DOJ's $599M McKesson contract for non-controlled and controlled substances awarded under full and open competition

Contract Overview

Contract Amount: $599,111 ($599.1K)

Contractor: Mckesson Corporation

Awarding Agency: Department of Justice

Start Date: 2026-02-01

End Date: 2026-04-07

Contract Duration: 65 days

Daily Burn Rate: $9.2K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: B1 MCKESSON NON-CONTROLLED AND CONTROLLED SUBSTANCES

Place of Performance

Location: IRVING, DALLAS County, TEXAS, 75039

State: Texas Government Spending

Plain-Language Summary

Department of Justice obligated $599,111.03 to MCKESSON CORPORATION for work described as: B1 MCKESSON NON-CONTROLLED AND CONTROLLED SUBSTANCES Key points: 1. The contract value of $599.1 million represents a significant investment in pharmaceutical supplies for federal correctional facilities. 2. Awarded to McKesson Corporation, a major player in pharmaceutical distribution, this contract highlights the reliance on established industry leaders for critical supplies. 3. The 'FULL AND OPEN COMPETITION' indicates a broad solicitation process, potentially leading to competitive pricing, though specific bidder numbers are not detailed. 4. The contract duration of 65 days for this delivery order suggests a need for rapid fulfillment of essential pharmaceutical needs. 5. The fixed-price contract type provides cost certainty for the government, shifting performance risk to the contractor. 6. The absence of small business set-aside flags suggests this contract was not specifically targeted for small business participation.

Value Assessment

Rating: good

Benchmarking the value of this $599.1 million contract is challenging without direct comparisons for the specific mix of controlled and non-controlled substances procured for the Federal Prison System. However, McKesson Corporation is a large, established distributor, and the firm-fixed-price nature of the contract suggests that pricing was negotiated to be competitive at the time of award. The contract's value should be assessed against the volume and types of pharmaceuticals required by the Bureau of Prisons over its term.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under 'FULL AND OPEN COMPETITION,' suggesting that all responsible sources were permitted to submit offers. While the specific number of bidders is not provided, this procurement method generally fosters a competitive environment, which can lead to better pricing and value for the government. The agency likely sought to maximize the pool of potential offerors to ensure a robust selection process.

Taxpayer Impact: A full and open competition process is generally favorable for taxpayers as it increases the likelihood of receiving competitive bids, potentially driving down costs and ensuring the government obtains the best value for its investment in essential pharmaceuticals.

Public Impact

The primary beneficiaries are inmates within the Federal Prison System, who will receive necessary pharmaceutical treatments. The contract ensures the continuous supply of non-controlled and controlled substances, critical for maintaining the health and well-being of the incarcerated population. The geographic impact is nationwide, covering all federal correctional facilities managed by the Bureau of Prisons. This contract supports jobs within McKesson Corporation's distribution and logistics network, as well as potentially in pharmaceutical manufacturing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases in future contract renewals if competition diminishes.
Reliance on a single large contractor could create vulnerabilities in the supply chain.
Ensuring the quality and efficacy of pharmaceuticals procured at this scale requires robust government oversight.

Positive Signals

Awarded through full and open competition, indicating a competitive bidding process.
Firm-fixed-price contract provides cost certainty for the government.
McKesson Corporation is a well-established entity with a proven track record in pharmaceutical distribution.

Sector Analysis

The pharmaceutical preparation manufacturing sector is a critical component of the healthcare industry, involving the production and distribution of medications. This contract falls within the broader healthcare and pharmaceutical distribution market, which is characterized by large, established players like McKesson Corporation. The market is highly regulated and requires significant infrastructure for storage, handling, and distribution, especially for controlled substances. Spending in this area is driven by the consistent demand for medications across various government agencies, including correctional facilities, military, and public health programs.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). This suggests that the scale and nature of the requirement may have favored larger, established distributors with the capacity to handle the volume and complexity of supplying both controlled and non-controlled substances to federal prisons. There is no explicit information on subcontracting requirements for small businesses within this specific award, but large prime contractors are often encouraged or required to have small business subcontracting plans for other contracts.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Justice's Bureau of Prisons procurement and contracting officials. Accountability measures are embedded in the firm-fixed-price contract terms, requiring McKesson Corporation to deliver specified pharmaceuticals according to agreed-upon quality standards and timelines. Transparency is facilitated through federal contract databases where such awards are reported. Inspector General jurisdiction would apply if any fraud, waste, or abuse related to the contract performance or award process were suspected.

Related Government Programs

Federal Prison System Medical Services
Bureau of Prisons Pharmaceutical Procurement
Department of Justice Drug Enforcement
General Services Administration Schedules (potential overlap)
Department of Veterans Affairs Pharmaceutical Contracts

Risk Flags

Potential supply chain concentration risk
Reliance on a single large distributor for critical pharmaceuticals

Frequently Asked Questions

What is this federal contract paying for?

Department of Justice awarded $599,111.03 to MCKESSON CORPORATION. B1 MCKESSON NON-CONTROLLED AND CONTROLLED SUBSTANCES

Who is the contractor on this award?

The obligated recipient is MCKESSON CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Justice (Federal Prison System / Bureau of Prisons).

What is the total obligated amount?

The obligated amount is $599,111.03.

What is the period of performance?

Start: 2026-02-01. End: 2026-04-07.

What is McKesson Corporation's track record with federal contracts, particularly for pharmaceutical supplies?

McKesson Corporation is a frequent recipient of federal contracts, primarily for the distribution of pharmaceuticals and medical supplies. They have a long history of serving various government agencies, including the Department of Defense, Department of Veterans Affairs, and the Department of Justice. Their track record generally reflects their position as one of the largest healthcare distributors in the United States. While specific performance metrics for individual contracts are not publicly detailed in this summary, their continued awards suggest a satisfactory performance history. However, like any large contractor, they may have faced scrutiny or performance issues on specific contracts over time, which would typically be managed through contract administration and performance reviews by the awarding agencies.

How does the $599.1 million value compare to historical spending on similar pharmaceutical contracts for the Federal Prison System?

Determining the precise historical comparison for this $599.1 million contract requires access to detailed historical spending data for the Federal Prison System's pharmaceutical needs, specifically for the mix of controlled and non-controlled substances. However, given the scale of the federal prison population and the essential nature of pharmaceuticals, a contract in the hundreds of millions of dollars is not unusual for a multi-year period or a significant portion of the system's needs. McKesson is a primary distributor, and their contracts often represent substantial portions of agency pharmaceutical budgets. Without specific historical data points for comparable contract vehicles (e.g., previous contracts with McKesson or other distributors for similar scope), it's difficult to definitively state if this value is higher or lower than historical averages, but it aligns with the expected magnitude for a large federal agency's pharmaceutical supply chain.

What are the primary risks associated with this contract, and how are they mitigated?

Key risks include supply chain disruptions (e.g., manufacturing issues, transportation delays), quality control failures of the pharmaceuticals, and potential price volatility for controlled substances. Mitigation strategies likely involve robust contract terms with McKesson, requiring adherence to strict quality standards (e.g., FDA regulations, USP standards), timely delivery schedules, and contingency planning for supply chain interruptions. The firm-fixed-price nature of the contract shifts some financial risk to McKesson. Furthermore, the government's oversight, including potential inspections and audits, helps ensure compliance and quality. The reliance on a single, large distributor also presents a systemic risk that the Bureau of Prisons may seek to diversify suppliers in future procurements or maintain strong relationships with alternative distributors.

How effective is the 'FULL AND OPEN COMPETITION' process in ensuring value for taxpayers in pharmaceutical procurement?

The 'FULL AND OPEN COMPETITION' process is generally considered effective in ensuring value for taxpayers because it maximizes the number of potential bidders, thereby increasing competition. This competitive pressure encourages offerors to submit their most favorable pricing and terms to win the contract. For pharmaceutical procurement, where market dynamics can be complex, this approach helps ensure that the government is not overpaying due to a lack of alternatives. However, the effectiveness is contingent on the clarity of the solicitation, the responsiveness of the market to bid, and the agency's ability to evaluate proposals rigorously. If the market for specific pharmaceuticals is limited, even full and open competition might result in fewer bids than desired, potentially impacting price discovery.

What are the implications of awarding a large contract for controlled substances to a single entity like McKesson?

Awarding a large contract for controlled substances to a single entity like McKesson Corporation has several implications. Positively, it can streamline procurement and ensure a consistent, reliable supply chain managed by an experienced distributor familiar with stringent regulations for controlled substances. McKesson has the infrastructure and expertise to handle these sensitive materials. However, it also concentrates risk; any disruption at McKesson (e.g., regulatory issues, operational failures) could significantly impact the supply to federal prisons. It also reduces opportunities for other distributors, including smaller specialized ones, to compete for this segment of the business. The government must maintain strong oversight to ensure compliance with all DEA and FDA regulations pertaining to controlled substances.

Industry Classification

NAICS: Manufacturing › Pharmaceutical and Medicine Manufacturing › Pharmaceutical Preparation Manufacturing

Product/Service Code: MEDICAL/DENTAL/VETERINARY EQPT/SUPP

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 6555 STATE HIGHWAY 161, IRVING, TX, 75039

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $599,111

Exercised Options: $599,111

Current Obligation: $599,111

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: 36W79720D0001

IDV Type: IDC

Timeline