VA's Pharmacy Prime Vendor contract awarded to McKesson Corporation for over $15.5 million

Contract Overview

Contract Amount: $15,497,535 ($15.5M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2009-06-01

End Date: 2009-06-30

Contract Duration: 29 days

Daily Burn Rate: $534.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: EXPRESS REPORT PHARMACY PRIME VENDOR

Place of Performance

Location: LOS ANGELES, LOS ANGELES County, CALIFORNIA, 90073

State: California Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $15.5 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT PHARMACY PRIME VENDOR Key points: 1. The contract represents a significant investment in pharmaceutical supply chain management for the VA. 2. Competition dynamics for this contract are crucial for ensuring cost-effectiveness in drug procurement. 3. Performance context is vital to understand the VA's reliance on this vendor for essential medications. 4. Sector positioning highlights the critical role of pharmaceutical wholesalers in the healthcare industry. 5. Risk indicators may include supply chain disruptions and price volatility for pharmaceuticals.

Value Assessment

Rating: good

The VA's Pharmacy Prime Vendor contract, awarded to McKesson Corporation, demonstrates a substantial commitment to ensuring a consistent supply of pharmaceuticals. While the total award amount is significant, it's essential to benchmark this against the VA's overall pharmaceutical spending and the scale of services provided. Comparing this to similar large-scale prime vendor contracts within the federal government or large healthcare systems can offer insights into its value proposition. The fixed-price nature of the contract provides some cost certainty, but ongoing monitoring of unit prices and overall expenditure against utilization is key to assessing long-term value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple bidders had the opportunity to submit proposals. The presence of robust competition is generally a positive sign for price discovery and can drive more favorable terms for the government. The number of bidders, if available, would provide further insight into the level of market interest and the intensity of the competition. A competitive process helps ensure that the selected vendor offers the best value proposition in terms of price, quality, and service delivery.

Taxpayer Impact: Full and open competition for this contract suggests that taxpayers benefit from a more competitive pricing environment, potentially leading to lower overall costs for essential pharmaceuticals procured by the VA.

Public Impact

Veterans across the nation benefit from timely access to prescription medications. The contract ensures the reliable supply of a wide range of pharmaceuticals to VA medical facilities. Geographic impact is nationwide, supporting VA healthcare operations in all states. Workforce implications include the logistics and administrative personnel required to manage and distribute medications.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases on pharmaceuticals over the contract term.
Dependence on a single vendor could create vulnerabilities in the supply chain.
Ensuring equitable distribution of medications across all VA facilities.

Positive Signals

Established vendor with significant experience in pharmaceutical distribution.
Contract structure aims for consistent and reliable delivery of essential medicines.
Competitive bidding process likely secured favorable pricing at the time of award.

Sector Analysis

The pharmaceutical wholesale and distribution sector is a critical component of the healthcare industry, responsible for the efficient movement of drugs from manufacturers to healthcare providers. This contract falls within the Drugs and Druggists' Sundries Merchant Wholesalers NAICS code (424210). The market is characterized by large, established players like McKesson, Cardinal Health, and AmerisourceBergen, who manage complex supply chains. Federal spending in this area is substantial, driven by agencies like the VA and DoD, as well as programs like Medicare and Medicaid. Benchmarking this contract's value would involve comparing its per-unit costs and overall expenditure against industry standards and other government contracts for similar services.

Small Business Impact

Analysis of small business set-aside provisions and subcontracting opportunities is not directly available from the provided data. However, large prime vendor contracts often include requirements for small business participation. The extent to which McKesson Corporation utilizes small businesses for subcontracting, particularly in logistics, delivery, or specialized pharmaceutical services, would impact the small business ecosystem. Further investigation into the subcontracting plan associated with this award would be necessary to fully assess its implications for small businesses.

Oversight & Accountability

Oversight for this contract would typically be managed by the Department of Veterans Affairs contracting officers and program managers. Accountability measures are embedded within the contract terms, including performance standards, delivery schedules, and quality requirements. Transparency is facilitated through contract award databases and reporting requirements. The Inspector General's office within the VA would have jurisdiction to investigate any potential fraud, waste, or abuse related to this contract.

Related Government Programs

VA Pharmaceutical Benefits Program
DoD TRICARE Pharmacy Program
Federal Supply Schedule (FSS) for Pharmaceuticals
National Acquisition Center (NAC) Contracts

Risk Flags

Potential for price increases
Supply chain vulnerability
Dependence on a single large vendor

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $15.5 million to MCKESSON CORPORATION. EXPRESS REPORT PHARMACY PRIME VENDOR

Who is the contractor on this award?

The obligated recipient is MCKESSON CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Veterans Affairs (Department of Veterans Affairs).

What is the total obligated amount?

The obligated amount is $15.5 million.

What is the period of performance?

Start: 2009-06-01. End: 2009-06-30.

What is the historical spending trend for the VA's Pharmacy Prime Vendor contract over the past decade?

Historical spending data for the VA's Pharmacy Prime Vendor contract reveals a consistent and significant investment in pharmaceutical procurement. While the specific award amount of $15.5 million is for a particular contract period, the VA's overall pharmaceutical spending has generally trended upwards over the last decade, driven by factors such as an expanding veteran population, increased utilization of healthcare services, and the rising cost of pharmaceuticals. Analyzing year-over-year expenditures for this prime vendor contract, alongside other pharmaceutical contracts, would provide a clearer picture of the VA's evolving needs and the cost dynamics within its supply chain. For instance, comparing the initial award in 2009 to subsequent renewals or replacements would highlight any inflationary pressures or cost-saving efficiencies achieved.

How does the unit cost of common pharmaceuticals under this contract compare to market rates or other federal agencies?

Benchmarking the unit cost of common pharmaceuticals under this contract against market rates and other federal agencies is crucial for assessing value for money. The VA's Pharmacy Prime Vendor contract, awarded to McKesson Corporation, likely leverages significant purchasing power. However, direct comparisons require access to detailed pricing data for specific drugs and a clear understanding of the contract's pricing structure (e.g., discounts off average wholesale price). Generally, large federal contracts aim to secure prices below commercial market rates due to volume and negotiation leverage. Comparing these prices to those obtained by the Defense Health Agency or through the Federal Supply Schedule can reveal potential cost efficiencies or areas where prices might be higher than anticipated, warranting further investigation into the specific drugs and terms.

What are the key performance indicators (KPIs) used to evaluate McKesson Corporation's performance under this contract?

Key Performance Indicators (KPIs) for a Pharmacy Prime Vendor contract typically focus on ensuring the reliable and efficient delivery of pharmaceuticals. Common KPIs include on-time delivery rates, order accuracy, fill rates (percentage of requested items available), inventory management effectiveness, and compliance with storage and handling requirements. For the VA's contract with McKesson Corporation, performance would likely be measured against stringent service level agreements (SLAs). The VA would monitor metrics related to the availability of critical medications, the speed of replenishment, and the overall quality of service provided to its medical facilities. Failure to meet these KPIs could result in penalties or impact future contract awards.

What is the potential impact of supply chain disruptions on the VA's ability to procure essential medications through this vendor?

Supply chain disruptions can have a significant impact on the VA's ability to procure essential medications through its prime vendor, McKesson Corporation. The pharmaceutical supply chain is complex and vulnerable to various disruptions, including manufacturing issues, raw material shortages, transportation delays, natural disasters, and geopolitical events. Given the VA's reliance on a prime vendor model, a disruption affecting McKesson could lead to shortages of critical drugs at VA facilities nationwide. Mitigation strategies often include maintaining safety stock levels, diversifying suppliers where possible (though challenging with a prime vendor), and having contingency plans in place. The VA's contract likely includes clauses addressing force majeure and requiring the vendor to maintain business continuity.

How has the consolidation within the pharmaceutical wholesale industry affected competition and pricing for VA contracts?

Consolidation within the pharmaceutical wholesale industry, which has seen the market dominated by a few major players including McKesson Corporation, has notable implications for competition and pricing in VA contracts. While this consolidation can lead to economies of scale and potentially more efficient distribution networks, it also raises concerns about reduced competition. With fewer large wholesalers, the bargaining power of the government might be somewhat diminished compared to a more fragmented market. However, the VA's commitment to full and open competition for its prime vendor contracts aims to mitigate this. Despite consolidation, the sheer volume of VA pharmaceutical purchases still provides significant leverage, enabling the agency to negotiate favorable terms, though ongoing vigilance is required to ensure prices remain competitive and reflective of true market value.

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: FULL AND OPEN COMPETITION

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 1 POST ST, SAN FRANCISCO, CA, 90

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $15,497,535

Exercised Options: $15,497,535

Current Obligation: $15,497,535

Parent Contract

Parent Award PIID: V797P1020

IDV Type: IDC

Timeline