Abbott Laboratories has agreed to pay approximately $385 million to resolve claims related to an investigation into contamination at its baby formula plant in Sturgis, Michigan, which was the largest such facility in the United States. The case highlights the operational and legal risks surrounding supply chains for essential healthcare products, particularly in a market where disruption at a major manufacturing facility can quickly affect nationwide availability.

Settlement Centers on Sturgis Plant and Government Claims

Abbott will pay a total of approximately $385 million to resolve claims brought by the U.S. Department of Justice, state prosecutors and attorneys general from several states. The settlement, totaling $384,999,040, relates to allegations involving the production of powdered infant formula and medical nutrition products at Abbott facilities in Sturgis and Casa Grande, Arizona, between January 1, 2018, and December 31, 2022.

Under the claims resolved by the settlement, Abbott allegedly failed to manufacture certain products in compliance with federal and state requirements, resulting in allegations involving products purchased through government programs. Of the total settlement, approximately $348.7 million will be paid to the federal government and about $36.3 million to certain states in connection with claims involving Medicaid and WIC programs.

Abbott has emphasized that the settlement does not constitute a finding of liability or wrongdoing. The company also said the related criminal investigation has been closed.

Plant Closure Deepened U.S. Baby Formula Shortage

The case gained broader significance in February 2022, when Abbott voluntarily shut down the Sturgis facility during an FDA investigation and recalled products manufactured there. The affected brands included Similac. The plant accounted for roughly one-fifth of all U.S. infant formula production, while Abbott overall produced more than 40% of the products sold in the American market.

The closure came as U.S. supply chains were already facing disruptions from the COVID-19 pandemic, alongside increased consumer stockpiling. The result was a severe nationwide baby formula shortage that prompted the U.S. government to take emergency measures, including easing imports, flying in products from Europe and using federal authorities to prioritize domestic production.

The facility reopened in June 2022 after Abbott carried out cleaning and repair work and implemented additional measures following FDA inspections.

Financial Impact Extends Beyond the Settlement

From a financial perspective, the settlement is significant but comes against the backdrop of Abbott’s diversified operations. In the second quarter of 2026, the company reported sales of $12.6 billion and adjusted earnings per share of $1.31. Its Nutrition business, which includes infant formula, came in slightly above the company’s expectations for the quarter, while Abbott maintained its forecast for 6.5%–7.5% sales growth in 2026.

Abbott has said that testing by regulators of sealed products collected from the homes involved in the 2022 investigation was negative for Cronobacter sakazakii, and that the bacterium was never found in sealed and distributed Abbott infant formula products. The CDC previously determined that there was no definitive link between the Sturgis plant and the cases under investigation.

Going forward, investors will be watching not only the accounting impact of the settlement but also Abbott’s ability to sustain growth in its Nutrition business and prevent further quality-related incidents. The case demonstrates how a disruption at a critical manufacturing facility can quickly become a broader legal, operational and financial issue, particularly when the affected product has few immediate substitutes in the market.