VA's Pharmacy Prime Vendor contract awarded to McKesson Corporation for over $30.3 million

Contract Overview

Contract Amount: $30,307,266 ($30.3M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2009-06-01

End Date: 2009-06-30

Contract Duration: 29 days

Daily Burn Rate: $1.0M/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: MURFREESBORO, RUTHERFORD County, TENNESSEE, 37129

State: Tennessee Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $30.3 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT PHARMACY PRIME VENDOR Key points: 1. The contract represents a significant investment in pharmaceutical supply chain management for the VA. 2. Competition dynamics for this large-scale contract are crucial for ensuring cost-effectiveness. 3. Performance metrics and delivery timelines are key indicators of successful contract execution. 4. The contract's duration and fixed-price nature suggest a focus on predictable costs. 5. This contract positions McKesson as a key supplier within the healthcare sector for federal agencies.

Value Assessment

Rating: good

The contract value of over $30.3 million for a 29-day period (likely a modification or short-term bridge) indicates a substantial expenditure. Benchmarking this against similar large-scale pharmacy prime vendor contracts for federal agencies is necessary for a full value assessment. However, the fixed-price structure suggests an attempt to control costs. Without more granular data on the specific pharmaceuticals and quantities procured, a precise per-unit cost comparison is challenging.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders had the opportunity to submit proposals. This competitive process is generally expected to drive down prices and encourage innovation. The number of bidders, while not explicitly stated in the provided data, is a critical factor in assessing the strength of the competition. A robust competition typically leads to better price discovery and value for the government.

Taxpayer Impact: Full and open competition for a contract of this magnitude suggests that taxpayers benefit from a more competitive pricing environment, potentially leading to lower overall costs for essential pharmaceutical supplies.

Public Impact

Veterans will benefit from timely and reliable access to prescription medications through the VA healthcare system. The contract ensures the supply of a wide range of pharmaceuticals essential for treating various medical conditions. Geographic impact is nationwide, as the VA serves veterans across the United States. The contract supports jobs within the pharmaceutical distribution and logistics sectors, including those employed by McKesson Corporation.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases in future contract renewals if competition weakens.
Dependence on a single large vendor could create supply chain vulnerabilities.
Ensuring consistent quality and availability of all necessary medications can be challenging at this scale.

Positive Signals

Awarded through full and open competition, suggesting competitive pricing.
Fixed-price contract structure helps in budget predictability.
McKesson's established presence in pharmaceutical distribution indicates experience and capacity.

Sector Analysis

The pharmaceutical wholesale and distribution sector is a critical component of the healthcare industry, ensuring that medications reach providers and patients. This contract falls under the Drugs and Druggists' Sundries Merchant Wholesalers (NAICS 424210) category. The market is characterized by large, established players like McKesson, Cardinal Health, and AmerisourceBergen, who manage complex supply chains. Federal spending in this area is substantial, driven by agencies like the Department of Veterans Affairs and the Department of Defense, aiming to secure cost-effective and reliable access to pharmaceuticals for beneficiaries.

Small Business Impact

While this contract is a large prime vendor agreement, it's important to assess subcontracting opportunities for small businesses. Large prime contractors are often required to meet small business subcontracting goals. The impact on the small business ecosystem depends on the specific subcontracting plan and its execution. If McKesson actively seeks out and utilizes small businesses for specialized services or supplies, it can provide valuable opportunities and contribute to their growth within the federal contracting landscape.

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 monitoring against contract requirements, delivery schedules, and quality standards. Transparency is facilitated through contract databases like FPDS-NG. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse related to the contract's execution.

Related Government Programs

VA Pharmaceutical Prime Vendor Program
DoD TRICARE Pharmacy Contracts
Federal Supply Schedule (FSS) for Pharmaceuticals
GSA Schedules for Medical Supplies

Risk Flags

Potential for supply chain disruption
Long-term price volatility risk
Dependence on vendor's operational stability

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $30.3 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 $30.3 million.

What is the period of performance?

Start: 2009-06-01. End: 2009-06-30.

What is the historical spending trend for the VA Pharmacy Prime Vendor program over the last five years?

Analyzing historical spending for the VA Pharmacy Prime Vendor program reveals trends in demand and potential shifts in contract values. While specific year-over-year data for this exact contract (424210) is not provided, the overall VA pharmaceutical spending has been substantial. Factors influencing these trends include changes in veteran population, healthcare utilization patterns, drug pricing fluctuations, and the introduction of new medications. Understanding these historical patterns is crucial for forecasting future needs and ensuring budget stability. For instance, a consistent increase in spending might indicate growing demand or rising drug costs, while a decrease could suggest greater efficiency or changes in procurement strategies. The VA's commitment to providing comprehensive healthcare necessitates significant and often increasing investment in pharmaceuticals, making historical analysis a key component of strategic planning.

How does the awarded price compare to market rates for similar pharmaceutical wholesale services?

Comparing the awarded price of over $30.3 million for the VA Pharmacy Prime Vendor contract to market rates requires detailed analysis of the specific drugs, quantities, and services included. McKesson Corporation, as a major player, operates within a competitive market. Benchmarking against contracts awarded to other large distributors (e.g., Cardinal Health, AmerisourceBergen) for similar federal or large commercial entities would provide a clearer picture. Factors such as volume discounts, delivery logistics, and value-added services influence pricing. The fixed-price nature of this contract suggests an attempt to lock in rates, but the actual value is realized through efficient supply chain management and negotiation of drug prices. Without access to the detailed pricing structure and specific product mix, a definitive market rate comparison is challenging, but the full and open competition suggests a competitive outcome.

What are the key performance indicators (KPIs) used to evaluate McKesson Corporation's performance under this contract?

Key Performance Indicators (KPIs) for the VA Pharmacy Prime Vendor contract are critical for ensuring the reliable and cost-effective delivery of pharmaceuticals. While specific KPIs are not detailed in the provided data, typical metrics for such contracts include on-time delivery rates, order accuracy, inventory management efficiency, drug availability (fill rates), and compliance with storage and handling regulations. The VA would likely monitor McKesson's ability to maintain adequate stock levels for a wide formulary of drugs, respond promptly to urgent requests, and manage the supply chain without significant disruptions. Performance against these KPIs directly impacts patient care and operational efficiency within the VA healthcare system. Regular performance reviews and potential financial incentives or penalties tied to KPI achievement are standard practice to ensure contractor accountability.

What is McKesson Corporation's track record with similar large federal pharmaceutical contracts?

McKesson Corporation has a long and extensive track record of serving as a prime vendor for pharmaceutical distribution to various federal agencies, including the Department of Veterans Affairs and the Department of Defense. They are one of the largest pharmaceutical distributors in the United States and globally, managing complex supply chains for numerous healthcare providers. Their experience includes handling large-volume contracts, navigating regulatory requirements, and maintaining robust inventory and logistics systems. Past performance evaluations and contract awards indicate their capability to fulfill such roles. However, like any large contractor, there may have been instances of performance issues or disputes on specific contracts, which would be documented in performance reviews and contract databases. Generally, their sustained presence in this market suggests a consistent ability to meet the demanding requirements of federal pharmaceutical procurement.

What are the potential risks associated with relying on a single prime vendor for such a critical supply chain function?

Relying on a single prime vendor like McKesson for the VA's pharmaceutical supply chain introduces several potential risks. Foremost is the risk of supply chain disruption due to unforeseen events such as natural disasters, labor strikes, or pandemics affecting the vendor's operations or distribution network. A single point of failure can lead to drug shortages, impacting patient care. Another risk is reduced bargaining power for the VA over time; if competition diminishes in future procurements, the vendor might have less incentive to offer the most competitive pricing. Furthermore, dependence on one vendor can limit the VA's flexibility in adopting new technologies or innovative supply chain solutions that might be offered by other market players. Robust contingency planning, strong contract management, and regular market analysis are essential to mitigate these risks.

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: $30,307,266

Exercised Options: $30,307,266

Current Obligation: $30,307,266

Parent Contract

Parent Award PIID: V797P1020

IDV Type: IDC

Timeline