VA awards McKesson Corporation $193M contract for pharmaceutical preparations, with a 30-day duration

Contract Overview

Contract Amount: $192,948,121 ($192.9M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2013-03-01

End Date: 2013-03-31

Contract Duration: 30 days

Daily Burn Rate: $6.4M/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 5

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: EXPRESS REPORT + PHARMACEUTICALS

Place of Performance

Location: MURFREESBORO, RUTHERFORD County, TENNESSEE, 37130

State: Tennessee Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $192.9 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT + PHARMACEUTICALS Key points: 1. The contract's value of $193 million for a 30-day period suggests a high per-diem cost, warranting further investigation into the specific pharmaceuticals procured. 2. As a sole-source award, the VA may not have achieved the most competitive pricing, potentially impacting overall value for money. 3. The contract's short duration of 30 days indicates a need for immediate pharmaceutical supply, possibly for emergency or surge requirements. 4. The pharmaceutical preparation manufacturing sector is highly regulated, implying significant compliance costs that could influence pricing. 5. The Department of Veterans Affairs is a major procurer of pharmaceuticals, making this contract a significant, albeit short-term, component of their supply chain. 6. The absence of small business set-aside flags suggests this contract was not specifically targeted to support small businesses.

Value Assessment

Rating: questionable

The contract value of $192,948,121.29 for a 30-day period is exceptionally high. Without detailed line-item data on the specific pharmaceuticals and quantities, it is difficult to benchmark this against similar contracts. However, the sheer magnitude for such a short duration raises concerns about potential overpricing or the procurement of extremely high-value, specialized medications. Further analysis of the unit costs for the specific drugs would be necessary to provide a definitive value-for-money assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded as a sole-source procurement. This means that the Department of Veterans Affairs identified McKesson Corporation as the only responsible source capable of fulfilling the requirement. While sole-source awards can be justified in specific circumstances, such as urgent needs or unique capabilities, they typically limit price competition. The absence of multiple bidders means the VA did not benefit from the competitive pressure that could drive down costs.

Taxpayer Impact: Sole-source awards can lead to higher prices for taxpayers as there is no direct competition to ensure the government receives the best possible value. This limits the government's ability to negotiate favorable terms and pricing.

Public Impact

Veterans will benefit from the timely availability of necessary pharmaceuticals, ensuring continuity of care. The contract ensures the supply of pharmaceutical preparations, crucial for various medical treatments and therapies administered by the VA. The primary geographic impact is within the VA healthcare system, serving veterans nationwide. This contract supports the pharmaceutical supply chain, indirectly impacting jobs within the pharmaceutical manufacturing and distribution sectors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

High contract value for a short duration raises concerns about potential overpricing or inefficient procurement.
Sole-source award limits competitive bidding, potentially leading to suboptimal pricing for taxpayers.
Lack of transparency regarding specific pharmaceuticals procured makes it difficult to assess value for money.
The short 30-day duration suggests a reactive procurement rather than strategic long-term planning, which could indicate potential supply chain vulnerabilities.

Positive Signals

Ensures critical pharmaceutical supplies are available to veterans, supporting their healthcare needs.
The award to a known entity like McKesson Corporation may indicate a reliance on established supply chains for critical medications.
The contract addresses a specific, likely urgent, need for pharmaceutical preparations within the VA system.

Sector Analysis

The pharmaceutical preparation manufacturing industry is a significant segment of the healthcare sector, characterized by high research and development costs, stringent regulatory oversight (FDA), and complex supply chains. Major players like McKesson Corporation are involved in the distribution and sometimes manufacturing of a wide range of pharmaceuticals. Federal spending in this area is substantial, driven by the healthcare needs of federal agencies like the Department of Veterans Affairs and the Department of Defense. This contract, though short-term, represents a portion of the government's ongoing investment in ensuring access to essential medicines.

Small Business Impact

This contract does not appear to have a small business set-aside. The award to McKesson Corporation, a large pharmaceutical distributor, suggests that the primary focus was on fulfilling a large-scale requirement rather than specifically promoting small business participation. There is no indication of subcontracting opportunities for small businesses within the provided data.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Veterans Affairs' contracting and procurement offices. The VA has an Office of Inspector General (OIG) responsible for auditing and investigating waste, fraud, and abuse within the department. Transparency regarding the specific items procured and their pricing would be key to effective oversight. The firm fixed-price nature of the contract provides some cost certainty, but the sole-source aspect necessitates careful review to ensure fair and reasonable pricing.

Related Government Programs

Department of Veterans Affairs Pharmaceutical Contracts
Federal Supply Schedule (FSS) Pharmaceutical Programs
Defense Logistics Agency (DLA) Troop Support Medical
General Services Administration (GSA) Schedules

Risk Flags

High Value, Short Duration
Sole Source Justification
Lack of Detailed Itemization

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $192.9 million to MCKESSON CORPORATION. EXPRESS REPORT + 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 $192.9 million.

What is the period of performance?

Start: 2013-03-01. End: 2013-03-31.

What specific pharmaceutical preparations were procured under this contract, and what were their unit costs?

The provided data does not specify the exact pharmaceutical preparations or their unit costs. The contract is for 'Pharmaceutical Preparation Manufacturing' with a total value of $192,948,121.29 over 30 days. To assess the value for money and understand the high cost, a detailed breakdown of the procured items, quantities, and their respective unit prices would be essential. This information is typically found in the contract's line item details or delivery orders. Without this granular data, it's impossible to determine if the pricing is competitive or justified by the nature of the pharmaceuticals.

Why was this contract awarded as a sole-source procurement, and what alternatives were considered?

Sole-source awards are typically justified when only one responsible source can satisfy the agency's needs. For pharmaceuticals, this could be due to exclusive manufacturing rights, unique formulations, or urgent, time-sensitive requirements where competition is not feasible. The Department of Veterans Affairs would have had to document the justification for this sole-source award, outlining why other potential contractors could not meet the requirement. The absence of competition means that the VA did not have the opportunity to solicit bids from multiple suppliers, which could have led to better pricing and terms. A review of the Justification for Other Than Full and Open Competition (JOFOC) would provide specific reasons.

How does the per-diem cost of this contract compare to typical pharmaceutical spending for the VA over a similar period?

The contract value is approximately $193 million for 30 days, equating to roughly $6.43 million per day. This daily expenditure is exceptionally high for a 30-day contract. Typical VA pharmaceutical spending can vary widely based on the specific drugs and volumes needed. However, a daily spend of this magnitude for a short-term contract suggests either the procurement of extremely high-cost specialty drugs, a massive quantity of common drugs, or potentially an inefficiently priced award. Benchmarking this against other VA contracts for similar drug categories or against national pharmaceutical spending trends would be necessary for a precise comparison, but the initial figure appears significantly elevated for a 30-day period.

What is McKesson Corporation's track record with the Department of Veterans Affairs for pharmaceutical supply contracts?

McKesson Corporation is a major pharmaceutical distributor and has a long-standing relationship with the Department of Veterans Affairs, as well as other federal agencies. They are a frequent recipient of contracts for pharmaceutical supplies. Their track record generally involves large-scale distribution capabilities. However, like any large contractor, they may have faced scrutiny or audits regarding pricing, delivery, or compliance in the past. Specific performance metrics and any past issues related to this particular type of pharmaceutical preparation or sole-source awards would require a deeper dive into VA contract performance databases and Inspector General reports.

What are the potential risks associated with a sole-source award of this magnitude for pharmaceutical preparations?

The primary risk associated with a sole-source award of this magnitude is the potential for inflated pricing due to the lack of competition. Taxpayers may be overpaying for the pharmaceuticals. Another risk is reduced transparency, making it harder to scrutinize the value received. Furthermore, relying on a single source could create supply chain vulnerabilities if that source encounters production issues or disruptions. The VA must ensure robust oversight and negotiation to mitigate these risks, verifying that the price is fair and reasonable despite the absence of competitive bids.

Does the 30-day duration indicate an emergency procurement or a gap-filling measure for pharmaceutical supply?

A 30-day duration for a contract valued at nearly $193 million strongly suggests an urgent or emergency procurement, or a short-term measure to bridge a gap in supply. Such short-term, high-value awards are often used to address immediate needs, such as unexpected surges in demand, stockouts of critical medications, or the transition between longer-term contracts. It implies that the VA required a rapid influx of pharmaceutical preparations and did not have the lead time for a full and open competition. This could be related to specific medical events, operational readiness, or unforeseen supply chain disruptions affecting other sources.

Industry Classification

NAICS: Manufacturing › Pharmaceutical and Medicine Manufacturing › Pharmaceutical Preparation Manufacturing

Product/Service Code: MEDICAL/DENTAL/VETERINARY EQPT/SUPP

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 5

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: ONE POST ST, SAN FRANCISCO, CA, 94104

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $192,948,121

Exercised Options: $192,948,121

Current Obligation: $192,948,121

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: VA797P12D0001

IDV Type: IDC

Timeline