VA Spends $190M on Pharmaceuticals via McKesson Corporation, Awarded under Full and Open Competition

Contract Overview

Contract Amount: $189,628,905 ($189.6M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2011-12-01

End Date: 2011-12-31

Contract Duration: 30 days

Daily Burn Rate: $6.3M/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 8

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: PHARMACEUTICALS

Place of Performance

Location: MURFREESBORO, RUTHERFORD County, TENNESSEE, 37130

State: Tennessee Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $189.6 million to MCKESSON CORPORATION for work described as: PHARMACEUTICALS Key points: 1. Significant spending on pharmaceuticals highlights reliance on major suppliers. 2. McKesson Corporation is a dominant player in the pharmaceutical distribution market. 3. The contract was awarded under full and open competition, suggesting a competitive bidding process. 4. The firm fixed price contract type aims to control costs for the government.

Value Assessment

Rating: good

The total award amount of $189.6M over 30 days suggests a high volume of pharmaceutical products. Benchmarking against similar large-scale pharmaceutical contracts would be necessary for a precise value assessment, but the competitive award method implies reasonable pricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded using full and open competition, indicating that multiple vendors had the opportunity to bid. This method generally promotes price discovery and can lead to more competitive pricing for the government.

Taxpayer Impact: The competitive nature of the award is beneficial for taxpayers, as it likely resulted in a more favorable price than a sole-source or limited competition scenario.

Public Impact

Ensures access to essential medications for veterans. Supports a major pharmaceutical distributor, impacting the broader healthcare supply chain. Highlights the government's role as a significant purchaser in the pharmaceutical market.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases in future contract renewals.
Dependence on a single large supplier could pose supply chain risks.
Limited visibility into the specific drugs and quantities purchased.

Positive Signals

Competitive award process likely secured a fair price.
Firm fixed price contract provides cost certainty.
Ensures availability of critical pharmaceutical supplies.

Sector Analysis

The pharmaceutical sector is characterized by high demand, complex supply chains, and significant government procurement. Spending benchmarks for pharmaceutical distribution contracts of this magnitude are typically in the hundreds of millions, reflecting the critical nature of these supplies.

Small Business Impact

This contract was awarded to McKesson Corporation, a large prime contractor. There is no direct indication of small business participation in this specific award, suggesting opportunities for subcontracting or future awards to smaller entities in the pharmaceutical supply chain.

Oversight & Accountability

The Department of Veterans Affairs is responsible for overseeing this contract. Standard procurement regulations and oversight mechanisms would apply to ensure compliance and performance. Further review of contract performance reports would be needed for a detailed oversight assessment.

Related Government Programs

Drugs and Druggists' Sundries Merchant Wholesalers
Department of Veterans Affairs Contracting
Department of Veterans Affairs Programs

Risk Flags

High contract value.
Potential for supply chain disruption.
Dependence on a single large supplier.
Limited data on specific product pricing.
No explicit small business participation noted.

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $189.6 million to MCKESSON CORPORATION. PHARMACEUTICALS

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 $189.6 million.

What is the period of performance?

Start: 2011-12-01. End: 2011-12-31.

What was the average per-unit cost of the pharmaceuticals procured under this contract, and how does it compare to market rates?

The provided data does not include per-unit cost details, only the total award amount. To determine the average per-unit cost, we would need itemized pricing and quantities. Comparing this to market rates would require access to pharmaceutical pricing databases and analysis of the specific drugs and formulations purchased under the contract.

What are the potential risks associated with relying on a single large distributor like McKesson for such a substantial portion of pharmaceutical needs?

Reliance on a single large distributor can create significant supply chain vulnerabilities. Disruptions due to McKesson's internal issues, natural disasters, or geopolitical events could severely impact the availability of essential medications. Furthermore, a lack of robust competition in future contract renewals could lead to less favorable pricing for the government.

How effectively did the full and open competition process ensure the best value for the government in this pharmaceutical procurement?

The full and open competition is a strong indicator of an effort to achieve best value. It theoretically allows multiple qualified vendors to compete, driving down prices and encouraging innovation. However, the true effectiveness depends on the number of bids received, the quality of proposals, and the negotiation process. Without more data on the bidding landscape, we assume it was effective.

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: $189,628,905

Exercised Options: $189,628,905

Current Obligation: $189,628,905

Parent Contract

Parent Award PIID: V797P1020

IDV Type: IDC

Timeline