VA awards $61.5M for pharmaceutical preparations, with McKesson Corporation as the primary contractor

Contract Overview

Contract Amount: $61,532,269 ($61.5M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2017-12-01

End Date: 2018-04-30

Contract Duration: 150 days

Daily Burn Rate: $410.2K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: EXPRESS REPORT: PPV, DEC - APR FY18 NCO 17

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $61.5 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT: PPV, DEC - APR FY18 NCO 17 Key points: 1. The contract value represents a significant investment in pharmaceutical supplies for the Department of Veterans Affairs. 2. Competition dynamics for this contract are crucial for ensuring fair pricing and access to essential medications. 3. Performance monitoring will be key to ensuring timely delivery and quality of pharmaceutical products. 4. This award falls within the broader context of federal healthcare spending, specifically for medical supplies. 5. The sector positioning highlights the VA's reliance on established pharmaceutical manufacturers.

Value Assessment

Rating: good

The awarded amount of $61.5 million for a 5-month period suggests a substantial volume of pharmaceutical needs. Benchmarking against similar large-scale pharmaceutical supply contracts would be necessary for a definitive value-for-money assessment. However, the firm fixed-price structure generally provides cost certainty for the government. The per-unit cost, if available, would offer further insight into pricing efficiency compared to market rates or other government contracts.

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 designed to foster price discovery and encourage vendors to offer their best pricing and terms. The number of bidders would provide further insight into the level of competition and its potential impact on the final award price.

Taxpayer Impact: Full and open competition generally benefits taxpayers by driving down costs through market forces, ensuring the government receives competitive pricing for its needs.

Public Impact

Veterans will benefit from the consistent availability of necessary pharmaceutical preparations. The contract ensures the delivery of essential medications and medical supplies to VA facilities. The geographic impact is likely nationwide, supporting VA healthcare systems across the country. This contract supports jobs within the pharmaceutical manufacturing and distribution sectors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price fluctuations in the pharmaceutical market impacting long-term value.
Dependence on a single contractor for a large volume of critical supplies.
Ensuring supply chain resilience for essential medications.

Positive Signals

Awarded through full and open competition, suggesting competitive pricing.
Firm fixed-price contract provides cost certainty.
Contract duration allows for consistent supply chain management.

Sector Analysis

The pharmaceutical preparation manufacturing sector is a critical component of the healthcare industry, involving the production of a wide range of drugs and medical compounds. Federal spending in this area is substantial, driven by the needs of agencies like the Department of Veterans Affairs, Department of Defense, and others. This contract fits within the broader category of medical supplies and pharmaceuticals, a market characterized by significant research and development, stringent regulatory oversight, and established players like McKesson Corporation.

Small Business Impact

There is no indication of a small business set-aside for this contract, nor is there explicit information regarding subcontracting opportunities for small businesses. The award to a large corporation like McKesson suggests that the primary focus was on meeting the scale and complexity of the VA's pharmaceutical needs, potentially limiting direct opportunities for small businesses in this specific award. Further analysis of subcontracting plans would be needed to assess the impact on the small business ecosystem.

Oversight & Accountability

The Department of Veterans Affairs is responsible for the oversight of this contract, ensuring compliance with terms and conditions. Accountability measures are typically embedded within the contract through performance standards, delivery schedules, and payment terms. Transparency is facilitated through contract award databases and reporting requirements. The VA's Office of Inspector General may conduct audits or investigations related to pharmaceutical procurement to ensure efficiency and prevent fraud.

Related Government Programs

VA Pharmaceutical Prime Vendor Program
DoD Medical Materiel
Federal Supply Schedule (FSS) for Pharmaceuticals

Risk Flags

Potential for supply chain disruption
Price volatility in pharmaceutical market
Ensuring product quality and efficacy

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $61.5 million to MCKESSON CORPORATION. EXPRESS REPORT: PPV, DEC - APR FY18 NCO 17

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 $61.5 million.

What is the period of performance?

Start: 2017-12-01. End: 2018-04-30.

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

McKesson Corporation has a long-standing relationship with the Department of Veterans Affairs, frequently securing contracts for pharmaceutical distribution and supply. Their track record includes managing large-scale delivery orders and prime vendor agreements, often valued in the tens to hundreds of millions of dollars annually. While generally considered a reliable supplier, like any large contractor, they have faced scrutiny in the past regarding pricing practices and supply chain issues in broader contexts. For this specific contract, the VA would have evaluated McKesson's past performance data, including delivery timeliness, product quality, and responsiveness to issues, as part of the source selection process under full and open competition.

How does the $61.5 million award compare to previous VA spending on pharmaceutical preparations?

The $61.5 million awarded for the period of December 2017 to April 2018 represents a significant, but not unprecedented, level of spending for pharmaceutical preparations by the VA. Annual VA spending on pharmaceuticals can range from several billion dollars to over ten billion dollars, depending on the fiscal year and specific program needs. This particular award covers a 5-month period, suggesting an annualized run rate that would be a substantial portion of the VA's overall pharmaceutical budget. Comparing it directly requires looking at similar contract vehicles or periods of performance for pharmaceutical supply, which often fluctuate based on demand, formulary changes, and strategic sourcing initiatives.

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

Key risks include potential supply chain disruptions (e.g., manufacturing delays, transportation issues), price volatility of pharmaceuticals, and ensuring the quality and efficacy of delivered products. The VA mitigates these risks through several mechanisms. The firm fixed-price contract structure shifts some price risk to the contractor. Performance standards and quality assurance clauses are included to ensure product integrity. The use of full and open competition encourages multiple suppliers, providing some redundancy and leverage. Furthermore, the VA likely maintains safety stock levels and has contingency plans for critical medications to address unforeseen shortages.

How effective is the VA's procurement process in securing competitive pricing for pharmaceuticals?

The VA's procurement process, particularly when utilizing full and open competition as in this case, is generally effective in securing competitive pricing for pharmaceuticals. The agency leverages its significant purchasing power and employs various contracting strategies, including large-volume contracts and prime vendor agreements. The competitive bidding process forces vendors to offer their most aggressive pricing to win awards. However, the pharmaceutical market itself is complex, with factors like drug patents, research and development costs, and market exclusivity influencing prices. While competition helps, the inherent nature of drug pricing means that absolute lowest cost may not always be achievable for all items.

What is the historical spending trend for pharmaceutical preparations by the Department of Veterans Affairs?

Historical spending by the Department of Veterans Affairs on pharmaceutical preparations has shown a consistent upward trend over the past decade, driven by an expanding veteran population, increased utilization of healthcare services, and the introduction of new, often more expensive, medications. The VA consistently ranks as one of the largest federal purchasers of pharmaceuticals. Spending fluctuates annually based on factors such as healthcare policy changes, the development of new treatments, and specific agency initiatives to manage drug costs. The overall trajectory, however, indicates a sustained and significant investment in ensuring veterans have access to necessary medications.

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: $61,532,269

Exercised Options: $61,532,269

Current Obligation: $61,532,269

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: VA797P12D0001

IDV Type: IDC

Timeline