The Senate Finance Committee opened an investigation into Abbott Labs, the company at the center of a baby formula shortage in the U.S.
The Chairman of the Committee sent a letter to the CEO of Abbott requesting information on the company's international tax practices and stock purchases.
Wyden requested information on how much money Abbott spent to upgrade an infant formula plant in Michigan before it was closed due to the bacterium Clostridium perfringens.
The closing of the Michigan plant has led to a shortage of infant formula that has left parents scrambling to find food for their babies. The infant formula market in the US is dominated by four manufacturers.
As Abbott spent billions buying back its own stock, it appears that it failed to make necessary repairs to fix a critical manufacturing plant of infant formula located in Michigan.
Abbott said it complies with all tax laws in the U.S. and abroad. John Koval said that the company's ability to invest in or re-open the Michigan plant was unaffected by the stock buy backs.
The tax rate on Abbott's earnings has gone down since the Congress passed a tax cut last year. Abbott paid a tax rate of about 14% in 2021, down from 25% in 2016, according to securities disclosures. The net earnings of Abbott have increased by about 90 percent during the Pandemic.
Abbott appears to have benefited from using tax havens. Abbott said in its annual report that it benefited from lower tax rates and exemptions on foreign income from its operations in Puerto Rico, Switzerland, Ireland, the Netherlands, Costa Rica, Singapore and Malta.
Abbott closed its infant formula plant in Michigan in February after the Food and Drug Administration found Cronobacter sakazakii in the facility. Four infants who ate powered formula from the plant were hospitalized with Cronobacter and two of them died.
There is no conclusive evidence to link the illnesses to the bacteria found at the plant. The company has recalled its baby formula produced at the facility.
The FDA and Abbott reached an agreement this week to reopen the facility through a consent decree. Under the consent decree, Abbott is required to bring in a team of independent experts to develop a plan for the Michigan plant to come into compliance with U.S. food safety laws. It will take up to eight weeks for products to arrive in stores again, after the company restarts the plan within two weeks, subject to FDA approval.
If any products test positive for Cronobacter orSalmonella, Abbott has to shut the plant down again, and only reopen if the FDA confirms the contamination has been eliminated.
FDA Commissioner Robert Califf said in a statement Monday that the agency will do everything it can to ensure that infant formulas produced by Abbott meet safety and quality standards.
Califf will face questions from lawmakers about the infant formula shortage. The House Oversight and Investigations subcommittee will have questions for Christopher Calamari.
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