DoD's $21.5M Pharmacy Benefit Management Contract with Paragon Benefits Faces Scrutiny for Value and Competition
Contract Overview
Contract Amount: $21,554,112 ($21.6M)
Contractor: Paragon Benefits, Inc.
Awarding Agency: Department of Defense
Start Date: 2020-01-01
End Date: 2024-12-31
Contract Duration: 1,826 days
Daily Burn Rate: $11.8K/day
Competition Type: COMPETED UNDER SAP
Number of Offers Received: 1
Pricing Type: FIRM FIXED PRICE
Sector: Healthcare
Official Description: MEDICAL EXPENSES
Place of Performance
Location: COLUMBUS, MUSCOGEE County, GEORGIA, 31909
State: Georgia Government Spending
Plain-Language Summary
Department of Defense obligated $21.6 million to PARAGON BENEFITS, INC. for work described as: MEDICAL EXPENSES Key points: 1. The contract's value of $21.5 million over five years for Pharmacy Benefit Management (PBM) services warrants close examination. 2. Competition under SAP (Small Acquisition Program) suggests potential limitations in market reach and price discovery. 3. The firm fixed-price structure aims to control costs, but the effectiveness of this for complex PBM services needs assessment. 4. The sector of third-party administration of insurance and pension funds is highly specialized, requiring specific expertise.
Value Assessment
Rating: fair
The $21.5 million contract value over five years for PBM services appears moderate. Benchmarking against similar DoD or large-scale government PBM contracts is crucial to determine if this represents fair pricing or if there's potential for overpayment.
Cost Per Unit: N/A
Competition Analysis
Competition Level: limited
Competed under SAP, this contract likely involved a limited number of bidders, potentially impacting the robustness of price discovery. While SAP can expedite procurement, it may not always yield the most competitive pricing compared to full and open competition.
Taxpayer Impact: The limited competition raises questions about whether taxpayers are receiving the best possible value for these essential pharmacy benefit management services.
Public Impact
Ensures access to prescription medications for service members and their families. Manages costs associated with pharmaceuticals, a significant component of healthcare spending. Supports the overall health and readiness of the military force. Potential for administrative inefficiencies or higher-than-market costs due to limited competition.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Limited competition under SAP
- Potential for suboptimal price discovery
- Lack of transparency in PBM pricing models
Positive Signals
- Firm fixed-price contract type
- Long-term contract duration provides stability
Sector Analysis
The Department of Defense's spending on Pharmacy Benefit Management falls within the broader healthcare and insurance administration sector. Benchmarks for PBM services can vary significantly based on the scope of services, covered population, and negotiated rebates.
Small Business Impact
There is no indication that small businesses were involved in this contract, either as prime contractors or significant subcontractors. Further analysis would be needed to determine if opportunities for small business participation were overlooked.
Oversight & Accountability
The contract's performance and adherence to terms should be monitored by the Department of the Navy to ensure effective service delivery and cost control. Robust oversight is essential, especially given the complexities of PBM operations.
Related Government Programs
- Pharmacy Benefit Management and Other Third Party Administration of Insurance and Pension Funds
- Department of Defense Contracting
- Department of the Navy Programs
Risk Flags
- Potential for inflated costs due to limited competition.
- Lack of transparency in PBM rebate pass-through.
- Risk of suboptimal drug formulary management.
- Dependency on a single provider without robust market checks.
Tags
pharmacy-benefit-management-and-other-th, department-of-defense, ga, definitive-contract, 10m-plus
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $21.6 million to PARAGON BENEFITS, INC.. MEDICAL EXPENSES
Who is the contractor on this award?
The obligated recipient is PARAGON BENEFITS, INC..
Which agency awarded this contract?
Awarding agency: Department of Defense (Department of the Navy).
What is the total obligated amount?
The obligated amount is $21.6 million.
What is the period of performance?
Start: 2020-01-01. End: 2024-12-31.
What is the typical cost range for similar Pharmacy Benefit Management services within the federal government or large healthcare organizations?
The typical cost range for PBM services can vary widely, often influenced by factors such as the size of the covered population, the breadth of the formulary, negotiated drug rebates, and the specific administrative services provided. Without detailed service scope and rebate information, direct comparison is challenging. However, industry benchmarks suggest that administrative fees can range from a few dollars per member per month to a percentage of drug spend, with significant savings often realized through manufacturer rebates.
How does the limited competition under SAP impact the government's ability to secure favorable pricing and rebates compared to a full and open competition?
Limited competition under SAP can restrict the pool of potential bidders, potentially leading to less aggressive pricing and fewer incentives for contractors to offer their best terms. While SAP aims for efficiency, it may not fully leverage market competition to drive down costs or maximize drug rebates. A full and open competition typically attracts a wider range of providers, fostering a more competitive environment that can result in better pricing and more advantageous rebate agreements for the government.
What mechanisms are in place to ensure the effectiveness and efficiency of Paragon Benefits' PBM services, particularly regarding drug utilization and cost containment?
Effectiveness and efficiency are typically ensured through performance metrics, service level agreements (SLAs), and regular reporting requirements outlined in the contract. For PBM services, this includes monitoring drug utilization patterns, adherence to clinical guidelines, formulary management, and the realization of negotiated rebates. The Department of the Navy should have established processes for reviewing these reports, conducting audits, and holding Paragon Benefits accountable for meeting contractual obligations related to cost containment and member satisfaction.
Industry Classification
NAICS: Finance and Insurance › Agencies, Brokerages, and Other Insurance Related Activities › Pharmacy Benefit Management and Other Third Party Administration of Insurance and Pension Funds
Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › MANAGEMENT SUPPORT SERVICES
Competition & Pricing
Extent Competed: COMPETED UNDER SAP
Solicitation Procedures: SIMPLIFIED ACQUISITION
Solicitation ID: N0018919RZ095
Offers Received: 1
Pricing Type: FIRM FIXED PRICE (J)
Evaluated Preference: NONE
Contractor Details
Address: 6065 BUSINESS PARK DR, COLUMBUS, GA, 31909
Business Categories: Category Business, Corporate Entity Not Tax Exempt, Small Business, Special Designations, U.S.-Owned Business
Financial Breakdown
Contract Ceiling: $22,783,323
Exercised Options: $22,783,323
Current Obligation: $21,554,112
Contract Characteristics
Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED
Cost or Pricing Data: NO
Timeline
Start Date: 2020-01-01
Current End Date: 2024-12-31
Potential End Date: 2024-12-31 00:00:00
Last Modified: 2026-01-15
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