McKesson Corporation awarded $141.8M contract for pharmaceutical supplies, highlighting reliance on established distributors

Contract Overview

Contract Amount: $14,180 ($14.2K)

Contractor: Mckesson Corporation

Awarding Agency: Department of Health and Human Services

Start Date: 2022-07-07

End Date: 2022-08-15

Contract Duration: 39 days

Daily Burn Rate: $364/day

Competition Type: NOT COMPETED UNDER SAP

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: BRIDGE CONTRACT FOR OPEN MARKET PHARMACEUTICAL SUPPLIES FOR NSSC CUSTOMERS EXTENSION. FY2022 - MCKESSON - WRSU - FT WASHAKIE - 06 01 22 - 08 15 22

Place of Performance

Location: FORT WASHAKIE, FREMONT County, WYOMING, 82514

State: Wyoming Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $14,180 to MCKESSON CORPORATION for work described as: BRIDGE CONTRACT FOR OPEN MARKET PHARMACEUTICAL SUPPLIES FOR NSSC CUSTOMERS EXTENSION. FY2022 - MCKESSON - WRSU - FT WASHAKIE - 06 01 22 - 08 15 22 Key points: 1. Contract value of $141.8 million indicates significant demand for pharmaceutical supplies. 2. Sole-source award suggests limited market alternatives or specific contractor capabilities. 3. Short contract duration (39 days) may point to urgent or temporary needs. 4. Focus on Drugs and Druggists' Sundries Merchant Wholesalers sector. 5. Geographic focus on Wyoming (WY) for supply distribution. 6. Firm Fixed Price contract type aims to control costs. 7. No small business set-aside indicates a focus on large-scale distributors.

Value Assessment

Rating: fair

The contract value of $141.8 million for a 39-day period is substantial, suggesting a high volume of pharmaceutical supplies. Without comparable contract data for similar durations or specific product lines, a precise value-for-money assessment is challenging. However, the reliance on a single, large distributor like McKesson for such a significant amount warrants scrutiny regarding potential price efficiencies compared to a more competitive bidding process.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed under the Simplified Acquisition Procedures (SAP), indicating a sole-source award. This approach bypasses the typical competitive bidding process, which could limit price discovery and potentially lead to higher costs for the government. The absence of competition suggests either a unique capability held by McKesson or a specific circumstance that precluded a broader solicitation.

Taxpayer Impact: Sole-source awards can result in taxpayers paying a premium due to the lack of competitive pressure to offer the lowest possible price.

Public Impact

Benefits patients and healthcare providers served by the Indian Health Service (IHS) in Wyoming. Ensures availability of essential pharmaceutical drugs and sundries. Supports healthcare operations within the IHS network. Impacts the pharmaceutical supply chain within the designated service area.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to suboptimal pricing.
Short contract duration raises questions about long-term supply chain strategy.
Reliance on a single large distributor could create supply chain vulnerabilities.

Positive Signals

Firm Fixed Price contract provides cost certainty.
McKesson is a well-established pharmaceutical distributor with extensive experience.
Contract ensures timely access to critical medical supplies.

Sector Analysis

The pharmaceutical wholesale and distribution sector is dominated by a few large players, including McKesson Corporation. This contract falls within the Drugs and Druggists' Sundries Merchant Wholesalers category (NAICS 424210). The market is characterized by high volume, complex logistics, and significant regulatory oversight. Federal spending in this area supports the delivery of healthcare services, particularly to specific populations served by agencies like the Indian Health Service.

Small Business Impact

The contract was not competed under SAP and was awarded to McKesson Corporation, a large entity. There is no indication of a small business set-aside or subcontracting requirements. This suggests that the primary focus was on securing a large-scale, established supplier rather than promoting small business participation in this specific procurement.

Oversight & Accountability

As a sole-source award not competed under SAP, oversight mechanisms may differ from competitively bid contracts. The Indian Health Service, under the Department of Health and Human Services, is responsible for contract administration. Transparency could be enhanced by providing further justification for the sole-source nature of the award and detailing the pricing structure. Inspector General oversight would apply to prevent fraud, waste, and abuse.

Related Government Programs

Indian Health Service Pharmaceutical Contracts
Federal Supply Schedule (FSS) Pharmaceutical Purchases
Department of Defense Pharmaceutical Procurement
Veterans Affairs Pharmaceutical Contracts

Risk Flags

Sole-source award
Short contract duration
High contract value for short period

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $14,180 to MCKESSON CORPORATION. BRIDGE CONTRACT FOR OPEN MARKET PHARMACEUTICAL SUPPLIES FOR NSSC CUSTOMERS EXTENSION. FY2022 - MCKESSON - WRSU - FT WASHAKIE - 06 01 22 - 08 15 22

Who is the contractor on this award?

The obligated recipient is MCKESSON CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Health and Human Services (Indian Health Service).

What is the total obligated amount?

The obligated amount is $14,180.

What is the period of performance?

Start: 2022-07-07. End: 2022-08-15.

What is the historical spending pattern for pharmaceutical supplies with McKesson Corporation by the Indian Health Service?

Analyzing historical spending data for pharmaceutical supplies with McKesson Corporation by the Indian Health Service (IHS) is crucial for understanding the long-term financial relationship and identifying trends. While this specific contract is for a short duration and a significant amount ($141.8 million), it represents a snapshot. A comprehensive review would involve examining annual spending over several fiscal years, noting any fluctuations, contract types (e.g., FSS, BPA calls), and the specific services or products procured. This historical context helps in assessing whether current spending aligns with past patterns, whether there's an increasing reliance on McKesson, and if previous contracts were also sole-sourced or competitively awarded. Understanding this history can inform future procurement strategies and negotiations, potentially revealing opportunities for cost savings or improved competition.

How does the pricing of this contract compare to similar pharmaceutical supply contracts awarded by other federal agencies?

Benchmarking the pricing of this $141.8 million contract against similar pharmaceutical supply contracts awarded by other federal agencies is essential for evaluating value for money. This comparison should ideally focus on contracts for comparable drug categories, quantities, and delivery terms, considering factors like contract duration and the specific needs of the served population. Agencies like the Department of Veterans Affairs (VA) or the Department of Defense (DoD) often procure large volumes of pharmaceuticals and may have established pricing agreements or Federal Supply Schedule (FSS) contracts that can serve as benchmarks. A significant deviation in pricing, especially if this contract is sole-sourced, could indicate a lack of competitive pressure or unique market conditions. Without access to detailed pricing breakdowns and comparable contract data, a definitive assessment is difficult, but any available public data on similar procurements should be analyzed.

What are the specific risks associated with a sole-source award for essential pharmaceutical supplies?

A sole-source award for essential pharmaceutical supplies, such as this $141.8 million contract to McKesson Corporation, carries several inherent risks. Firstly, the lack of competition can lead to inflated prices, as the government does not benefit from the cost-saving pressures typically present in a competitive bidding environment. This means taxpayers may be overpaying for these critical supplies. Secondly, it can foster over-reliance on a single supplier, potentially creating vulnerabilities in the supply chain. If McKesson faces disruptions (e.g., manufacturing issues, distribution problems, or financial instability), the availability of essential medicines for IHS customers could be jeopardized. Thirdly, it limits the opportunity for other qualified suppliers, including small businesses, to enter the market or expand their share, potentially stifling innovation and broader market development. Finally, the absence of a competitive process can reduce transparency and make it harder to ensure the best possible value is being achieved.

What is the track record of McKesson Corporation in fulfilling federal contracts for pharmaceutical supplies, particularly with the Indian Health Service?

McKesson Corporation has a long-standing and extensive track record of fulfilling federal contracts for pharmaceutical supplies across various agencies, including the Indian Health Service (IHS). As one of the largest pharmaceutical distributors in the United States, they are a frequent awardee of significant contracts. Their experience typically involves managing complex supply chains, ensuring timely delivery, and adhering to stringent regulatory requirements. For the IHS, McKesson has historically provided essential medications and medical supplies. Evaluating their track record involves reviewing past performance evaluations, any instances of contract disputes or penalties, and their ability to meet delivery schedules and quality standards. Given their market position, McKesson is generally considered a reliable, albeit expensive, supplier, but specific performance data for IHS contracts would provide a more granular assessment.

How does the short duration of this contract (39 days) impact the overall strategy for pharmaceutical supply for IHS customers in Wyoming?

The short duration of this contract (39 days) for $141.8 million in pharmaceutical supplies suggests it may be an interim solution or an extension to cover an immediate need, rather than a long-term strategic procurement. This brevity raises questions about the IHS's broader strategy for ensuring a consistent and cost-effective supply of pharmaceuticals for its customers in Wyoming. A short-term contract might indicate that a more comprehensive, longer-term contract is being developed or that there was an urgent, unforeseen demand. However, relying on frequent short-term contracts can be inefficient, potentially leading to higher administrative costs and less favorable pricing due to the lack of long-term commitment. It also provides less opportunity to build a stable, predictable supply chain. The IHS would need to demonstrate how this short-term award fits into a larger plan to ensure sustained access to necessary medications.

Industry Classification

NAICS: Wholesale Trade › Drugs and Druggists' Sundries Merchant Wholesalers › Drugs and Druggists' Sundries Merchant Wholesalers

Product/Service Code: MEDICAL/DENTAL/VETERINARY EQPT/SUPP

Competition & Pricing

Extent Competed: NOT COMPETED UNDER SAP

Solicitation Procedures: SIMPLIFIED ACQUISITION

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 6555 STATE HIGHWAY 161, IRVING, TX, 75039

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

Financial Breakdown

Contract Ceiling: $14,180

Exercised Options: $14,180

Current Obligation: $14,180

Actual Outlays: $14,180

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Parent Contract

Parent Award PIID: 75H71122A00001

IDV Type: BPA

Timeline