McKesson Corp awarded $26.7M contract for clinical pharmacy supplies by Indian Health Service

Contract Overview

Contract Amount: $26,672,987 ($26.7M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Health and Human Services

Start Date: 2024-07-11

End Date: 2025-07-31

Contract Duration: 385 days

Daily Burn Rate: $69.3K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: 24-GIMC-CLINICAL-PHARMACY-SUPPLIES-PRIME VENDOR CONTRACT MCKESSON CORP- PERIOD OF PERFORMANCE 8/10/2024-7/31/2024

Place of Performance

Location: IRVING, DALLAS County, TEXAS, 75039

State: Texas Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $26.7 million to MCKESSON CORPORATION for work described as: 24-GIMC-CLINICAL-PHARMACY-SUPPLIES-PRIME VENDOR CONTRACT MCKESSON CORP- PERIOD OF PERFORMANCE 8/10/2024-7/31/2024 Key points: 1. Contract awarded to a single prime vendor, McKesson Corporation, for essential clinical pharmacy supplies. 2. The contract utilizes a Firm Fixed Price (FFP) structure, providing cost certainty for the government. 3. Performance period spans over a year, indicating a need for sustained supply chain support. 4. The award was made under full and open competition, suggesting a robust bidding process. 5. The contract value is substantial, reflecting the scale of pharmacy supply needs for the Indian Health Service. 6. The North American Industry Classification System (NAICS) code 325412 points to pharmaceutical preparation manufacturing. 7. The contract is a Delivery Order, implying it's part of a larger indefinite-delivery/indefinite-quantity (IDIQ) vehicle or a similar framework.

Value Assessment

Rating: good

The contract value of $26.7 million for a one-year period appears reasonable for a prime vendor supplying clinical pharmacy essentials to a federal agency like the Indian Health Service. Benchmarking against similar large-scale pharmaceutical supply contracts would provide a more precise value-for-money assessment. The FFP pricing structure is generally favorable for predictable cost management. Without specific details on the exact mix of pharmaceuticals and supplies, a direct comparison of per-unit costs is challenging, but the overall award size suggests significant volume purchasing power.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple qualified vendors had the opportunity to bid. The specific number of bidders is not provided, but the designation suggests a competitive environment that should theoretically drive favorable pricing and terms for the government. The agency sought proposals from the broadest possible range of sources, aiming to secure the best value through market forces.

Taxpayer Impact: A full and open competition process is beneficial for taxpayers as it maximizes the potential for cost savings by encouraging multiple vendors to offer their best pricing and terms, leading to a more efficient use of public funds.

Public Impact

Beneficiaries include patients served by the Indian Health Service, ensuring access to necessary clinical pharmacy supplies. Services delivered encompass the provision of a wide range of pharmaceutical preparations and related supplies. Geographic impact is likely nationwide, supporting IHS facilities across various locations. Workforce implications may involve the logistics and distribution personnel managed by McKesson Corporation.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases over the contract term if not adequately managed.
Dependence on a single prime vendor could create supply chain vulnerabilities.
Ensuring equitable distribution of supplies to all IHS facilities requires robust logistical oversight.

Positive Signals

Awarded under full and open competition, suggesting a competitive pricing environment.
Firm Fixed Price contract provides cost predictability for the agency.
Long-standing relationship with a major supplier like McKesson can ensure supply chain stability.
The contract duration allows for consistent access to critical supplies.

Sector Analysis

The pharmaceutical preparation manufacturing sector is a critical component of the healthcare industry, involving the production and distribution of drugs and medical supplies. This contract falls within the broader healthcare services and pharmaceutical supply chain market. Federal spending in this area is substantial, supporting various agencies' healthcare missions. Comparable spending benchmarks would involve analyzing other large federal contracts for pharmaceutical distribution and clinical supplies, often awarded through GSA schedules or specific agency solicitations.

Small Business Impact

The provided data does not indicate any specific small business set-aside provisions for this contract. As a prime vendor contract awarded to a large corporation, McKesson Corporation, the primary focus is likely on large-scale distribution capabilities. There is no explicit information on subcontracting plans for small businesses, which would be a key area to investigate for potential impacts on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Health and Human Services and the Indian Health Service contracting officers and program managers. Accountability measures are embedded in the contract terms, including performance standards and reporting requirements. Transparency is facilitated through contract award databases like FPDS. The Inspector General for HHS would have jurisdiction to investigate any potential fraud, waste, or abuse related to this contract.

Related Government Programs

Federal Supply Schedule (FSS) contracts for pharmaceutical products
Department of Veterans Affairs (VA) pharmaceutical contracts
Department of Defense (DoD) medical supply contracts
Other agency-specific prime vendor contracts for medical supplies

Risk Flags

Potential for supply chain disruption
Dependence on a single vendor
Price volatility in pharmaceutical markets
Ensuring equitable distribution across diverse locations

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $26.7 million to MCKESSON CORPORATION. 24-GIMC-CLINICAL-PHARMACY-SUPPLIES-PRIME VENDOR CONTRACT MCKESSON CORP- PERIOD OF PERFORMANCE 8/10/2024-7/31/2024

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 $26.7 million.

What is the period of performance?

Start: 2024-07-11. End: 2025-07-31.

What is McKesson Corporation's track record with federal contracts, particularly with the Indian Health Service?

McKesson Corporation is a major player in the healthcare supply chain and has a significant history of holding federal contracts across various agencies, including the Department of Defense, Department of Veterans Affairs, and the Indian Health Service (IHS). Their track record typically involves large-scale distribution of pharmaceuticals and medical supplies. For IHS, McKesson has been a consistent provider, often through prime vendor contracts similar to this one. While generally considered reliable for distribution, past performance reviews and any past issues related to delivery, quality, or pricing on similar federal contracts would be crucial for a comprehensive assessment. Examining contract close-out data and any disputes or claims filed against McKesson on prior federal awards would offer further insight into their performance reliability and adherence to contractual obligations.

How does the awarded price of $26.7 million compare to similar clinical pharmacy supply contracts for federal agencies?

Directly comparing the $26.7 million award to other clinical pharmacy supply contracts requires access to detailed pricing data for comparable services and volumes across different federal agencies. However, given that this is a prime vendor contract for a full year of operations, the amount is substantial and indicative of a large scope of work. Contracts for pharmaceutical distribution to agencies like the VA or DoD can range from tens of millions to hundreds of millions of dollars annually, depending on the breadth of services and the number of facilities supported. The Indian Health Service serves a unique population, and the specific formulary and supply needs can influence costs. A benchmark analysis would involve identifying contracts with similar performance periods, service requirements (e.g., just-in-time delivery, inventory management), and the types of pharmaceuticals and supplies covered. Without such granular data, it's difficult to definitively state if this represents superior or inferior value, but it aligns with the scale expected for a major federal healthcare provider's supply chain needs.

What are the primary risks associated with relying on a single prime vendor for clinical pharmacy supplies?

The primary risks associated with relying on a single prime vendor like McKesson Corporation for clinical pharmacy supplies include supply chain disruptions, potential price increases due to lack of immediate competition, and vendor performance issues. A disruption at McKesson's facilities, transportation network, or manufacturing partners could lead to shortages of critical medications and supplies for IHS facilities, impacting patient care. While the contract is FFP, future contract renewals or modifications could see price escalations if competition is limited or if market conditions change significantly. Furthermore, if McKesson's performance falters in terms of delivery timeliness, order accuracy, or product quality, the IHS has limited immediate alternatives without a lengthy re-competition process. Robust oversight, contingency planning, and clear performance metrics within the contract are essential to mitigate these risks.

How effective is the 'full and open competition' process in ensuring value for money for this type of contract?

The 'full and open competition' process is generally considered the most effective method for ensuring value for money in federal contracting, as it theoretically maximizes the number of potential bidders and fosters a competitive environment. For a contract of this nature—supplying essential clinical pharmacy items—a broad solicitation allows various distributors and manufacturers to propose their best terms. This competition should drive down prices, encourage innovation in service delivery, and ensure the government selects the offer that represents the best overall value, considering both price and non-price factors like past performance and technical approach. However, the effectiveness is contingent on the clarity of the solicitation, the agency's ability to evaluate proposals rigorously, and the actual number and capability of firms that choose to bid. If only a few firms can realistically meet the requirements, the competitive pressure might be less intense.

What are the historical spending patterns for clinical pharmacy supplies within the Indian Health Service?

Historical spending patterns for clinical pharmacy supplies within the Indian Health Service (IHS) would reveal trends in contract values, types of awards (e.g., prime vendor vs. individual orders), and the primary contractors over time. Analyzing past IHS budgets allocated to pharmaceuticals and medical supplies, as well as the specific contracts awarded for these items, would provide context for the current $26.7 million award. For instance, if previous annual spending was consistently in a similar range, this award aligns with historical needs. If spending has significantly increased or decreased, it might indicate changes in patient volume, healthcare services offered, or procurement strategies. Understanding these patterns helps assess whether the current contract represents a sustainable level of investment or a deviation requiring further explanation, such as expanded services or market price fluctuations.

What are the implications of the Firm Fixed Price (FFP) contract type for cost control and risk management?

The Firm Fixed Price (FFP) contract type is advantageous for cost control and risk management from the government's perspective. Under an FFP agreement, the contractor, McKesson Corporation, assumes the majority of the cost risk. This means the agreed-upon price is fixed regardless of the contractor's actual costs incurred during performance. For the Indian Health Service (IHS), this provides budget certainty and predictability, as the total cost of the supplies is known upfront. It incentivizes the contractor to manage its own costs efficiently to maintain profitability. While FFP contracts are generally preferred for minimizing cost uncertainty, they can sometimes lead to higher initial prices compared to cost-reimbursement contracts, as contractors may build in a contingency for unforeseen expenses. However, for readily definable supplies like pharmaceuticals, FFP is typically a suitable and effective pricing structure.

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: $26,672,987

Exercised Options: $26,672,987

Current Obligation: $26,672,987

Actual Outlays: $26,672,987

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