HHS awards $48.8M contract for Remdesivir distribution to AmerisourceBergen Drug Corp

Contract Overview

Contract Amount: $48,799,000 ($48.8M)

Contractor: Amerisourcebergen Drug Corp

Awarding Agency: Department of Health and Human Services

Start Date: 2020-09-30

End Date: 2021-09-28

Contract Duration: 363 days

Daily Burn Rate: $134.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: REMDESVIR FOR DISTRIBUTION TO CLINICAL SITES UNDER OWS

Place of Performance

Location: CHESTERBROOK, CHESTER County, PENNSYLVANIA, 19087

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $48.8 million to AMERISOURCEBERGEN DRUG CORP for work described as: REMDESVIR FOR DISTRIBUTION TO CLINICAL SITES UNDER OWS Key points: 1. Contract awarded to a single supplier, raising questions about price competitiveness. 2. The contract duration of 363 days suggests a focused, short-term need for distribution. 3. Fixed-price contract type aims to control costs, but without competition, true value is uncertain. 4. Distribution of a critical pharmaceutical product highlights the government's role in public health supply chains. 5. The award falls under a prime contract mechanism, indicating a pre-existing relationship or framework. 6. Lack of competition suggests potential risks related to contractor performance and cost escalation.

Value Assessment

Rating: questionable

The contract value of $48.8 million for pharmaceutical distribution is significant. However, without competitive bidding, it is difficult to benchmark the value for money. The fixed-price nature of the contract provides some cost certainty, but the absence of multiple bids prevents an assessment of whether the price is truly competitive against market rates or alternative suppliers. The government may have paid a premium due to the lack of competition.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor was solicited. This approach bypasses the standard competitive bidding process, which typically involves multiple companies submitting proposals. The lack of competition limits the government's ability to leverage market forces to secure the best possible price and terms. It suggests a specific reason for selecting this contractor, such as unique capabilities or an urgent need.

Taxpayer Impact: Taxpayers may have paid more than necessary due to the absence of competitive pressure. The government missed an opportunity to explore potentially lower-cost options from other qualified distributors.

Public Impact

Patients requiring Remdesivir will benefit from timely access to the medication through this distribution network. Clinical sites across the nation will receive the necessary pharmaceutical supplies to treat patients. The contract supports the national response to public health emergencies by ensuring drug availability. Healthcare providers and pharmacists are indirectly impacted through the reliable supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially increases costs for taxpayers.
Lack of competition raises concerns about contractor performance incentives and potential for complacency.
Contract duration is relatively short, which could lead to frequent re-solicitations and administrative burden.
No clear indication of small business subcontracting opportunities within this sole-source award.

Positive Signals

Fixed-price contract type provides cost certainty for the government.
Award supports the distribution of a critical pharmaceutical, addressing a public health need.
Contract is managed by the National Institutes of Health, a reputable research and health agency.

Sector Analysis

The pharmaceutical preparation manufacturing sector is highly regulated and characterized by significant research and development costs, complex supply chains, and stringent quality control. This contract falls within the pharmaceutical distribution segment, which is crucial for ensuring that manufactured drugs reach healthcare providers and patients efficiently. The market for drug distribution is often dominated by a few large players, but competition can still be fostered through various contracting mechanisms.

Small Business Impact

As this contract was awarded on a sole-source basis, there is no explicit small business set-aside. The prime contractor, AmerisourceBergen Drug Corp., is a large entity. Without a competitive solicitation, it is less likely that subcontracting opportunities for small businesses were specifically mandated or explored as part of the award process. Further investigation would be needed to determine if any small business subcontracting plans are in place.

Oversight & Accountability

The contract is managed by the National Institutes of Health (NIH), part of the Department of Health and Human Services (HHS). Oversight would typically involve contract officers and program managers within NIH responsible for monitoring performance, ensuring compliance with contract terms, and managing payments. Transparency regarding the specific oversight mechanisms and performance metrics for this sole-source award would require further review of contract documentation.

Related Government Programs

COVID-19 Therapeutics Distribution
Pharmaceutical Supply Chain Management
Emergency Drug Procurement
Public Health Emergency Response Contracts

Risk Flags

Sole-source award
Lack of competition
Potential for inflated pricing
Supply chain dependency risk

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $48.8 million to AMERISOURCEBERGEN DRUG CORP. REMDESVIR FOR DISTRIBUTION TO CLINICAL SITES UNDER OWS

Who is the contractor on this award?

The obligated recipient is AMERISOURCEBERGEN DRUG CORP.

Which agency awarded this contract?

Awarding agency: Department of Health and Human Services (National Institutes of Health).

What is the total obligated amount?

The obligated amount is $48.8 million.

What is the period of performance?

Start: 2020-09-30. End: 2021-09-28.

What is the track record of AmerisourceBergen Drug Corp. in fulfilling government contracts, particularly for pharmaceutical distribution?

AmerisourceBergen Drug Corp. is a major global pharmaceutical distributor. They have a history of holding significant government contracts, including those with the Department of Defense and the Department of Veterans Affairs, for the supply and distribution of pharmaceuticals and medical supplies. Their experience typically involves managing complex logistics, ensuring regulatory compliance, and maintaining large-scale distribution networks. While specific details of past performance on government contracts would require a deeper dive into contract databases and performance reports, their position as a leading distributor suggests a substantial capacity to handle large-volume pharmaceutical distribution requirements. However, the nature of sole-source awards means that direct comparisons of their performance against competitors on similar government contracts are not readily available.

How does the $48.8 million contract value compare to similar government contracts for pharmaceutical distribution?

Benchmarking the $48.8 million value for this specific Remdesivir distribution contract against similar government contracts is challenging without more context on the scope, duration, and specific services included. Pharmaceutical distribution contracts can vary widely based on the types of drugs, quantities, geographic reach, and value-added services (e.g., cold chain logistics, inventory management). Given that this is a sole-source award for a specific drug during a period of high demand (likely related to the COVID-19 pandemic), the price might reflect urgency and market conditions rather than standard competitive pricing. Generally, large-scale pharmaceutical distribution contracts can range from tens of millions to hundreds of millions of dollars annually, depending on the agency and the breadth of the pharmaceutical formulary covered.

What are the primary risks associated with a sole-source award for critical pharmaceutical distribution?

The primary risks associated with a sole-source award for critical pharmaceutical distribution include a lack of price competition, which can lead to higher costs for the government and taxpayers. There's also a reduced incentive for the contractor to innovate or optimize services, as there is no competitive pressure. Furthermore, reliance on a single supplier can create vulnerabilities in the supply chain; if the contractor experiences performance issues, financial instability, or unforeseen disruptions, the government has limited immediate alternatives. This can jeopardize the timely and reliable distribution of essential medications, potentially impacting patient care and public health outcomes. The absence of multiple bidders also limits the government's ability to assess the full range of available capabilities and potentially secure better terms.

What is the expected effectiveness of this contract in ensuring the availability of Remdesivir to clinical sites?

The effectiveness of this contract in ensuring Remdesivir availability hinges on AmerisourceBergen Drug Corp.'s operational capacity and adherence to the contract terms. As a major pharmaceutical distributor, the company possesses the infrastructure and expertise to manage complex logistics, including temperature-controlled transport if required for Remdesivir. The contract's fixed-price nature aims to provide cost predictability. However, its effectiveness is also dependent on the government's ability to accurately forecast demand and manage inventory levels in coordination with the distributor. The short duration (363 days) suggests it was intended to meet a specific, potentially time-bound, need. Successful execution relies on robust communication and performance monitoring between NIH and the contractor.

How does this contract fit into the broader federal strategy for managing pharmaceutical supply chains during public health emergencies?

This contract represents a component of the federal government's strategy to manage pharmaceutical supply chains, particularly during public health emergencies like the COVID-19 pandemic. The government often utilizes various contracting mechanisms, including sole-source awards when speed and specific capabilities are paramount, to ensure the availability of critical medications. By contracting with a large distributor like AmerisourceBergen, HHS aims to leverage established logistical networks to rapidly deploy therapeutics to clinical sites. This approach complements other strategies such as direct manufacturing support, stockpiling, and research into new treatments. The focus on distribution underscores the importance of the 'last mile' in getting treatments to patients when and where they are needed most.

Industry Classification

NAICS: Manufacturing › Pharmaceutical and Medicine Manufacturing › Pharmaceutical Preparation Manufacturing

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Cencora, Inc. (UEI: 039277590)

Address: 1300 MORRIS DR STE 100, CHESTERBROOK, PA, 19087

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

Financial Breakdown

Contract Ceiling: $48,799,000

Exercised Options: $48,799,000

Current Obligation: $48,799,000

Actual Outlays: $48,656,250

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Timeline