VA pharmacy vendor contract awarded $58.7M for 7 months of pharmaceutical preparation manufacturing

Contract Overview

Contract Amount: $58,728,820 ($58.7M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2017-03-01

End Date: 2017-09-30

Contract Duration: 213 days

Daily Burn Rate: $275.7K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: EXPRESS REPORT: PHARMACY PRIME VENDOR FY17 MAR 1, 2016 TO SEP 30, 2016 CONTRACT VA797P-12-D-0001

Place of Performance

Location: SAN FRANCISCO, SAN FRANCISCO County, CALIFORNIA, 94104

State: California Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $58.7 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT: PHARMACY PRIME VENDOR FY17 MAR 1, 2016 TO SEP 30, 2016 CONTRACT VA797P-12-D-0001 Key points: 1. The contract represents a significant investment in pharmaceutical supply chain management for the VA. 2. Analysis of value for money requires benchmarking against similar prime vendor contracts and market prices for pharmaceuticals. 3. Competition dynamics appear strong with a 'full and open' award, suggesting potential for competitive pricing. 4. Risk indicators include the short duration of the contract (7 months) which may limit long-term strategic planning and price stability. 5. Performance context is critical; the effectiveness of McKesson Corporation in fulfilling VA's pharmaceutical needs will be a key determinant of success. 6. Sector positioning places this contract within the broader healthcare and pharmaceutical manufacturing industry, a vital component of the VA's mission.

Value Assessment

Rating: fair

The contract value of $58.7 million for a 7-month period averages approximately $8.39 million per month. Benchmarking this against similar large-scale pharmaceutical prime vendor contracts is essential to assess value for money. Without specific data on the volume and types of pharmaceuticals procured, a precise per-unit cost comparison is difficult. However, the firm-fixed-price nature suggests that the contractor bears the risk of cost overruns, which can be a positive indicator if the price is competitive.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under 'full and open competition,' indicating that all responsible sources were permitted to submit bids. This suggests a robust bidding process where multiple vendors likely vied for the contract. The level of competition is a positive sign for price discovery, as it incentivizes bidders to offer competitive terms to secure the award.

Taxpayer Impact: A full and open competition generally benefits taxpayers by driving down prices through market forces, ensuring the government receives the best possible value for its expenditure on essential pharmaceuticals.

Public Impact

Veterans across the nation will benefit from the consistent and timely availability of necessary pharmaceuticals. The contract ensures the delivery of pharmaceutical preparation manufacturing services, crucial for maintaining the VA's healthcare operations. Geographic impact is nationwide, supporting VA medical centers and clinics serving veterans across the United States. Workforce implications may include roles within McKesson Corporation related to logistics, distribution, and pharmaceutical handling, as well as VA personnel managing the contract.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Short contract duration (7 months) may lead to less favorable pricing compared to longer-term agreements.
Reliance on a single vendor for a critical supply chain function introduces potential single-point-of-failure risks.
The firm-fixed-price contract, while shifting risk, could lead to higher initial bids if the contractor anticipates significant market volatility.

Positive Signals

Awarded through full and open competition, indicating a competitive bidding process.
The firm-fixed-price contract structure places cost risk on the contractor.
The contract supports a critical function for the Department of Veterans Affairs, ensuring access to essential medications for veterans.

Sector Analysis

This contract falls within the pharmaceutical manufacturing and distribution sector, a critical component of the healthcare industry. The market is characterized by significant regulatory oversight, complex supply chains, and substantial investment in research and development. Large prime vendor contracts like this are common for government agencies to ensure reliable access to a wide range of pharmaceuticals. Comparable spending benchmarks would involve analyzing other large federal contracts for pharmaceutical supply, such as those with the Department of Defense or other health agencies.

Small Business Impact

The provided data indicates this contract was not set aside for small businesses (sb: false) and does not explicitly mention subcontracting plans for small businesses. Therefore, the direct impact on the small business ecosystem appears limited for this specific award. However, the prime contractor, McKesson Corporation, may engage small businesses for ancillary services or supplies, which would be detailed in subcontracting reports not included here.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Veterans Affairs contracting officers and program managers. Accountability measures are embedded in the firm-fixed-price contract terms, requiring delivery of specified pharmaceutical preparations. Transparency is facilitated through federal contract databases like FPDS. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse related to the contract.

Related Government Programs

Department of Veterans Affairs Medical Care Programs
Federal Supply Schedule (FSS) Pharmaceutical Contracts
DoD Pharmacy Operations

Risk Flags

Short contract duration
Potential for supply chain disruption
Reliance on a single prime vendor

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $58.7 million to MCKESSON CORPORATION. EXPRESS REPORT: PHARMACY PRIME VENDOR FY17 MAR 1, 2016 TO SEP 30, 2016 CONTRACT VA797P-12-D-0001

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 $58.7 million.

What is the period of performance?

Start: 2017-03-01. End: 2017-09-30.

What is McKesson Corporation's track record with the Department of Veterans Affairs for similar pharmaceutical contracts?

McKesson Corporation has a long-standing relationship with the Department of Veterans Affairs (VA) as a major pharmaceutical distributor and prime vendor. They have held numerous contracts with the VA over many years, including previous iterations of the Pharmacy Prime Vendor program. Their extensive experience suggests a deep understanding of the VA's procurement processes and logistical requirements. However, like any large contractor, they may have faced scrutiny or performance issues on specific contracts, which would be detailed in past performance reviews and contract award histories. Analyzing their performance on prior VA contracts, including on-time delivery rates, product availability, and adherence to pricing agreements, would provide crucial context for this current award.

How does the awarded price compare to market rates for pharmaceutical preparation manufacturing and distribution?

Determining the precise value for money requires a detailed comparison of the awarded price against market benchmarks for the specific pharmaceuticals and services procured under this contract. The $58.7 million for a 7-month period translates to an average monthly expenditure of approximately $8.39 million. Without knowing the exact mix of drugs and quantities, direct comparison is challenging. However, industry reports and analyses of similar large-scale prime vendor contracts with other federal agencies or large healthcare systems can provide a basis for comparison. Factors such as bulk purchasing discounts, the firm-fixed-price nature, and the competitive bidding process should ideally result in pricing favorable to the government. A thorough analysis would involve examining the average prices paid for key pharmaceutical categories against publicly available pricing data or benchmark studies.

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

The primary risks associated with this contract include potential supply chain disruptions, price volatility of pharmaceuticals, and contractor performance issues. The short 7-month duration could also pose a risk if it leads to less favorable pricing or limits the VA's ability to leverage long-term strategic partnerships. Mitigation strategies likely include robust contract oversight by the VA, requiring McKesson Corporation to maintain adequate inventory levels and adhere to strict delivery schedules. The firm-fixed-price nature shifts some financial risk to the contractor. Furthermore, the 'full and open competition' award process itself helps mitigate risks by selecting a vendor deemed most capable and competitive. The VA may also have contingency plans in place to address potential disruptions from alternative suppliers or emergency procurement procedures.

How effective has McKesson Corporation been in fulfilling its obligations under previous VA pharmaceutical contracts?

Assessing McKesson Corporation's past effectiveness with the VA is crucial. Historical data from contract performance reports, payment histories, and any documented disputes or corrective actions would provide insight. Generally, McKesson has been a primary supplier for the VA for many years, indicating a baseline level of operational success. However, effectiveness can vary. Key performance indicators would include on-time delivery rates, order fill rates, product quality, and responsiveness to VA needs. Any instances of significant backorders, drug shortages attributed to the vendor, or quality control issues would be important considerations. A review of past performance evaluations, if publicly available, would offer a more definitive assessment.

What are the historical spending patterns for pharmaceutical prime vendor contracts at the VA?

Historical spending on VA pharmaceutical prime vendor contracts has been substantial, reflecting the significant healthcare needs of the veteran population. Annual spending has often been in the hundreds of millions, if not billions, of dollars, depending on the scope and duration of the contracts. These contracts are typically awarded through competitive processes, though the specific type of competition (full and open, limited, sole-source) can vary. Spending levels can fluctuate based on changes in pharmaceutical costs, VA healthcare utilization, and the number and size of active contracts. Analyzing trends over several fiscal years would reveal patterns in contract values, vendor awards, and the overall government expenditure on pharmaceutical procurement to support VA medical facilities nationwide.

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: ONE POST ST, SAN FRANCISCO, CA, 94104

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

Financial Breakdown

Contract Ceiling: $58,728,820

Exercised Options: $58,728,820

Current Obligation: $58,728,820

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: VA797P12D0001

IDV Type: IDC

Timeline