The company has acknowledged that the recalls and shutdown exacerbated the baby formula shortage in the U.S., but maintains that both internal and FDA testing show no evidence of their products being linked to the infants' illnesses.

baby formula shortage

A woman shops for baby formula at Target in Annapolis, Maryland, on May 16, 2022, as a nationwide shortage of baby formula continues due to supply chain crunches tied to the coronavirus pandemic that have already strained the countrys formula stock, (Photo by JIM WATSON/AFP via Getty Images / Getty Images)

In response to FOX Business' request for comment regarding Wyden's letter, Abbott said in a statement: "Abbott is a responsible and transparent taxpayer, paying all of its taxes owed in every country in which it operates around the world. We comply with all local and international tax laws and regulations, including in the U.S."

The company added, "Stock buybacks are not impacting our ability to invest in or re-open our Sturgis manufacturing facility; in fact, our strong balance sheet has allowed us to invest in our facilities, including in Sturgis, and will help us make additional investments and more quickly restart the facility."

In an earlier statement, the company said, "Abbott has been around for 130 years because we’re trusted to do the right thing. We will work hard to re-earn the trust moms, dads and caregivers have placed in our formulas for decades. It’s important to know that there is no conclusive evidence to link our formulas to the reported infant illnesses."

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Abbott also noted that the Centers for Disease Control and Prevention "concluded its investigation with no findings of a link between Abbott formulas and infant illnesses."

This story has been updated to include Abbott's statement reacting to Wyden's letter.