VA awards $50M+ contract for drugs and sundries to McKesson Corporation, highlighting a significant portion of federal pharmaceutical spending

Contract Overview

Contract Amount: $50,053,802 ($50.1M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2010-03-01

End Date: 2010-03-31

Contract Duration: 30 days

Daily Burn Rate: $1.7M/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

Place of Performance

Location: HINES, COOK County, ILLINOIS, 60141

State: Illinois Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $50.1 million to MCKESSON CORPORATION for work described as: TAS::36 0160::TAS Key points: 1. The contract represents a substantial investment in pharmaceutical supplies for the Department of Veterans Affairs. 2. McKesson Corporation, a major player in the pharmaceutical distribution market, secured this award. 3. The contract's duration and value suggest a consistent need for these supplies within the VA. 4. The fixed-price nature of the contract aims to provide cost certainty for the government. 5. Analysis of this award can inform future pharmaceutical procurement strategies for the VA and other agencies. 6. The geographic scope of this contract is focused on Illinois, indicating a regional distribution focus.

Value Assessment

Rating: good

This contract award of over $50 million to McKesson Corporation for drugs and druggists' sundries appears to be a significant, albeit regional, procurement for the Department of Veterans Affairs. Benchmarking this against similar contracts for pharmaceutical sundries requires access to a broader dataset of VA and DoD pharmaceutical procurements. However, the fixed-price contract type suggests an effort to control costs. The value is substantial for a single award, indicating a large volume of goods or services being procured.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple vendors had the opportunity to bid. With 8 bidders participating, this suggests a reasonably competitive environment for this specific procurement. A higher number of bidders generally leads to better price discovery and potentially lower prices for the government. The fact that it was fully competed is a positive indicator for value for money.

Taxpayer Impact: Taxpayers benefit from the competitive bidding process, which is designed to ensure that the government receives the best possible pricing for essential pharmaceutical supplies. Full and open competition helps prevent inflated costs and promotes efficiency.

Public Impact

Veterans receiving medical care through the VA healthcare system will benefit from the availability of necessary drugs and medical sundries. The contract ensures the supply chain for essential pharmaceutical products within the VA's Illinois region. This contract supports the VA's mission to provide comprehensive healthcare services to its beneficiaries. The distribution of these goods likely involves a network of pharmacies and medical facilities within Illinois.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases in future contract renewals if competition diminishes.
Dependence on a single large supplier could create supply chain vulnerabilities.
Ensuring consistent quality and availability of a wide range of sundries can be challenging.

Positive Signals

Awarded through full and open competition, indicating a robust bidding process.
Fixed-price contract type helps to lock in costs and manage budget predictability.
McKesson Corporation is a well-established entity in pharmaceutical distribution, suggesting reliability.
The contract duration of 30 days is short, implying it might be a task order or a specific period within a larger framework, allowing for frequent re-evaluation.

Sector Analysis

The pharmaceutical and medical supplies sector is a critical component of the healthcare industry, with significant government spending. This contract falls under the 'Drugs and Druggists' Sundries Merchant Wholesalers' NAICS code, representing a segment focused on the distribution of pharmaceuticals. Federal spending in this area is substantial, driven by agencies like the VA and DoD serving large populations. Comparable spending benchmarks would involve analyzing other large-scale pharmaceutical distribution contracts across federal agencies.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the 'ss' flag is also false, suggesting no specific small business subcontracting goals were mandated within this award. This means the primary contractor, McKesson Corporation, is likely fulfilling the contract directly or through its own established supply chain, with limited direct impact on the small business ecosystem for this specific award.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Veterans Affairs' contracting officers and program managers. Accountability measures are embedded in the contract terms, including performance standards and reporting requirements. Transparency is facilitated through contract databases like FPDS. Inspector General jurisdiction would apply if any fraud, waste, or abuse related to the contract were suspected or reported.

Related Government Programs

Department of Veterans Affairs Medical Care Programs
Federal Supply Schedule (FSS) for Medical Equipment and Pharmaceuticals
DoD Pharmaceutical and Medical Supply Contracts
National Acquisition Center (NAC) Contracts

Risk Flags

Potential for supply chain disruption
Risk of price escalation in future renewals
Dependence on a single large vendor

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $50.1 million to MCKESSON CORPORATION. TAS::36 0160::TAS

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 $50.1 million.

What is the period of performance?

Start: 2010-03-01. End: 2010-03-31.

What is the historical spending pattern of the VA on drugs and druggists' sundries, and how does this $50M+ award compare?

The Department of Veterans Affairs (VA) consistently allocates significant funds towards pharmaceutical and medical sundries to support its vast network of healthcare facilities and beneficiaries. While this specific award to McKesson Corporation totals $50,053,801.65, understanding its context requires examining the VA's broader spending trends. Historically, the VA's annual spending on pharmaceuticals and related supplies can range from several billion dollars to tens of billions, depending on the scope of services and the specific fiscal year. Awards of this magnitude are not uncommon for major pharmaceutical distributors serving large regions or national needs. This $50M+ contract, awarded in 2010 for a 30-day period, represents a substantial single transaction, likely a large order or a specific period's requirement, rather than an annual total. To fully contextualize it, one would need to compare it against other large-dollar awards within the same NAICS code (424210) and against the VA's total pharmaceutical budget for that period.

How does the pricing of this McKesson contract compare to other pharmaceutical distributors for similar goods?

Directly comparing the pricing of this specific McKesson contract to other pharmaceutical distributors for similar goods is challenging without access to the detailed pricing structure and the specific list of drugs and sundries included. However, the fact that this contract was awarded under 'full and open competition' with 8 bidders suggests that the pricing was subjected to market forces. In a competitive bidding environment, the government aims to secure the most favorable pricing. McKesson, as a major distributor, operates on established pricing models that are often benchmarked against market rates and competitor offerings. The fixed-price nature of the contract further implies that the price was agreed upon upfront, providing cost certainty. To perform a detailed price comparison, one would need to analyze the unit prices for identical or comparable items across multiple bids received for this contract, or benchmark against other VA/DoD contracts for the same or similar items awarded around the same time.

What are the key performance indicators (KPIs) typically monitored for such pharmaceutical supply contracts?

For pharmaceutical supply contracts like this one awarded to McKesson Corporation by the VA, key performance indicators (KPIs) typically focus on ensuring timely delivery, product quality, and accurate order fulfillment. Common KPIs include: On-Time Delivery Rate (ensuring pharmaceuticals arrive by the agreed-upon deadlines), Order Accuracy Rate (verifying that the correct items and quantities are delivered), Fill Rate (the percentage of ordered items that are actually available and shipped), Product Quality and Integrity (ensuring drugs are within their expiration dates, properly stored, and not damaged), and Invoice Accuracy (confirming that billing matches the delivered goods and contract terms). The VA would monitor these KPIs to ensure the contractor is meeting its contractual obligations and that veterans receive the necessary medications without interruption or compromise.

What is McKesson Corporation's track record with federal contracts, particularly with the Department of Veterans Affairs?

McKesson Corporation has a long and extensive history of contracting with U.S. federal agencies, including the Department of Veterans Affairs (VA) and the Department of Defense (DoD), for the distribution of pharmaceuticals and medical supplies. As one of the largest healthcare companies in the United States, McKesson is a frequent awardee of large-scale federal contracts. Their track record generally reflects their capacity to manage complex supply chains and fulfill significant demand. While specific performance details for individual contracts are often proprietary or require deep dives into contract databases, McKesson's continued success in winning federal bids indicates a generally positive performance history and a strong understanding of government procurement requirements. However, like any large contractor, there may be instances of performance issues or disputes on specific contracts, which would be documented in contract performance reports and agency records.

What are the potential risks associated with a sole large distributor like McKesson for a significant portion of VA's pharmaceutical needs?

While this contract was awarded under full and open competition, the reliance on a single large distributor like McKesson for a significant portion of the VA's pharmaceutical needs, even regionally, carries potential risks. One primary risk is supply chain disruption. Unforeseen events such as natural disasters, labor strikes, or global health crises could impact McKesson's ability to deliver, potentially leading to shortages for veterans. Another risk is price escalation in future contract renewals. If competition dwindles or McKesson gains significant leverage due to its established role, future pricing could increase. Furthermore, a heavy reliance on one vendor might reduce the incentive for continuous innovation or cost-efficiency improvements if the vendor feels secure in their market position. The VA mitigates these risks through robust contract management, contingency planning, and by maintaining relationships with alternative suppliers where feasible.

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: $50,053,802

Exercised Options: $50,053,802

Current Obligation: $50,053,802

Parent Contract

Parent Award PIID: V797P1020

IDV Type: IDC

Timeline