VA's Pharmacy Prime Vendor contract awarded to McKesson Corporation for $17.5M, utilizing full and open competition

Contract Overview

Contract Amount: $17,477,688 ($17.5M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2009-09-01

End Date: 2009-09-30

Contract Duration: 29 days

Daily Burn Rate: $602.7K/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 $17.5 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT PHARMACY PRIME VENDOR Key points: 1. The contract represents a significant portion of the VA's pharmaceutical supply chain management. 2. Full and open competition suggests a robust bidding process, potentially leading to competitive pricing. 3. The contract duration of 29 months provides a stable period for service delivery. 4. Fixed-price contract type shifts risk to the contractor, encouraging cost control. 5. The award to a single vendor, McKesson Corporation, highlights market concentration in pharmaceutical wholesaling. 6. The North American Industry Classification System (NAICS) code 424210 indicates a focus on drug and sundries wholesale.

Value Assessment

Rating: good

The contract value of $17.5 million over 29 months appears reasonable for a national-level pharmacy prime vendor service. Benchmarking against similar large-scale pharmaceutical distribution contracts for federal agencies would provide a more precise value-for-money assessment. The firm-fixed-price structure is generally favorable for the government when contractor performance is predictable, as it caps the government's financial exposure.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit a bid. The presence of multiple bidders, though not explicitly detailed in the provided data, is implied by this competition type. A competitive bidding process is expected to drive down prices and ensure the government receives the best value.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it fosters a competitive environment, which typically leads to lower prices and higher quality services, maximizing the return on taxpayer investment.

Public Impact

Veterans nationwide benefit from timely and reliable access to prescription medications through the VA's healthcare system. The contract ensures the efficient distribution of pharmaceuticals to VA medical centers and clinics across the country. This contract supports the VA's mission to provide comprehensive healthcare services to its beneficiaries. The contract has implications for the pharmaceutical supply chain workforce involved in warehousing, logistics, and distribution.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for vendor lock-in if competition is not consistently robust for future renewals.
Reliance on a single large vendor could create supply chain vulnerabilities in extreme circumstances.
Ensuring consistent quality and delivery across all VA facilities requires diligent oversight.

Positive Signals

Awarded through full and open competition, suggesting a competitive market.
Firm-fixed-price contract type aligns incentives for cost efficiency.
The vendor, McKesson Corporation, is a major player with established infrastructure.
The contract supports a critical healthcare function for veterans.

Sector Analysis

The pharmaceutical wholesale industry is a mature and consolidated sector. This contract falls within the 'Drugs and Druggists' Sundries Merchant Wholesalers' category (NAICS 424210). Large federal contracts like this represent significant revenue streams for major distributors. The VA's Pharmacy Prime Vendor program is a critical component of its healthcare delivery system, ensuring a steady supply of medications to its vast network of facilities.

Small Business Impact

The provided data does not indicate any specific small business set-aside provisions for this contract. As a large prime vendor contract, it is unlikely to be directly awarded to small businesses. However, the prime contractor, McKesson Corporation, may engage small businesses for subcontracting opportunities related to logistics, transportation, or specialized services, though this is not explicitly detailed.

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 and reporting requirements. Transparency is generally maintained through contract award databases and public reporting, though specific performance metrics may be internal. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

VA Pharmaceutical Prime Vendor Program
Federal Supply Schedule (FSS) for Medical Supplies
Department of Defense (DoD) Pharmacy Contracts
General Services Administration (GSA) Schedules

Risk Flags

Potential for supply chain disruption
Price escalation risk in future contracts
Vendor performance variability

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $17.5 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 $17.5 million.

What is the period of performance?

Start: 2009-09-01. End: 2009-09-30.

What is McKesson Corporation's track record with the VA for similar prime vendor contracts?

McKesson Corporation has a long-standing relationship with the Department of Veterans Affairs as a prime vendor for pharmaceuticals. They have historically been awarded significant contracts to manage the distribution of medications to VA facilities nationwide. Their extensive experience in pharmaceutical logistics and established infrastructure make them a frequent recipient of such awards. Analyzing past performance data, including any past issues or commendations related to delivery timeliness, inventory management, and pricing accuracy, would provide a more comprehensive view of their track record specifically with the VA's complex needs.

How does the $17.5 million contract value compare to previous VA Pharmacy Prime Vendor contracts?

The $17.5 million contract value represents the total obligated amount for the 29-month period. To assess its comparability, one would need to examine historical VA Pharmacy Prime Vendor contracts, adjusting for inflation and changes in scope or volume. For instance, if previous annual contract values were in the range of $5-7 million, then $17.5 million over 29 months (approximately $7.25 million annually) would be in a similar ballpark, suggesting consistent spending levels for this critical service. Significant deviations could indicate changes in pharmaceutical utilization, pricing trends, or contract scope.

What are the primary risks associated with relying on a single prime vendor for pharmaceutical distribution?

The primary risks associated with relying on a single prime vendor like McKesson Corporation include potential supply chain disruptions due to unforeseen events (e.g., natural disasters, labor strikes, pandemics), price increases if competition is limited in future solicitations, and a lack of vendor responsiveness if performance standards are not rigorously enforced. A sole reliance can also reduce the government's leverage in negotiating favorable terms. Mitigating these risks involves robust contract management, clear performance metrics, contingency planning, and ensuring a competitive landscape for future contract awards.

How effective is the VA's Pharmacy Prime Vendor program in ensuring medication availability for veterans?

The VA's Pharmacy Prime Vendor program is generally considered effective in ensuring medication availability for veterans, given the scale and complexity of the VA healthcare system. By consolidating pharmaceutical procurement and distribution through a prime vendor, the VA aims to achieve economies of scale, streamline logistics, and maintain adequate inventory levels across its numerous facilities. The program's success is contingent on strong contract oversight, accurate demand forecasting, and the vendor's ability to meet delivery schedules and maintain product integrity. Performance metrics within the contract are crucial for measuring and ensuring this effectiveness.

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

Historical spending on VA Pharmacy Prime Vendor contracts has likely shown a steady increase over the last decade, driven by factors such as an expanding veteran population, rising pharmaceutical costs, and increased utilization of VA healthcare services. While the specific data for this $17.5 million contract covers a 29-month period, a broader analysis of VA pharmaceutical spending would reveal trends in total expenditure, average contract values, and the number of prime vendor awards. This trend analysis is essential for budget forecasting and identifying potential areas for cost savings or efficiency improvements within the VA's pharmaceutical supply chain.

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: $17,477,688

Exercised Options: $17,477,688

Current Obligation: $17,477,688

Parent Contract

Parent Award PIID: V797P1020

IDV Type: IDC

Timeline