McKesson Corporation awarded $659M VA Pharmaceutical Prime Vendor contract for December 2024

Contract Overview

Contract Amount: $659,105,031 ($659.1M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2024-12-01

End Date: 2024-12-31

Contract Duration: 30 days

Daily Burn Rate: $22.0M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: EXPRESS REPORT: PHARMACEUTICAL PRIME VENDOR (PPV)FY2025 DECEMBER

Place of Performance

Location: IRVING, DALLAS County, TEXAS, 75039

State: Texas Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $659.1 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT: PHARMACEUTICAL PRIME VENDOR (PPV)FY2025 DECEMBER Key points: 1. Contract awarded via full and open competition, suggesting a competitive pricing environment. 2. The contract is a delivery order under a larger IDIQ, indicating ongoing program needs. 3. Firms Fixed Price contract type helps mitigate cost overrun risks for the government. 4. The contract duration is short (30 days), suggesting it may be for immediate or specific needs. 5. The award value represents a significant portion of annual pharmaceutical spending. 6. The contractor, McKesson Corporation, is a major player in pharmaceutical distribution.

Value Assessment

Rating: good

The contract value of $659 million for a 30-day period is substantial, reflecting the critical need for pharmaceutical supplies within the VA. Benchmarking against similar prime vendor contracts is challenging due to the specific nature of delivery orders and the short duration. However, the firm-fixed-price structure provides cost certainty. The value appears consistent with the scale of operations for a large federal agency like the VA requiring a broad range of pharmaceuticals.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple qualified vendors had the opportunity to bid. The specific number of bidders is not provided, but this procurement method generally fosters a competitive environment, which is expected to drive favorable pricing for the government. The VA's use of full and open competition for such a critical service suggests a robust market for pharmaceutical prime vendors.

Taxpayer Impact: Taxpayers benefit from the competitive nature of this award, as it is likely to result in more cost-effective pricing for essential pharmaceuticals compared to a sole-source or limited competition scenario.

Public Impact

Veterans will benefit from timely access to a wide range of pharmaceuticals. The Department of Veterans Affairs ensures the continuity of its pharmaceutical supply chain. The contract supports the distribution of medications across VA healthcare facilities nationwide. This award sustains jobs within the pharmaceutical distribution and logistics sectors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price fluctuations in subsequent delivery orders if not managed closely.
Dependence on a single large contractor for critical pharmaceutical needs.
Ensuring compliance with VA's stringent quality and delivery standards.

Positive Signals

Awarded through full and open competition, indicating market responsiveness.
Firm Fixed Price contract type provides cost predictability.
McKesson Corporation's established track record in pharmaceutical distribution.
Supports a vital government function ensuring veteran healthcare.

Sector Analysis

The pharmaceutical prime vendor market is a critical segment of the healthcare industry, responsible for the efficient and reliable distribution of medications. This contract fits within the broader federal spending on healthcare and pharmaceuticals, which is substantial. The VA's reliance on prime vendors like McKesson highlights the importance of established supply chains in ensuring access to medical supplies for federal beneficiaries. Comparable spending benchmarks would typically involve analyzing the total federal pharmaceutical spend and the market share of major distributors.

Small Business Impact

The provided data does not indicate any specific small business set-aside or subcontracting requirements for this particular delivery order. As a large prime vendor contract, the primary focus is on the prime contractor's ability to meet the extensive pharmaceutical needs of the VA. While McKesson Corporation may engage small businesses in its broader supply chain, this specific award does not appear to directly benefit small businesses through set-asides.

Oversight & Accountability

The Department of Veterans Affairs has established oversight mechanisms for its contracts, including performance monitoring and compliance checks. The firm-fixed-price nature of this contract provides a degree of financial oversight by locking in costs. Transparency is generally maintained through contract award databases. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse related to this contract.

Related Government Programs

Department of Defense Pharmaceutical Prime Vendor Program
Federal Supply Schedule (FSS) Pharmaceutical Contracts
VA Medical Care Programs
National Acquisition Center (NAC) Contracts

Risk Flags

High contract value for a short duration requires careful scrutiny of the scope and potential for follow-on orders.
Dependence on a single large vendor for critical healthcare supplies.
Need to ensure robust quality control and delivery assurance mechanisms are in place.

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $659.1 million to MCKESSON CORPORATION. EXPRESS REPORT: PHARMACEUTICAL PRIME VENDOR (PPV)FY2025 DECEMBER

Who is the contractor on this award?

The obligated recipient is MCKESSON CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Veterans Affairs (Department of Veterans Affairs).

What is the total obligated amount?

The obligated amount is $659.1 million.

What is the period of performance?

Start: 2024-12-01. End: 2024-12-31.

What is McKesson Corporation's historical performance with the VA for pharmaceutical prime vendor services?

McKesson Corporation has a long-standing relationship with the Department of Veterans Affairs as a pharmaceutical prime vendor. Historical data indicates consistent contract awards and performance in fulfilling pharmaceutical needs for VA facilities. While specific performance metrics for past contracts are not detailed here, the continued awarding of significant contracts suggests a generally satisfactory performance record. The VA typically monitors contractor performance through various metrics, including delivery timeliness, product quality, and responsiveness to requirements. Any significant performance issues would likely be reflected in contract modifications, disputes, or a lack of future awards.

How does the $659 million value for a 30-day period compare to typical monthly pharmaceutical spending for the VA?

The $659 million value for a single 30-day delivery order is exceptionally high and suggests this may represent a consolidated or particularly urgent requirement, or potentially an annual estimate for a specific period rather than a monthly spend. Typical monthly pharmaceutical spending for an agency as large as the VA would likely be in the hundreds of millions, but a single delivery order of this magnitude for just one month is unusual. It's more probable that this figure represents an annualized value or a significant portion of a larger contract's allocation for a specific period, rather than a standard monthly expenditure. Further context on how this delivery order fits into the larger IDIQ contract is needed for precise comparison.

What are the primary risks associated with relying on a single prime vendor for such a large volume of pharmaceuticals?

The primary risks associated with relying on a single prime vendor like McKesson for a large volume of pharmaceuticals include supply chain disruptions, potential for price increases if competition weakens in the future, and a lack of flexibility in sourcing alternatives during emergencies. A single point of failure in the supply chain could lead to critical medication shortages for veterans. Furthermore, over-reliance can reduce the government's negotiating leverage over time. Mitigating these risks involves robust contract management, performance monitoring, and potentially exploring multi-vendor strategies for different categories of pharmaceuticals or geographic regions.

What is the typical duration and value range for Pharmaceutical Prime Vendor contracts awarded by the VA?

Pharmaceutical Prime Vendor (PPV) contracts, often awarded as Indefinite Delivery/Indefinite Quantity (IDIQ) vehicles, typically have longer base periods and option years, often spanning multiple years. Individual delivery orders under these IDIQs can vary significantly in duration and value, from short-term needs to longer-term supply agreements. The value of individual delivery orders can range from thousands to tens of millions of dollars, depending on the specific requirements. The $659 million figure for a 30-day delivery order is exceptionally large, suggesting it might be an annualized estimate or a consolidation of needs, rather than a typical monthly delivery order value.

How does the 'Full and Open Competition' procurement method impact the cost-effectiveness of this contract?

The 'Full and Open Competition' method is designed to maximize competition by allowing all responsible sources to submit offers. This process typically leads to more competitive pricing as vendors vie for the contract. For the VA, this means they are likely to receive more favorable pricing for pharmaceuticals compared to sole-source or limited competition awards. The presence of multiple bidders encourages efficiency and innovation among contractors to offer the best value. This method is generally considered the most effective way to ensure fair and reasonable pricing and achieve the best value for taxpayer dollars in the long run.

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: $659,105,031

Exercised Options: $659,105,031

Current Obligation: $659,105,031

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