HHS awards $25.7M for pharmaceutical supplies, with McKesson Corporation as the primary contractor

Contract Overview

Contract Amount: $25,715,402 ($25.7M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Health and Human Services

Start Date: 2022-08-15

End Date: 2024-10-31

Contract Duration: 808 days

Daily Burn Rate: $31.8K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: PHARMACEUTICAL AND MED/SURGICAL PRODUCTS/SUPPLIES ON AS NEEDED BASIS.

Place of Performance

Location: CHINLE, APACHE County, ARIZONA, 86503

State: Arizona Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $25.7 million to MCKESSON CORPORATION for work described as: PHARMACEUTICAL AND MED/SURGICAL PRODUCTS/SUPPLIES ON AS NEEDED BASIS. Key points: 1. The contract value of $25.7 million over its period of performance represents a significant investment in essential medical supplies. 2. Competition dynamics indicate a full and open process, suggesting potential for competitive pricing. 3. The fixed-price contract type offers cost certainty for the government, mitigating risk of cost overruns. 4. Performance is benchmarked against similar contracts for pharmaceutical supplies to assess value for money. 5. The contract is positioned within the broader healthcare sector, specifically supporting the Indian Health Service's supply chain. 6. Risk indicators are monitored through contract performance and delivery metrics.

Value Assessment

Rating: good

The contract value of $25.7 million for pharmaceutical and medical/surgical supplies appears reasonable given the scope and duration. Benchmarking against similar contracts for the Indian Health Service and other federal agencies would provide a clearer picture of value for money. The firm fixed-price structure helps control costs, but the ultimate value depends on the actual utilization and pricing of the specific products delivered.

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 offers. The data does not specify the number of bidders, but this procurement method generally fosters a competitive environment, which can lead to better pricing and innovation. The agency's commitment to open competition suggests a desire to leverage the broadest possible market.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it encourages multiple vendors to bid, driving down prices and ensuring the government receives competitive rates for its purchases.

Public Impact

Beneficiaries include Native American communities served by the Indian Health Service, ensuring access to necessary medications and medical supplies. Services delivered encompass the provision of pharmaceutical preparations and medical/surgical products on an as-needed basis. Geographic impact is primarily focused on Arizona, where the contract is being performed. Workforce implications are likely minimal for the government, with the primary impact on the contractor's supply chain and distribution network.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price fluctuations in the pharmaceutical market could impact long-term value.
Dependence on a single large supplier (McKesson Corporation) could present supply chain risks if not managed effectively.

Positive Signals

The firm fixed-price contract provides cost predictability.
Full and open competition suggests a robust market engagement.
The contract duration allows for sustained supply chain support.

Sector Analysis

The pharmaceutical and medical supply sector is a critical component of the healthcare industry, characterized by complex supply chains and significant regulatory oversight. Federal agencies, particularly those serving vulnerable populations like the Indian Health Service, rely heavily on these contracts to ensure the availability of essential medicines and equipment. Spending in this category can fluctuate based on public health needs and government health initiatives. Comparable spending benchmarks would involve analyzing other large-scale pharmaceutical distribution contracts awarded by agencies such as the Department of Defense or Veterans Affairs.

Small Business Impact

The provided data indicates that this contract was not set aside for small businesses (ss: false, sb: false). Therefore, there are no direct subcontracting implications for small businesses arising from a set-aside provision. The primary contractor, McKesson Corporation, is a large entity, and its engagement does not inherently create opportunities for small business subcontractors unless specified in the contract's performance requirements or through voluntary subcontracting plans.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting officer and the relevant program officials within the Indian Health Service. Accountability measures are embedded in the contract terms, including delivery schedules, quality standards, and payment terms. Transparency is generally maintained through contract award databases and public reporting mechanisms. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

Department of Veterans Affairs Pharmaceutical Contracts
Department of Defense Medical Supplies
General Services Administration Schedules for Medical Equipment

Risk Flags

Potential for price increases if market conditions change significantly.
Dependence on a single large contractor for critical supplies.

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $25.7 million to MCKESSON CORPORATION. PHARMACEUTICAL AND MED/SURGICAL PRODUCTS/SUPPLIES ON AS NEEDED BASIS.

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 $25.7 million.

What is the period of performance?

Start: 2022-08-15. End: 2024-10-31.

What is McKesson Corporation's track record with federal contracts, particularly for pharmaceutical supplies?

McKesson Corporation is a major player in the pharmaceutical distribution industry and has a long history of holding numerous federal contracts. They are a frequent supplier to various government agencies, including the Department of Defense, Department of Veterans Affairs, and Health and Human Services. Their track record generally involves large-scale distribution agreements for pharmaceuticals and medical supplies. While specific performance metrics for each contract are not publicly detailed in this summary, their continued success in securing federal awards suggests a generally positive performance history and capability to meet government requirements. However, as with any large contractor, past performance reviews and any disputes or corrective actions associated with their federal contracts would be important to consider for a comprehensive assessment.

How does the awarded price compare to market rates for similar pharmaceutical supplies?

Determining the precise value for money requires a detailed comparison of the specific pharmaceutical products and quantities procured under this contract against prevailing market rates and similar federal contracts. The contract is firm fixed-price, which provides cost certainty for the government. However, without knowing the exact list of items and their unit prices, a direct market rate comparison is challenging. Generally, large-volume federal contracts can achieve competitive pricing due to economies of scale. Benchmarking against contracts awarded by other agencies like the VA or DoD for similar categories of pharmaceuticals would be necessary to assess if the pricing is advantageous. The 'br' (benchmark rate) value of 31826 provided in the data might represent an internal benchmark or a specific product's rate, but its context is unclear without further information.

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

The primary risks associated with this contract include potential supply chain disruptions, price volatility in the pharmaceutical market, and ensuring consistent quality of delivered products. Given that McKesson Corporation is a large, established distributor, the risk of complete supply chain failure is relatively low, but localized disruptions or delays are always possible. Price volatility is mitigated by the firm fixed-price contract structure, which locks in prices for the duration. However, if market prices decrease significantly, the government might be paying above current market rates. Quality is managed through standard government procurement regulations and quality assurance processes. The Indian Health Service would have oversight mechanisms to monitor delivery performance and product quality, addressing any deviations through contractual remedies.

What is the historical spending pattern for pharmaceutical and medical supplies by the Indian Health Service?

Historical spending patterns for pharmaceutical and medical supplies by the Indian Health Service (IHS) are generally substantial, reflecting the agency's mission to provide comprehensive healthcare to Native Americans. The IHS consistently procures a wide range of medical supplies and pharmaceuticals to serve its network of clinics and hospitals across the country. Annual spending can vary based on specific health needs, disease outbreaks, and budget allocations. The $25.7 million awarded for this specific contract represents a portion of the IHS's overall procurement budget for these essential items. Analyzing past IHS contract awards for similar goods and services would reveal trends in spending volume, types of products procured, and primary suppliers over time, indicating consistent demand for these critical supplies.

How does the 'full and open competition' procurement method impact the overall cost-effectiveness for taxpayers?

The 'full and open competition' method is designed to maximize cost-effectiveness for taxpayers by ensuring that the government receives offers from the widest possible range of qualified vendors. This competitive pressure encourages bidders to offer their best prices and terms to win the contract. When multiple companies vie for a contract, they are incentivized to be efficient and innovative to remain competitive. This process helps prevent monopolies or oligopolies from dictating prices and ensures that taxpayer dollars are used efficiently. While the administrative effort to manage a full and open competition can be higher, the potential savings realized through competitive bidding typically outweigh these costs, leading to better value for the government and, by extension, the taxpayers.

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: 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: $25,715,402

Exercised Options: $25,715,402

Current Obligation: $25,715,402

Actual Outlays: $25,715,402

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: 36W79720D0001

IDV Type: IDC

Timeline