DOJ's $3.47M McKesson contract for pharmaceutical items in FY26 shows strong competition

Contract Overview

Contract Amount: $3,465,248 ($3.5M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Justice

Start Date: 2025-10-01

End Date: 2026-09-30

Contract Duration: 364 days

Daily Burn Rate: $9.5K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: PPV PHARMACEUTICAL ITEMS - FISCAL YEAR 26

Place of Performance

Location: IRVING, DALLAS County, TEXAS, 75039

State: Texas Government Spending

Plain-Language Summary

Department of Justice obligated $3.5 million to MCKESSON CORPORATION for work described as: PPV PHARMACEUTICAL ITEMS - FISCAL YEAR 26 Key points: 1. The contract leverages a firm-fixed-price structure, providing cost certainty for the government. 2. Full and open competition suggests a robust marketplace for pharmaceutical supplies. 3. The contract duration of one year aligns with typical pharmaceutical procurement cycles. 4. The specific product category (Pharmaceutical Preparation Manufacturing) is essential for correctional healthcare. 5. The award to McKesson Corporation, a major distributor, indicates reliance on established supply chains.

Value Assessment

Rating: good

Benchmarking the value of this specific delivery order is challenging without detailed itemized pricing. However, the firm-fixed-price contract type is generally favorable for managing costs. The scale of the award suggests it covers a significant volume of pharmaceutical needs for the Federal Prison System. Further analysis would require comparing unit prices against government-negotiated pricing agreements or other federal contracts for similar pharmaceutical preparations.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. The specific number of bidders is not provided, but this procurement method generally fosters competitive pricing and encourages a wider range of suppliers to participate. The open competition suggests that the government sought the best value from the market.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it typically drives down prices through market forces and ensures the government is not overpaying for essential goods and services.

Public Impact

Inmates within the Federal Prison System will receive necessary pharmaceutical items. The contract ensures the continuity of healthcare services for a vulnerable population. The primary geographic impact is on federal correctional facilities nationwide, supplied from Texas. The contract supports the pharmaceutical supply chain, indirectly impacting jobs in manufacturing and distribution.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of specific unit pricing makes detailed value assessment difficult.
Dependence on a single large distributor could pose supply chain risks if not managed proactively.

Positive Signals

Firm-fixed-price contract provides cost predictability.
Full and open competition suggests a healthy market and potential for competitive pricing.
Award to a major, established pharmaceutical distributor ensures reliability of supply.

Sector Analysis

The pharmaceutical preparation manufacturing sector is a critical component of the broader healthcare industry. Federal agencies, particularly those managing large populations like the Federal Prison System, are significant consumers of pharmaceuticals. Spending in this sector is driven by healthcare needs, disease prevalence, and the availability of new treatments. Comparable spending benchmarks would involve analyzing other federal contracts for pharmaceutical supplies to correctional facilities or similar institutional settings.

Small Business Impact

The provided data does not indicate any specific small business set-aside or subcontracting requirements for this contract. As a delivery order under a larger contract, the prime contractor, McKesson Corporation, is a large business. The impact on the small business ecosystem would depend on whether McKesson utilizes small businesses for any subcontracting opportunities, which is not detailed in this award notice.

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 inherent in the firm-fixed-price structure, requiring delivery of specified goods. Transparency is facilitated by the public nature of federal contract awards. The Inspector General for the Department of Justice would have jurisdiction to investigate any potential fraud, waste, or abuse related to this contract.

Related Government Programs

Federal Prison System Healthcare Services
Department of Justice Pharmaceutical Procurement
General Services Administration Schedules (if applicable)
Department of Veterans Affairs Pharmaceutical Contracts

Risk Flags

Potential for supply chain disruption
Price volatility of pharmaceuticals
Ensuring product quality and efficacy

Frequently Asked Questions

What is this federal contract paying for?

Department of Justice awarded $3.5 million to MCKESSON CORPORATION. PPV PHARMACEUTICAL ITEMS - FISCAL YEAR 26

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 $3.5 million.

What is the period of performance?

Start: 2025-10-01. End: 2026-09-30.

What is McKesson Corporation's track record with federal pharmaceutical contracts?

McKesson Corporation is a major player in the pharmaceutical distribution industry and has a long history of contracting with various U.S. federal agencies, including the Department of Defense, Department of Veterans Affairs, and the Department of Justice. Their track record typically involves supplying a wide range of pharmaceuticals and medical supplies. While generally considered reliable due to their scale and established infrastructure, like any large contractor, they may have faced scrutiny or performance issues on specific contracts over time. A comprehensive review would involve examining past performance evaluations and any documented disputes or corrective actions related to their federal awards.

How does the $3.47 million award compare to historical spending on pharmaceutical items for the Federal Prison System?

To compare this $3.47 million award for FY26 against historical spending, one would need to analyze the Federal Prison System's (FPS) pharmaceutical expenditures in previous fiscal years. This would involve looking at total spending on pharmaceutical preparations, potentially broken down by contractor or contract type. For instance, if previous annual spending for similar needs averaged $4-5 million, this $3.47 million award might represent a reduction or a more efficient procurement. Conversely, if historical spending was significantly lower, this award could indicate an increase in demand, price inflation, or a shift in procurement strategy. Accessing historical contract data and budget reports from the Bureau of Prisons would be necessary for a precise comparison.

What are the primary risks associated with this contract for pharmaceutical preparation manufacturing?

Key risks for this contract include supply chain disruptions, which can arise from manufacturing issues, transportation problems, or global events impacting raw material availability. Price volatility for certain pharmaceuticals is another risk, although mitigated by the firm-fixed-price structure. There's also a risk of product obsolescence or the emergence of more effective treatments, potentially rendering procured items less useful. Furthermore, ensuring the quality and efficacy of manufactured pharmaceuticals is paramount, requiring robust quality control measures by the contractor and diligent oversight by the government to prevent the distribution of substandard or counterfeit products.

How effective is the firm-fixed-price (FFP) contract type in managing costs for pharmaceutical supplies?

The firm-fixed-price (FFP) contract type is generally considered effective for managing costs in situations where the scope of work is well-defined and risks are relatively predictable, such as the procurement of standard pharmaceutical items. Under an FFP contract, the contractor assumes most of the cost risk, agreeing to a set price regardless of their actual costs. This provides the government with significant cost certainty and predictability, making budgeting easier. For pharmaceuticals, where market prices can fluctuate, an FFP contract awarded after competitive bidding can lock in a favorable price, protecting the government from unexpected cost increases. However, if the initial price is set too high due to inadequate competition or poor estimation, the government may end up overpaying.

What is the significance of the contract being awarded to McKesson Corporation for the Federal Prison System?

Awarding the contract to McKesson Corporation, a major pharmaceutical distributor, signifies the Federal Prison System's reliance on established, large-scale supply chains to meet the healthcare needs of its inmate population. McKesson's extensive distribution network and warehousing capabilities, including facilities in Texas, suggest an ability to efficiently deliver a wide array of pharmaceutical products across various federal correctional institutions. This choice likely prioritizes reliability, breadth of product availability, and potentially economies of scale. It also implies that the Bureau of Prisons views McKesson as capable of meeting the stringent regulatory and logistical demands associated with supplying medications to a secure environment.

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: $3,465,248

Exercised Options: $3,465,248

Current Obligation: $3,465,248

Actual Outlays: $1,401,950

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