[Congressional Record Volume 150, Number 93 (Thursday, July 8, 2004)]
[Extensions of Remarks]
[Pages E1328-E1329]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          CHILD NUTRITION AND WIC REAUTHORIZATION ACT OF 2004

                                 ______
                                 

                               speech of

                          HON. JOHN A. BOEHNER

                                of ohio

                    in the house of representatives

                        Thursday, June 24, 2004

  Mr. BOEHNER. Mr. Speaker, effective, fair vendor cost containment is 
critical to ensure that federal funds for the Special Supplemental 
Nutrition Program for Women, Infants, and Children (WIC) are managed 
appropriately. It is equally important that this objective be achieved 
with balance. WIC cost containment measures in S. 2507 should provide 
assurance that WIC-Only stores have prices that are consistent with 
traditional retail WIC vendors. It is the intent of Congress that the 
provisions of this bill be implemented in a fair and equitable manner. 
Cost containment measures contained in S. 2507 are not to be used to 
drive vendors out of the program.
  Central to the vendor cost containment provisions is the authority to 
establish a series of vendor peer groups, each with its own competitive 
price criteria and allowable reimbursement levels. These vendor peer 
groups recognize that there are economic realities that cause pricing 
to vary among stores based on store size and geographic location. Large 
supermarket chains and box stores bypass wholesalers and purchase 
directly from manufacturers. Other stores, including some WIC-Only 
stores do not. Much more important, supermarket chains receive 
significant price discounts and concessions from manufacturers, such as 
allowances for product promotion, product shelf placement, etc. 
Independently owned stores, including independently owned chains and 
most WIC-Only stores, generally do not have the negotiating power to 
bargain for these benefits. As a result, independently owned stores may 
spend as much to purchase a product at wholesale as the retail price at 
a big chain. Because of this, vendor peer groups should allow for 
somewhat higher prices at small stores, relative to the larger 
supermarkets.
  During implementation of vendor peer groups to achieve cost-
containment, it is vital that transparent, objective criteria be used 
in defining peer group characteristics. It is expected that the 
criteria that have traditionally been used, the square footage of 
stores or the number of store registers, will continue to be used as 
appropriate. However, there is clear authority for adoption of other 
readily discernible, objective criteria that define appropriate peer 
group distinctions. WIC sales volume alone may not be an appropriate 
basis for defining peer groups since it accounts for only a portion of 
the sales of a given product and, in many situations, would be a poor 
indicator of factors that affect retail pricing decisions.
  Special authority is provided for establishing competitive price 
criteria and allowable reimbursement levels for WIC-Only stores because 
those stores are insulated from marketplace price competition. It is 
not discriminatory to regulate them in a different manner. However, it 
would be inconsistent with the intent of Congress to use that unique 
regulatory treatment to apply a different standard to WIC-Only stores.
  The objective of cost containment measures contained in S. 2507 is 
for WIC Program food costs to be the same regardless of whether program 
participants redeemed food instruments at a WIC-Only store or 
comparable market-based vendor. This neutrality objective is expressed 
by the dual statements in the bill: First, the bill provides for 
establishing and publishing competitive price criteria and allowable 
reimbursement levels that do not result in higher food costs in WIC-
Only stores than in other authorized vendors. Second, the bill is clear 
that it is not to be construed to compel a State agency to achieve 
lower food costs in WIC-Only stores than in other authorized vendors. 
The objective is neutrality; for WIC-Only store costs to be at the same 
level as costs at comparable market-based vendors.

  The language now before the House is different from the language 
reported by the Senate Committee on Agriculture, Nutrition, and 
Forestry, but the neutrality objective has been consistently pursued 
throughout this legislative process. Refinements in that language are 
intended to remove any question that the objective is cost neutrality.
  S. 2507 includes language requiring that competitive price criteria 
and allowable reimbursement levels will ``not result in higher food 
costs if program participants redeem supplemental food vouchers'' at 
WIC-Only stores than other vendors. This language is a statement of the 
general cost neutrality objective previously explained. It is not to be 
construed to compel a rigid cost limitation test. Neither USDA nor 
individual states can know with absolute certainty or ongoing precision 
what food prices will be.
  In the bill's system of vendor peer groups, provision is made for 
peer groups for WIC-Only stores. It does not necessarily require a 
single peer group for WIC-Only stores because not all WIC-Only stores 
are alike. WIC-Only store peer groups are to have their prices limited 
to the same levels as prices of comparable market-based stores. The 
legislation is not prescriptive in specifying characteristics that make 
stores ``comparable.'' However, as with the regulatory basis for 
defining peer groups, the basis for comparing peer groups must be 
objective and readily discernable. Absent compelling basis for a 
different approach, the same criteria as are used to distinguish 
between traditional vendor peer groups should be used to distinguish 
between peer groups in WIC-Only stores and to identify peer groups of 
comparable market-based stores.
  Another provision that warrants close oversight is a prohibition on 
certain marketing practices for WIC-Only stores. The Department of 
Agriculture is charged with promulgation of a rule to prohibit WIC-Only 
stores from giving certain ``incentive items'' to WIC participants 
unless the vendor proves that the incentive items were obtained at no 
cost. The provision was adopted because of reports that some WIC-Only 
stores have given incentive items that are out of the bounds of 
traditional vendor marketing practices. It is the intent of this 
provision to halt such marketing practices and to ensure that the 
acquisition of incentive items does not increase WIC Program costs.
  This provision is intended to prevent marketing practices that are 
wholly inconsistent with those that occur in traditional food 
retailing. It is not intended that this provision would be used to 
create a situation where WIC-Only stores are prohibited from employing 
the same marketing practices that traditional stores use to induce 
customers. The fact that this restriction applies only to WIC-Only 
stores must not be viewed as an intention to create marketing 
restrictions that afford traditional vendors a competitive advantage 
over WIC-Only stores. The Secretary has authority in its implementing 
rulemaking to require a State Agency to waive restrictions on marketing 
practices of WIC-Only stores where competing traditional vendors engage 
in those practices.
  The bill makes clear that merchandise of nominal value and food are 
not to be prohibited. Likewise, this provision does not provide 
authority to restrict incentives other than free merchandise. 
Specifically, it does not authorize restriction of services provided to 
program participants that are attendant to the redemption of 
supplemental food vouchers, such as assistance in complying with WIC 
program rules as they select their purchases or assistance in getting 
the food to their transportation or home, even if traditional vendors 
do not provide such services. The provision only authorizes restriction 
of use of non-food merchandise in marketing practices; it does not 
authorize restriction of retail services. Therefore, the Department of 
Agriculture rulemaking is to prohibit merchandise gifts that are 
inconsistent with marketing practices of the traditional food retail 
trade, but not marketing practices that are employed by other 
authorized vendors.
  Mr. Speaker, I commend my colleagues for including vendor provisions 
in S. 2507 that will provide for effective cost containment, 
particularly in WIC-Only stores that are generally insulated from 
marketplace price competition. This bill does a commendable job in 
providing fair and balanced regulation. WIC-Only stores

[[Page E1329]]

have become very popular with WIC participants because of their 
convenience and service. That should continue.

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