Attorney General Jeff Jackson Reaches $384 Million Settlement Over Contaminated Baby Formula That Caused Supply Shortage

A coalition of 40 states, acting bipartisanly, and the federal government reached a $384 million settlement with Abbott Laboratories to resolve Medicaid fraud allegations. The settlement arises from Abbott's manufacture, sale, and subsequent recall of contaminated baby formula products made at certain production facilities. North Carolina will receive $216,593.82 in restitution and recoveries, directed to the state's Medicaid and food assistance programs. The states and the federal government alleged that Abbott knowingly sold baby formula to Medicaid programs and the federal WIC program that carried an unacceptably high risk of bacterial contamination. The complaint alleged that Abbott failed to properly maintain equipment and to monitor and control water areas within certain production facilities, conditions that created the contamination risk. The 2022 recall of affected formula products worsened an existing nationwide formula shortage, causing pharmacies and grocery stores to ration sales and enabling fraudulent formula sales by scammers. Abbott manufactures more than 40% of all infant formula sold in the United States, including the Similac brand. More than half of all infant formula purchased in the United States is paid for by state Medicaid programs and the federal WIC program, establishing the government-payer nexus underlying the fraud allegations. The North Carolina Medicaid Investigations Division, the state's federally designated Medicaid Fraud Control Unit, participated in the investigation. The MID receives 75% of its funding from HHS under a grant totaling $8,561,152 for federal fiscal year 2026, with the remaining 25% funded by North Carolina.