The Legal and Regulatory Risks Facing Abbott in the Premature Baby Formula Market

The legal and regulatory landscape for Abbott Laboratories has grown increasingly treacherous in 2025, as the company faces mounting litigation over its premature infant formula products and intensifying scrutiny from health authorities. These challenges, coupled with aggressive lobbying efforts to shield itself from liability, have raised critical questions about the long-term financial and reputational risks for one of the world's largest healthcare companies.

A Perfect Storm of Litigation

At the heart of Abbott's current crisis are lawsuits alleging that its cow milk-based formulas, such as Similac and Enfamil, increase the risk of necrotizing enterocolitis (NEC) in premature infants. NEC, a severe gastrointestinal condition that can be fatal, has become the focal point of a multidistrict litigation (MDL 3026) with 759 pending cases as of August 2025. Plaintiffs argue that Abbott and Mead Johnson failed to warn consumers about the risks, despite scientific evidence linking cow milk-based formulas to higher NEC incidence.

The litigation has yielded mixed outcomes. While state court verdicts have been devastating for Abbott-such as the $495 million award in a Missouri case in July 2024 according to reports-federal courts have offered some reprieve. The first two bellwether trials in the MDL were dismissed in favor of the defendants, with judges excluding expert testimony that failed to establish a clear causal link between the formulas and NEC. However, the legal battle is far from over, with additional trials scheduled for late 2025 and early 2026.

Compounding these challenges, Abbott faces a separate crisis involving ByHeart infant formula, a competitor whose products were linked to a botulism outbreak in November 2025. While ByHeart itself is the direct target of lawsuits, the incident has amplified public and regulatory scrutiny of the infant formula industry, indirectly pressuring Abbott to defend its own safety protocols.

Lobbying for Legal Immunity

Abbott's response to the litigation has been as aggressive as it is controversial. The company has lobbied lawmakers to pass legislation that would grant it legal immunity for NEC-related claims, a move that has drawn sharp criticism from consumer advocates. During its Q2 2025 earnings call, CEO Robert Ford declared that Abbott would "rather pull its products from the market than allow lawyers in courtrooms to override doctors and regulators" according to reports. This stance, while defiant, underscores the company's willingness to prioritize legal defense over consumer transparency.

The lobbying efforts have not gone unnoticed. A Bloomberg report revealed that Abbott has spent millions to influence policy decisions, including a push for a scientific consensus report in October 2024 from the NIH, FDA, and CDC stating there was "no conclusive evidence that preterm infant formula causes NEC". Critics, however, have questioned whether this report was shaped by corporate interests, given Abbott's active role in its promotion.

Financial and Reputational Fallout

The financial toll of these legal battles is already evident. In 2022, a contamination crisis at Abbott's Sturgis plant led to a nationwide formula shortage, a 60% drop in operating earnings for its Nutritional Products segment and $176 million in charges. While the company's medical devices segment has shown resilience-with 14.8% year-over-year growth in U.S. sales in Q3 2025-its nutrition division remains vulnerable. The ongoing NEC litigation could result in settlements ranging from $50,000 to $50 million+ per case, depending on injury severity.

Reputational damage is equally concerning. The FDA's "Operation Stork Speed" initiative, launched in response to the ByHeart botulism outbreak, has heightened public awareness of infant formula safety risks. Consumer trust, already strained by the 2022 contamination crisis, now faces renewed erosion. While Abbott has maintained that its products are "safe and backed by science," the company's defensive posture has done little to quell concerns about transparency according to reports.

The Road Ahead

For investors, the key risks lie in the uncertainty of litigation outcomes and the potential for regulatory overhauls. If state court verdicts like the Missouri $495 million award become a trend, Abbott could face billions in liabilities. Conversely, favorable federal rulings might limit its exposure. Meanwhile, the FDA's increased oversight could force costly reforms in manufacturing and labeling practices.

Abbott's lobbying efforts suggest it is prepared to fight these challenges on multiple fronts. However, as the legal and regulatory environment evolves, the company's ability to balance corporate interests with public health concerns will be a critical determinant of its long-term success.