VA awards $76.5M for pharmaceutical preparations, with McKesson Corporation as the sole awardee

Contract Overview

Contract Amount: $76,519,362 ($76.5M)

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: $510.1K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: EXPRESS REPORT: PPV, DEC-APR FY18 NCO 22G&22L

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $76.5 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT: PPV, DEC-APR FY18 NCO 22G&22L Key points: 1. The contract value represents a significant investment in pharmaceutical supplies for the VA. 2. Competition dynamics for this contract are limited, potentially impacting price discovery. 3. The short duration of the contract (150 days) suggests a need for immediate or short-term supply. 4. The fixed-price contract type offers cost certainty for the government. 5. The award is a delivery order against an existing contract, indicating a pre-established relationship. 6. The geographic location of the contractor in California may influence distribution logistics.

Value Assessment

Rating: fair

The total award of $76.5 million over 150 days is substantial. Benchmarking this against similar pharmaceutical supply contracts is challenging without more specific product details. However, the per-unit cost benchmark of $510,129 (likely representing a batch or specific item) needs further analysis to determine if it aligns with market rates for comparable pharmaceutical preparations. The fixed-price nature provides some cost control, but the overall value proposition depends heavily on the necessity and urgency of the supplies procured.

Cost Per Unit: $510,129

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, suggesting that multiple vendors had the opportunity to bid. However, the provided data indicates McKesson Corporation as the sole awardee for this specific delivery order. Further investigation would be needed to determine the number of bids received and the reasons why only one award was made. A single awardee under full and open competition can sometimes indicate a highly specialized requirement or a dominant market player.

Taxpayer Impact: While full and open competition is generally favorable for taxpayers, a single awardee may limit the potential for aggressive price negotiation and could indicate a lack of robust competition for this specific procurement.

Public Impact

Veterans will benefit from the timely availability of necessary pharmaceutical preparations. The Department of Veterans Affairs will receive critical medical supplies to support healthcare services. The contract supports the pharmaceutical manufacturing sector, contributing to the broader healthcare supply chain. The primary impact is on the healthcare services provided to veterans across the nation, facilitated by the supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases in future solicitations if competition remains limited.
Dependence on a single supplier for critical pharmaceutical needs could pose a supply chain risk.

Positive Signals

Awarded under full and open competition, indicating an effort to maximize vendor participation.
Fixed-price contract type provides budget certainty for the government.
The contractor, McKesson Corporation, is a major player in pharmaceutical distribution, suggesting established capabilities.

Sector Analysis

The pharmaceutical preparation manufacturing sector is a critical component of the healthcare industry, characterized by stringent regulatory requirements and significant R&D investment. This contract falls within the broader healthcare and life sciences market, which is a substantial area of federal spending. Comparable spending benchmarks would typically involve analyzing other VA or DoD contracts for similar pharmaceutical supplies, considering factors like volume, type of preparation, and contract duration.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). As a large award to a major corporation, it is unlikely to have direct subcontracting opportunities for small businesses unless McKesson Corporation voluntarily includes them in its supply chain. The focus is on large-scale pharmaceutical manufacturing and distribution rather than fostering small business participation.

Oversight & Accountability

The Department of Veterans Affairs has established oversight mechanisms for its contracts, including potential reviews by the VA Office of Inspector General. Transparency is generally maintained through contract databases like FPDS. Accountability for this delivery order would be managed through performance metrics and adherence to the terms of the firm-fixed-price contract. The fixed-price nature itself serves as a form of cost accountability.

Related Government Programs

Department of Veterans Affairs Pharmaceutical Contracts
Federal Supply Schedule (FSS) Pharmaceutical Purchases
Medical Supplies and Equipment Procurement
Defense Logistics Agency (DLA) Troop Support Medical

Risk Flags

Limited competition indicated by single awardee
Potential for price escalation in future procurements
Supply chain dependency on a single large contractor

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $76.5 million to MCKESSON CORPORATION. EXPRESS REPORT: PPV, DEC-APR FY18 NCO 22G&22L

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 $76.5 million.

What is the period of performance?

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

What is the specific type of pharmaceutical preparation being procured under this contract?

The provided data identifies the North American Industry Classification System (NAICS) code as 325412, which corresponds to 'Pharmaceutical Preparation Manufacturing.' This broad category includes establishments primarily engaged in manufacturing pharmaceutical preparations (except biologicals and medicinal chemicals and their components). Examples could range from tablets and capsules to sterile solutions and ointments. Without more specific product descriptors within the contract details, it is difficult to pinpoint the exact nature of the preparations. However, the significant award amount suggests a substantial quantity or high-value specialized pharmaceuticals are being acquired to meet the needs of veterans served by the VA.

How does the per-unit cost of $510,129 compare to market rates for similar pharmaceutical preparations?

The per-unit cost benchmark of $510,129 is a significant figure that requires careful contextualization. It is highly probable that this figure does not represent a single pill or vial, but rather a larger unit of measure, such as a batch, a specific dosage form, or a kit containing multiple items. To accurately benchmark this against market rates, one would need to know the exact product, the quantity represented by this 'unit,' and compare it to publicly available pricing data for similar items from other government contracts or commercial distributors. Given the scale of the total award ($76.5M), this per-unit cost likely reflects a bulk purchase of critical or high-cost medications, rather than a simple over-the-counter drug. Further analysis would involve identifying the specific National Drug Codes (NDCs) if available and cross-referencing with databases like First Databank or Red Book.

What is McKesson Corporation's track record with the Department of Veterans Affairs?

McKesson Corporation is a major pharmaceutical distributor and healthcare company with a long-standing relationship with the federal government, including the Department of Veterans Affairs. They are frequently awarded contracts for the supply of pharmaceuticals and medical supplies. Analyzing McKesson's historical performance with the VA would involve reviewing past contract awards, delivery order history, and any reported performance issues or successes. As a large, established entity, McKesson typically possesses the infrastructure and experience to manage large-scale federal contracts. However, like any large contractor, there may have been instances of performance deviations or disputes that would be documented in contract performance reports or agency oversight records.

What are the potential risks associated with a single awardee under full and open competition for this contract?

While the contract was awarded under 'full and open competition,' the fact that only one award was made to McKesson Corporation presents potential risks. Firstly, it could indicate that only McKesson possessed the specific capabilities, product availability, or pricing structure to meet the VA's requirements for this particular solicitation. This might limit future competition if the VA continues to procure similar items. Secondly, a single awardee can reduce the government's leverage in price negotiations over time, as the contractor may face less pressure from competitors. This could lead to higher costs in subsequent contract periods or renewals. Lastly, it concentrates the supply chain risk; if McKesson faces production or distribution issues, the VA's supply of these pharmaceuticals could be significantly disrupted.

How does this $76.5 million award compare to the VA's historical spending on pharmaceutical preparations?

The $76.5 million award for pharmaceutical preparations from December 2017 to April 2018 represents a substantial, albeit short-term, expenditure. To contextualize this against historical spending, one would need to examine the VA's total pharmaceutical budget and procurement data over multiple fiscal years. The VA is one of the largest purchasers of pharmaceuticals in the United States, aiming to provide cost-effective medications to veterans. This single award, covering a five-month period, likely represents a portion of the VA's overall annual pharmaceutical needs. Comparing it to previous years would reveal trends in spending, potential increases or decreases in demand, and the impact of market dynamics or policy changes on procurement costs. Without access to the VA's comprehensive historical spending reports, it's difficult to definitively state if this award is higher or lower than average, but it underscores the significant financial commitment required to maintain pharmaceutical supplies for veterans.

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: $76,519,362

Exercised Options: $76,519,362

Current Obligation: $76,519,362

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: VA797P12D0001

IDV Type: IDC

Timeline