VA awards $2.1M contract for sterile hazardous compounding services to Optum Pharmacy, emphasizing firm-fixed-price terms

Contract Overview

Contract Amount: $2,119,086 ($2.1M)

Contractor: Optum Pharmacy 601, LLC

Awarding Agency: Department of Veterans Affairs

Start Date: 2020-12-26

End Date: 2025-12-25

Contract Duration: 1,825 days

Daily Burn Rate: $1.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: STERILE HAZARDOUS COMPOUNDING SERVICES

Place of Performance

Location: LITTLE ROCK, PULASKI County, ARKANSAS, 72205

State: Arkansas Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $2.1 million to OPTUM PHARMACY 601, LLC for work described as: STERILE HAZARDOUS COMPOUNDING SERVICES Key points: 1. Contract value of $2.1 million over five years suggests a steady demand for specialized pharmaceutical services. 2. Full and open competition indicates a healthy market with multiple potential providers. 3. Firm-fixed-price contract structure transfers risk to the contractor, potentially stabilizing costs. 4. The award to Optum Pharmacy, a known entity, suggests a focus on reliable performance. 5. The contract duration of five years allows for consistent service delivery and planning. 6. Geographic focus on Arkansas (AR) highlights regional needs for these specialized services.

Value Assessment

Rating: good

The contract value of $2.1 million over five years, averaging approximately $423,817 annually, appears reasonable for specialized sterile hazardous compounding services. Benchmarking against similar contracts is challenging without more specific service details, but the firm-fixed-price structure suggests cost predictability. The competition level implies that pricing was likely scrutinized against market rates.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, meaning all responsible sources were permitted to submit an offer. The number of bidders is not specified, but the open competition suggests a competitive environment that should drive fair pricing. This approach is generally favored for ensuring the government receives the best value.

Taxpayer Impact: Taxpayers benefit from full and open competition as it typically leads to more competitive pricing and a wider selection of qualified contractors, ensuring efficient use of public funds.

Public Impact

Veterans in Arkansas will benefit from access to essential sterile hazardous compounded medications. The contract ensures the availability of critical pharmaceutical preparations for patient treatment. Services are geographically focused within Arkansas, addressing specific regional healthcare needs. The contract supports the pharmaceutical supply chain and potentially specialized pharmacy jobs.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price creep if initial fixed price does not account for unforeseen material cost increases.
Dependence on a single contractor for a critical service could pose a risk if performance issues arise.

Positive Signals

Firm-fixed-price contract provides cost certainty for the duration of the award.
Full and open competition suggests a robust market and potential for high-quality service providers.
Long-term contract (5 years) allows for stable service delivery and relationship building.

Sector Analysis

The pharmaceutical manufacturing sector, particularly the niche of sterile hazardous compounding, is critical for healthcare delivery. This contract fits within the broader pharmaceutical services market, which is characterized by stringent regulatory requirements and specialized expertise. Spending in this area is driven by patient needs for complex and often customized medications.

Small Business Impact

The provided data does not indicate any specific small business set-aside or subcontracting requirements for this contract. Therefore, the direct impact on the small business ecosystem is likely minimal unless Optum Pharmacy utilizes small businesses in its supply chain.

Oversight & Accountability

The contract is subject to standard federal procurement oversight. The firm-fixed-price nature simplifies some aspects of financial oversight by establishing a set cost. Accountability will be managed through performance metrics and contract administration by the Department of Veterans Affairs. Transparency is maintained through federal contract databases.

Related Government Programs

Pharmaceutical Compounding Services
Veterans Health Administration Pharmacy Benefits
Hazardous Drug Compounding
Specialty Pharmacy Contracts

Risk Flags

Potential for service disruption if contractor faces operational issues.
Long-term reliance on one vendor may reduce competitive pressure over time.

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $2.1 million to OPTUM PHARMACY 601, LLC. STERILE HAZARDOUS COMPOUNDING SERVICES

Who is the contractor on this award?

The obligated recipient is OPTUM PHARMACY 601, LLC.

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 $2.1 million.

What is the period of performance?

Start: 2020-12-26. End: 2025-12-25.

What is the historical spending pattern for sterile hazardous compounding services by the Department of Veterans Affairs?

Analyzing historical spending for sterile hazardous compounding services by the VA is crucial for understanding trends and justifying current contract values. While specific historical data for this exact service line is not provided in the current data, the VA generally spends billions annually on pharmaceutical products and services. Previous awards for similar compounding services, if available, would offer a benchmark. A consistent or increasing trend in spending on specialized compounding could indicate growing demand due to an aging veteran population or advancements in treatment requiring such preparations. Conversely, a decrease might suggest shifts in service delivery models or increased in-house capabilities. Without detailed historical figures, it's difficult to provide precise figures, but the overall pharmaceutical budget of the VA provides context for the scale of such procurements.

How does the annual value of this contract compare to other VA pharmaceutical contracts?

The annual value of this contract, approximately $423,817 ($2.1M / 5 years), represents a moderate investment within the VA's vast pharmaceutical spending. The VA's total pharmaceutical budget often runs into the tens of billions of dollars annually. This specific contract addresses a specialized niche – sterile hazardous compounding – which typically involves higher per-unit costs due to the complexity, safety protocols, and specialized personnel required. Therefore, while not a large dollar amount in the context of the entire VA pharmaceutical spend, it is significant for the specific service provided. Comparing it to other contracts for bulk drug purchases or general pharmacy services would show a difference in scale and purpose, but it is likely competitive within its specialized domain.

What are the key performance indicators (KPIs) for this contract, and how is performance monitored?

Key performance indicators (KPIs) for a sterile hazardous compounding services contract typically revolve around medication accuracy, timeliness of delivery, adherence to safety and sterility standards (e.g., USP <797>, <800>), and proper handling of hazardous materials. Performance monitoring by the VA would likely involve regular audits of compounding processes, verification of delivery schedules, review of quality control reports, and patient/clinician feedback. The firm-fixed-price nature of the contract means that the contractor is incentivized to meet these KPIs to avoid penalties or contract termination, while the VA is responsible for diligent oversight to ensure compliance and patient safety. Specific KPIs and monitoring protocols would be detailed in the contract's Performance Work Statement (PWS).

What is the track record of Optum Pharmacy 601, LLC with the VA or similar government contracts?

Optum Pharmacy 601, LLC is part of the larger OptumHealth network, which has a significant presence in providing healthcare services and pharmacy benefits management. While specific contract history details with the VA for this exact entity and service are not provided in the data, Optum entities have historically held numerous contracts with federal agencies, including the VA, for various pharmaceutical and healthcare-related services. Their experience likely encompasses managing complex pharmacy operations and adhering to stringent regulatory requirements. A thorough review would involve examining past performance evaluations (e.g., Contractor Performance Assessment Reporting System - CPARS) and any prior awards to Optum entities for similar compounding or specialty pharmacy services to assess their reliability and quality of service delivery.

What are the potential risks associated with relying on a single contractor for sterile hazardous compounding services?

Relying on a single contractor, even one with a good track record like Optum Pharmacy, introduces several potential risks. Firstly, there's a risk of service disruption due to unforeseen events affecting the contractor, such as natural disasters, labor disputes, or internal operational failures. Secondly, a lack of ongoing competition could potentially lead to complacency or less incentive for continuous improvement in service quality or cost-efficiency over the contract's lifespan. Thirdly, if the contractor's performance degrades, the VA faces a lengthy and potentially disruptive process to re-compete the contract or find an alternative provider, impacting patient care continuity. Mitigating these risks often involves robust contract management, clear performance expectations, and contingency planning.

Industry Classification

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

Product/Service Code: MEDICAL SERVICES › MEDICAL, DENTAL, AND SURGICAL SVCS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: 36C25621Q0283

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Unitedhealth Group Incorporated

Address: 1070 E BRANDON BLVD, BRANDON, FL, 33511

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

Financial Breakdown

Contract Ceiling: $3,319,086

Exercised Options: $2,119,086

Current Obligation: $2,119,086

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline