VA's Pharmacy Prime Vendor contract awarded to McKesson Corporation for $16.88M, utilizing full and open competition

Contract Overview

Contract Amount: $16,877,417 ($16.9M)

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: $582.0K/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: LANCASTER, DALLAS County, TEXAS, 75134

State: Texas Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $16.9 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. McKesson Corporation, a major player in pharmaceutical distribution, holds this key contract. 3. The award was made under full and open competition, suggesting a competitive bidding process. 4. The contract duration of 29 months provides a stable period for pharmaceutical supply. 5. The fixed-price nature of the contract aims to control costs for the VA. 6. The contract's value is substantial, reflecting the scale of VA pharmaceutical needs.

Value Assessment

Rating: good

The contract value of $16.88 million over 29 months appears reasonable for a prime vendor supporting a large federal agency like the VA. Benchmarking against similar large-scale pharmaceutical distribution contracts for federal agencies would provide a more precise value-for-money assessment. The fixed-price structure suggests an effort to ensure cost predictability. However, without detailed cost breakdowns or comparisons to private sector equivalents, 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 multiple qualified vendors had the opportunity to bid. The presence of a competitive process is generally favorable for price discovery and ensuring the government receives competitive pricing. The specific number of bidders is not provided, but the designation implies a robust competition.

Taxpayer Impact: Full and open competition typically leads to better pricing for taxpayers by fostering a competitive environment among potential suppliers, driving down costs through the bidding process.

Public Impact

Veterans across the nation benefit from timely access to pharmaceuticals through this contract. The contract ensures the reliable supply of a wide range of drugs and sundries to VA facilities. The geographic impact is nationwide, covering all VA healthcare facilities requiring pharmaceutical support. This contract supports jobs within McKesson Corporation's distribution network and related pharmaceutical industries.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases in future contract renewals if competition diminishes.
Reliance on a single prime vendor could create supply chain vulnerabilities if not managed proactively.

Positive Signals

Awarded through full and open competition, indicating a competitive market.
Fixed-price contract type helps in budget predictability and cost control.
Long-standing relationship with a major distributor like McKesson can ensure supply chain stability.

Sector Analysis

The pharmaceutical distribution sector is a critical component of the healthcare industry, characterized by large, established players like McKesson Corporation. This contract falls within the 'Drugs and Druggists' Sundries Merchant Wholesalers' NAICS code (424210). Spending in this sector for federal agencies is substantial, encompassing the procurement of pharmaceuticals for various healthcare providers, including the VA, DoD, and other federal entities. The market is generally consolidated, with a few major distributors handling the bulk of distribution.

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 in the award information.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Veterans Affairs' procurement and program management offices. Accountability measures are inherent in the firm-fixed-price contract type, requiring McKesson to deliver specified goods and services within the agreed-upon price. Transparency is facilitated by the contract award being publicly available, though detailed performance metrics and oversight reports may not be readily accessible without specific Freedom of Information Act requests or internal VA reporting.

Related Government Programs

Department of Defense Pharmaceutical Prime Vendor Contracts
Federal Supply Schedule (FSS) for Pharmaceuticals
VA Medical Care Programs
National Acquisition Center (NAC) Contracts

Risk Flags

Potential for price increases in future contract renewals if competition diminishes.
Reliance on a single prime vendor could create supply chain vulnerabilities if not managed proactively.
Contract awarded in 2009, historical data may not reflect current market conditions or pricing.

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $16.9 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 $16.9 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 pharmaceutical prime vendor services?

McKesson Corporation has a long-standing history of serving as a prime vendor for the Department of Veterans Affairs, managing the distribution of pharmaceuticals to VA medical centers nationwide. Their track record includes managing large-scale logistics, ensuring timely delivery, and maintaining a comprehensive formulary of medications. While specific performance metrics for this particular $16.88 million contract (2009-2009) are not detailed in the provided data, McKesson's continued presence as a major federal contractor suggests a generally satisfactory performance history. However, like any large government contract, there may have been periods of scrutiny or performance reviews over the years that are not captured here.

How does the $16.88 million contract value compare to other VA pharmaceutical prime vendor contracts?

The $16.88 million value for this specific contract (2009-2009) appears to be a component or a specific award within a larger, potentially multi-year prime vendor program. The VA's overall pharmaceutical spending is significantly higher, often in the billions annually, reflecting the vast number of veterans served and the breadth of medical services provided. Prime vendor contracts are typically large, encompassing the distribution of a wide array of medications. This $16.88 million figure might represent a specific contract period, a regional award, or a portion of a larger consolidated contract. Without knowing the exact scope and duration it represented, direct comparison is difficult, but it is a substantial sum for the period it covered.

What are the primary risks associated with this type of pharmaceutical prime vendor contract?

Key risks include supply chain disruptions (due to manufacturing issues, natural disasters, or geopolitical events), potential for price volatility of pharmaceuticals (even with fixed-price contracts, underlying costs can fluctuate), cybersecurity threats to sensitive patient data handled by the vendor, and the risk of contractor performance issues (e.g., delivery delays, stockouts, or quality control failures). Additionally, over-reliance on a single prime vendor can create systemic risk. The VA mitigates these through robust contract management, performance monitoring, and contingency planning.

How effective is the firm-fixed-price (FFP) contract type in managing costs for the VA in this context?

The Firm-Fixed-Price (FFP) contract type is generally effective for managing costs in predictable procurement scenarios like pharmaceutical distribution, as it shifts the risk of cost overruns to the contractor. For the VA, this means the price is set upfront, providing budget certainty. McKesson, as the contractor, is incentivized to manage its own costs efficiently to maximize profit. However, if market prices for pharmaceuticals increase significantly beyond what was anticipated during the bidding process, the contractor might face reduced profit margins, potentially impacting their willingness or ability to perform optimally in the long run or leading to aggressive negotiation in future contracts.

What is the historical spending trend for VA pharmaceutical prime vendor contracts?

Historical spending on VA pharmaceutical prime vendor contracts has generally shown an increasing trend over the years, driven by factors such as an expanding veteran population, advancements in medical treatments requiring more complex and expensive drugs, and inflation. While specific figures for this 2009 contract are provided, the VA's overall pharmaceutical budget has grown substantially. For instance, annual pharmaceutical spending by the VA has often been in the multi-billion dollar range in recent years, reflecting the scale and importance of these services. This growth underscores the critical need for efficient procurement and contract management.

What is the significance of the NAICS code 424210 (Drugs and Druggists' Sundries Merchant Wholesalers) for this contract?

The North American Industry Classification System (NAICS) code 424210 signifies that the primary business activity of the contractor, McKesson Corporation in this instance, is wholesale trade of drugs, drug proprietaries, and Druggists' sundries. This classification is crucial for understanding the nature of the services provided under the contract – it confirms the contract is for the distribution and wholesaling of pharmaceutical products, rather than manufacturing or direct patient care. It also helps in benchmarking this contract against other federal and commercial contracts within the same industry sector.

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: $16,877,417

Exercised Options: $16,877,417

Current Obligation: $16,877,417

Parent Contract

Parent Award PIID: V797P1020

IDV Type: IDC

Timeline