VA awards $18.7M contract to McKesson Corporation for pharmaceutical supplies, highlighting a long-standing relationship

Contract Overview

Contract Amount: $18,729,591 ($18.7M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2010-06-01

End Date: 2010-06-30

Contract Duration: 29 days

Daily Burn Rate: $645.8K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 8

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: TAS::36 0160::TAS PHARM PRIME VENDR EXPRESS RPT

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $18.7 million to MCKESSON CORPORATION for work described as: TAS::36 0160::TAS PHARM PRIME VENDR EXPRESS RPT Key points: 1. Contract awarded through full and open competition, suggesting a competitive bidding process. 2. The contract duration of 29 months indicates a medium-term commitment for pharmaceutical supply. 3. The fixed-price contract type aims to provide cost certainty for the government. 4. The award to a single vendor, McKesson Corporation, warrants scrutiny for potential price efficiencies. 5. The North American Industry Classification System (NAICS) code 424210 points to a well-established market for these goods. 6. The contract's value is substantial, requiring careful performance monitoring.

Value Assessment

Rating: good

The contract value of $18.7 million over 29 months for pharmaceutical supplies appears reasonable given the scope. Benchmarking against similar contracts for drugs and druggists' sundries would provide a clearer picture of value for money. McKesson Corporation is a major player in this market, and their pricing is likely competitive within the industry. However, without specific unit cost data or comparisons to other large-scale pharmaceutical procurements, a definitive value assessment is challenging.

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 bids. The presence of 8 bidders suggests a healthy level of competition for this pharmaceutical supply requirement. A competitive environment generally leads to better price discovery and potentially more favorable terms for the government. The number of bidders is a positive indicator of market engagement.

Taxpayer Impact: The competitive bidding process for this contract likely resulted in a more advantageous price for taxpayers compared to a sole-source or limited competition award. The active participation of multiple vendors ensures that the Department of Veterans Affairs receives competitive pricing.

Public Impact

Veterans will benefit from timely access to necessary pharmaceutical products. The contract ensures the supply of drugs and druggists' sundries to support healthcare services within the VA system. The geographic impact is primarily within the United States, serving VA facilities nationwide. The contract supports the pharmaceutical supply chain, indirectly impacting jobs in logistics, distribution, and healthcare.

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 large vendor could pose supply chain risks if not diversified.
Ensuring consistent quality and availability of a wide range of pharmaceuticals is critical.

Positive Signals

Awarded through full and open competition, indicating a robust bidding process.
The fixed-price contract type provides budget certainty.
McKesson Corporation is a well-established and experienced supplier in the pharmaceutical market.
The contract duration allows for stable supply chain planning.

Sector Analysis

The pharmaceutical wholesale market is a significant sector within the broader healthcare industry. This contract falls under the 'Drugs and Druggists' Sundries Merchant Wholesalers' category (NAICS 424210). The market is characterized by large distributors, complex supply chains, and stringent regulatory requirements. Spending in this area is consistently high due to the essential nature of pharmaceuticals. Comparable spending benchmarks would involve analyzing other large federal contracts for pharmaceutical distribution to agencies like the Department of Defense or the Health Resources and Services Administration.

Small Business Impact

This contract does not appear to have a specific small business set-aside. As a large prime vendor contract, the primary focus is on securing a broad range of pharmaceutical products. However, McKesson Corporation, as a large entity, may engage small businesses for subcontracting opportunities within its distribution network, though this is not explicitly detailed in the award data. The impact on the small business ecosystem would depend on McKesson's subcontracting practices.

Oversight & Accountability

Oversight for this contract would typically be managed by the Department of Veterans Affairs contracting officers and program managers. Accountability measures would include performance metrics, delivery schedules, and quality control. Transparency is facilitated through contract award databases like FPDS. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

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

Risk Flags

Potential for price increases
Supply chain vulnerability
Contractor performance monitoring

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $18.7 million to MCKESSON CORPORATION. TAS::36 0160::TAS PHARM PRIME VENDR EXPRESS RPT

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 $18.7 million.

What is the period of performance?

Start: 2010-06-01. End: 2010-06-30.

What is McKesson Corporation's track record with the Department of Veterans Affairs and other federal agencies?

McKesson Corporation has a long and extensive history of contracting with the Department of Veterans Affairs (VA) and other federal agencies, including the Department of Defense and the Public Health Service. They are a major pharmaceutical distributor and have held numerous large-scale prime vendor contracts for many years. Their track record generally indicates a capacity to manage complex supply chains and deliver a wide array of pharmaceutical products. However, like any large contractor, they may have faced scrutiny or performance issues on specific contracts over time, which would be detailed in agency performance reviews and contract databases. Their consistent presence in federal contracting suggests a generally satisfactory performance history, though specific contract performance metrics would need to be examined for a comprehensive view.

How does the $18.7 million contract value compare to similar pharmaceutical supply contracts awarded by the VA or other federal agencies?

The $18.7 million contract value over 29 months represents a significant but not extraordinary expenditure for pharmaceutical supplies within the federal government. Large federal agencies, particularly the VA and DoD, routinely award contracts in the tens or hundreds of millions of dollars for pharmaceutical distribution due to the sheer volume and variety of medications required. For instance, the VA's Prime Vendor program often involves contracts of this magnitude or larger. When compared to other prime vendor contracts for similar goods and services, this award appears to be within the expected range for a major federal healthcare provider. A more precise comparison would involve analyzing the per-unit costs and the breadth of the formulary covered by this contract against other similar awards.

What are the primary risks associated with this contract, and how are they mitigated?

Primary risks include supply chain disruptions (e.g., drug shortages, transportation issues), price volatility of pharmaceuticals, and potential for contractor performance deficiencies. Mitigation strategies typically involve robust contract language requiring timely delivery, adherence to quality standards, and reporting mechanisms for shortages. The VA likely employs performance monitoring, regular reviews of contractor performance data, and maintains contingency plans. The fixed-price nature of the contract helps mitigate some price volatility risk for the government, though significant market shifts could still impact the contractor. Furthermore, the competitive award process itself reduces the risk of selecting an underperforming vendor.

How effective is the current pharmaceutical supply chain managed by McKesson for the VA in ensuring timely access to critical medications?

The effectiveness of the supply chain is generally indicated by the VA's ability to maintain adequate stock levels and provide timely access to medications for its patients. McKesson, as a major prime vendor, plays a crucial role in this. Effectiveness is typically measured through metrics such as fill rates, on-time delivery performance, and the absence of critical drug stock-outs. While specific performance data for this particular contract isn't detailed here, the VA's continued reliance on large prime vendors like McKesson suggests a generally effective system. However, periodic reviews and audits by the VA are essential to ensure ongoing effectiveness and identify areas for improvement, especially in light of potential national or global drug shortages.

What has been the historical spending trend for pharmaceutical supplies by the Department of Veterans Affairs over the last 5-10 years?

Historical spending by the Department of Veterans Affairs on pharmaceutical supplies has shown a consistent upward trend over the last decade, driven by an expanding veteran population, increased utilization of healthcare services, and the rising cost of pharmaceuticals. Annual spending often reaches billions of dollars, encompassing a wide range of medications procured through various mechanisms, including prime vendor contracts like this one, as well as direct purchases and formulary agreements. The VA's budget for pharmaceuticals is substantial and reflects the critical role these supplies play in its healthcare mission. Analyzing specific annual reports or budget documents from the VA would provide precise figures on historical spending patterns.

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: 8

Pricing Type: FIRM FIXED PRICE (J)

Contractor Details

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

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $18,729,591

Exercised Options: $18,729,591

Current Obligation: $18,729,591

Parent Contract

Parent Award PIID: V797P1020

IDV Type: IDC

Timeline