VA awards $120M+ for pharmacy services over 7 months, McKesson Corporation secures contract

Contract Overview

Contract Amount: $120,053,788 ($120.1M)

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: $563.6K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: EXPRESS REPORT: PHARMACY PRIME VENDOR NCO 16 FY 17 MAR 1, 2017 TO SEP 30, 2017 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 $120.1 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT: PHARMACY PRIME VENDOR NCO 16 FY 17 MAR 1, 2017 TO SEP 30, 2017 CONTRACT VA797P-12-D-0001 Key points: 1. Contract value indicates significant demand for pharmaceutical supplies within the VA. 2. The short duration (7 months) suggests a potential need for interim services or a bridge to a larger contract. 3. McKesson Corporation's established presence in pharmaceutical distribution likely influenced this award. 4. The contract's focus on pharmaceutical preparation manufacturing points to a critical supply chain component for healthcare. 5. Analysis of per-unit costs for key pharmaceuticals would provide deeper value-for-money insights. 6. The contract's performance context is crucial for understanding if it met the VA's needs within the specified timeframe.

Value Assessment

Rating: good

This contract, valued at over $120 million for a 7-month period, represents a substantial investment in pharmaceutical supplies for the Department of Veterans Affairs. Benchmarking this against similar, longer-term pharmacy prime vendor contracts would be necessary for a comprehensive value assessment. However, the significant dollar amount suggests a high volume of pharmaceutical needs being met. Without specific line-item data, a precise per-unit cost comparison is challenging, but the overall expenditure reflects the scale of VA's pharmaceutical operations.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple vendors had the opportunity to bid. This competitive process is generally favorable for price discovery and ensuring the government receives competitive pricing. The specific number of bidders is not provided, but the 'full and open' designation suggests a robust bidding environment, which should have driven down costs compared to a sole-source or limited competition scenario.

Taxpayer Impact: Taxpayers benefit from the competitive nature of this award, as it increases the likelihood of securing pharmaceutical supplies at the most advantageous prices available in the market.

Public Impact

Veterans Affairs healthcare facilities nationwide benefit from the reliable supply of pharmaceuticals. The contract ensures the availability of essential medications for the treatment of various health conditions among veterans. The geographic impact is nationwide, supporting VA medical centers and clinics across the United States. The contract supports the pharmaceutical manufacturing and distribution workforce, ensuring jobs in this critical sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The short contract duration (7 months) may indicate a stop-gap measure, potentially leading to future contract instability or higher costs if not managed effectively.
Lack of detailed performance metrics within the provided data makes it difficult to assess the contractor's performance and adherence to quality standards.
The significant dollar amount without granular cost breakdowns raises questions about potential overspending or lack of cost optimization.

Positive Signals

Awarded under full and open competition, suggesting a competitive bidding process that should yield favorable pricing.
McKesson Corporation is a major player in the pharmaceutical distribution industry, implying experience and established infrastructure to fulfill the contract.
The contract addresses a critical need for pharmaceutical supplies within the VA healthcare system, ensuring continuity of care for veterans.

Sector Analysis

The pharmaceutical industry is a vital component of the healthcare sector, characterized by high R&D investment, complex supply chains, and significant government procurement. This contract falls within the pharmaceutical preparation manufacturing sub-sector, which is essential for producing and distributing medications. The market for pharmaceuticals is substantial, with government agencies like the VA being major purchasers. Comparable spending benchmarks would involve analyzing other large-scale pharmaceutical prime vendor contracts across federal agencies.

Small Business Impact

The provided data does not indicate any specific small business set-aside provisions for this contract. As a large prime vendor contract, it is unlikely to have direct small business set-aside components. However, McKesson Corporation, as a large prime contractor, may engage small businesses for subcontracting opportunities within its supply chain, though this is not explicitly detailed here. The impact on the small business ecosystem would depend on the extent of any such subcontracting.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Veterans Affairs contracting officers and program managers. Accountability measures would be embedded in the contract terms, including delivery schedules, quality standards, and pricing. Transparency is facilitated by the contract award being publicly available, but detailed performance reports and Inspector General reviews would provide deeper insights into accountability and potential issues.

Related Government Programs

VA Federal Supply Schedule (FSS) Contracts
Department of Defense Pharmaceutical Contracts
National Institutes of Health (NIH) Research Grants
Centers for Medicare & Medicaid Services (CMS) Drug Spending

Risk Flags

Short contract duration may indicate interim solution or potential for future instability.
Lack of detailed performance metrics hinders assessment of contractor effectiveness.
Significant dollar amount without granular cost breakdown raises questions about value optimization.

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $120.1 million to MCKESSON CORPORATION. EXPRESS REPORT: PHARMACY PRIME VENDOR NCO 16 FY 17 MAR 1, 2017 TO SEP 30, 2017 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 $120.1 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, frequently securing contracts for pharmaceutical prime vendor services. Their track record includes numerous awards for supplying medications to VA medical centers and other facilities. While specific performance details for past contracts are not provided here, McKesson's consistent presence suggests a generally satisfactory performance history in meeting the VA's pharmaceutical needs. However, a deeper dive into past contract performance reviews, any disputes, or quality issues would be necessary for a comprehensive assessment of their track record.

How does the per-unit cost of pharmaceuticals under this contract compare to other federal agencies or the commercial market?

Without specific line-item data for the pharmaceuticals procured under this $120M+ contract, a direct per-unit cost comparison is not feasible. Federal agencies like the VA often leverage large purchasing volumes and specific formulary agreements to negotiate competitive pricing. Generally, federal contracts aim for prices at or below market rates, especially through programs like the Federal Supply Schedule (FSS). A thorough comparison would require access to the detailed pricing schedules within this contract and benchmarking them against similar VA contracts, other agency contracts (e.g., DoD), and commercial market data for the same or comparable pharmaceutical products.

What are the primary risks associated with this contract, given its short duration and significant value?

The primary risks associated with this contract stem from its short duration (7 months) and substantial value. A key risk is the potential for supply chain disruptions if McKesson faces unforeseen challenges in sourcing or delivering the required pharmaceuticals within this compressed timeframe. Another risk is the possibility that this short-term contract is a stop-gap measure, leading to increased administrative burden and potentially higher costs associated with subsequent, longer-term contract procurements. Furthermore, the significant dollar amount without granular cost breakdowns could mask inefficiencies or opportunities for cost savings that are not being realized.

How effective is this contract in ensuring the consistent availability of critical medications for veterans?

This contract is designed to ensure the consistent availability of critical medications for veterans by providing a large volume of pharmaceuticals to VA facilities. The 'full and open competition' award mechanism suggests that the VA sought to secure reliable supply from a capable vendor. McKesson Corporation's established infrastructure in pharmaceutical distribution is a positive indicator for consistent availability. However, the effectiveness is ultimately measured by the actual delivery performance, adherence to quality standards, and the absence of stock-outs or delays impacting patient care. Without specific performance data, the effectiveness is inferred from the contract's purpose and the contractor's presumed capabilities.

What are the historical spending patterns for pharmacy prime vendor contracts within the VA over the past five years?

Historical spending patterns for pharmacy prime vendor contracts within the VA have generally shown a consistent and significant investment in pharmaceutical supplies, often in the hundreds of millions of dollars annually. These contracts are crucial for supporting the vast network of VA healthcare facilities. Spending has likely fluctuated based on healthcare demand, drug pricing trends, and the award of new, large-scale contracts. The VA's commitment to providing comprehensive care to veterans necessitates substantial and ongoing expenditure in this area. Analyzing specific contract awards and their values over time would reveal trends in vendor selection, contract durations, and overall budget allocation for pharmaceuticals.

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: $120,053,788

Exercised Options: $120,053,788

Current Obligation: $120,053,788

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: VA797P12D0001

IDV Type: IDC

Timeline