VA Spends $34.3M on Pharmaceuticals via McKesson, Highlighting Need for Price Benchmarking

Contract Overview

Contract Amount: $34,296,385 ($34.3M)

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: $1.2M/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: MURFREESBORO, RUTHERFORD County, TENNESSEE, 37129

State: Tennessee Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $34.3 million to MCKESSON CORPORATION for work described as: TAS::36 0160::TAS PHARM PRIME VENDR EXPRESS RPT Key points: 1. Significant spending on pharmaceuticals underscores the importance of drug procurement efficiency. 2. McKesson Corporation is a major player in the pharmaceutical distribution market. 3. Potential risks include price volatility and supply chain disruptions for essential medicines. 4. The healthcare sector relies heavily on reliable drug wholesalers like McKesson.

Value Assessment

Rating: fair

The contract value of $34.3 million is substantial. Without specific per-unit cost data or comparison to similar contracts for the same drugs, it's difficult to definitively assess pricing fairness. Benchmarking against other government contracts or commercial prices for these specific pharmaceuticals is crucial.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, which generally promotes competitive pricing. However, the effectiveness of price discovery depends on the specific bidding process and the number of qualified bidders for these pharmaceutical products.

Taxpayer Impact: Taxpayer funds are utilized for this pharmaceutical procurement. Ensuring competitive pricing through robust competition is essential to maximize the value of these expenditures.

Public Impact

Ensures access to essential pharmaceuticals for veterans. Supports the healthcare infrastructure by providing necessary medical supplies. Potential for cost savings through competitive bidding on drug contracts.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of detailed pricing data for unit cost analysis.
Potential for price increases in future contract renewals.
Dependence on a single large vendor for a significant portion of pharmaceutical needs.

Positive Signals

Awarded under full and open competition.
Contract duration of 29 months suggests a stable supply chain.
Firm fixed price contract provides cost certainty.

Sector Analysis

The healthcare sector, particularly pharmaceutical procurement, is a critical area of government spending. Benchmarks for drug wholesale prices vary significantly by drug type and volume, making direct comparisons challenging without specific product information.

Small Business Impact

This contract primarily involves a large prime vendor, McKesson Corporation, which is a major player in the pharmaceutical distribution industry. Analysis of small business participation in this specific contract is not readily available from the provided data.

Oversight & Accountability

The Department of Veterans Affairs is responsible for overseeing this contract. Robust oversight mechanisms, including regular performance reviews and audits, are necessary to ensure contract compliance and cost-effectiveness.

Related Government Programs

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

Risk Flags

Lack of detailed unit cost data.
Potential for price inflation over time.
Dependence on a large prime vendor.
Limited insight into specific drug pricing benchmarks.

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $34.3 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 $34.3 million.

What is the period of performance?

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

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

The provided data does not specify the exact pharmaceutical products or their individual unit costs. To conduct a thorough value assessment, a detailed breakdown of the procured drugs and their corresponding prices is necessary. This information would allow for benchmarking against market rates and identifying potential cost savings or overpayments.

How did the pricing in this full and open competition compare to other government or commercial contracts for similar pharmaceutical products?

Without access to comparative pricing data, it's impossible to definitively state how this contract's pricing fared against other benchmarks. While full and open competition is a positive indicator, the actual price discovery depends on the competitive landscape for these specific drugs at the time of award. Further analysis would require accessing historical pricing data for similar procurements.

What is the VA's strategy for ensuring long-term cost-effectiveness and supply chain resilience in pharmaceutical procurement beyond this single contract?

The VA's long-term strategy likely involves a multi-faceted approach, including leveraging group purchasing organizations, exploring alternative suppliers, negotiating volume discounts, and potentially developing more direct relationships with manufacturers. Continuous market analysis and proactive contract management are key to ensuring both cost-effectiveness and supply chain resilience for essential medicines.

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: $34,296,385

Exercised Options: $34,296,385

Current Obligation: $34,296,385

Parent Contract

Parent Award PIID: V797P1020

IDV Type: IDC

Timeline