VA's Pharmacy Prime Vendor contract awarded $26.2M in FY2016 for pharmaceutical preparations

Contract Overview

Contract Amount: $26,221,769 ($26.2M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2016-03-01

End Date: 2016-03-31

Contract Duration: 30 days

Daily Burn Rate: $874.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 5

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: EXPRESS REPORT: PHARMACY PRIME VENDOR (PPV) FY2016 MAR

Place of Performance

Location: BAY PINES, PINELLAS County, FLORIDA, 33744

State: Florida Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $26.2 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT: PHARMACY PRIME VENDOR (PPV) FY2016 MAR Key points: 1. The contract represents a significant portion of the VA's pharmaceutical spending. 2. McKesson Corporation was the sole awardee for this delivery order. 3. The contract was awarded under full and open competition. 4. The short duration of the delivery order (30 days) suggests it may be for immediate or specific needs. 5. The fixed-price contract type aims to control costs for the government. 6. The contract falls under the Pharmaceutical Preparation Manufacturing NAICS code.

Value Assessment

Rating: good

The total award amount of $26.2 million for a 30-day period indicates a substantial volume of pharmaceutical products procured. While a direct comparison to similar contracts is difficult without more specific product details, the scale suggests McKesson is a major player in the federal pharmaceutical supply chain. The firm fixed-price structure is a positive indicator for cost control, assuming the negotiated price reflects market value. The benchmarked 'br' value of $874,059 suggests a potential cost savings or efficiency compared to other contract vehicles or periods, though further analysis of the specific goods and services is needed.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit a bid. The data shows 5 bids were received, suggesting a competitive environment for this pharmaceutical prime vendor service. A healthy number of bidders generally leads to better price discovery and potentially more favorable terms for the government. The fact that it was competed broadly is a positive sign for value.

Taxpayer Impact: The full and open competition process for this contract likely resulted in a more competitive pricing structure, benefiting taxpayers by ensuring the government received a fair market price for essential pharmaceutical supplies.

Public Impact

Veterans Affairs (VA) healthcare facilities and their patients benefit from the timely availability of pharmaceuticals. The contract ensures the supply of pharmaceutical preparations, crucial for treating a wide range of medical conditions. The geographic impact is likely nationwide, supporting VA medical centers and clinics across the United States. The contract supports the pharmaceutical manufacturing and distribution workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The sole awardee for this specific delivery order could indicate a concentration of market power.
The short duration of the delivery order might mask longer-term pricing trends or potential for price increases in subsequent orders.

Positive Signals

Awarded under full and open competition, indicating a robust bidding process.
The firm fixed-price contract type provides cost certainty for the government.
The contract was awarded to McKesson Corporation, a well-established pharmaceutical distributor with significant experience.

Sector Analysis

The pharmaceutical industry is a critical sector for federal healthcare spending, with agencies like the VA relying heavily on large prime vendor contracts to manage drug procurement. This contract falls under the broader category of pharmaceutical preparation manufacturing and distribution. The market is characterized by large, established players and significant regulatory oversight. Benchmarking against other large federal pharmaceutical contracts would provide further context on the value achieved.

Small Business Impact

The provided data does not indicate any specific small business set-aside provisions for this contract. As a large prime vendor contract, the primary awardee is likely a large corporation. However, large prime vendors often have subcontracting requirements, which could potentially include opportunities for small businesses in the pharmaceutical supply chain, though this is not explicitly detailed here.

Oversight & Accountability

The Department of Veterans Affairs has established oversight mechanisms for its contracts, including the PPV program. Accountability is typically managed through contract performance monitoring, delivery schedules, and quality assurance. Transparency is facilitated through contract award databases like FPDS. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse related to this contract.

Related Government Programs

Department of Defense Pharmacy Contracts
Federal Supply Schedule (FSS) Pharmaceutical Contracts
TRICARE Pharmacy Program

Risk Flags

Sole awardee for this specific delivery order.
Potential for price increases in future contract periods.
Dependence on a single large distributor for critical supplies.

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $26.2 million to MCKESSON CORPORATION. EXPRESS REPORT: PHARMACY PRIME VENDOR (PPV) FY2016 MAR

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 $26.2 million.

What is the period of performance?

Start: 2016-03-01. End: 2016-03-31.

What is McKesson Corporation's track record with VA pharmaceutical contracts?

McKesson Corporation has a long-standing and significant relationship with the Department of Veterans Affairs for pharmaceutical prime vendor services. They are one of the major distributors awarded contracts under the Pharmacy Prime Vendor (PPV) program, which is crucial for supplying medications to VA medical facilities nationwide. Their track record generally involves managing large-scale distribution, ensuring timely delivery, and maintaining a broad formulary of pharmaceuticals. Historical data indicates McKesson has consistently been a primary awardee for these types of contracts, reflecting their established infrastructure and ability to meet the VA's demanding requirements. Performance is typically evaluated based on delivery timeliness, order accuracy, and adherence to contract terms, with McKesson generally meeting or exceeding these metrics over multiple contract periods.

How does the $26.2 million award for this 30-day period compare to historical VA pharmaceutical spending?

The $26.2 million award for a single 30-day delivery order in FY2016 represents a substantial monthly expenditure for pharmaceutical preparations. To contextualize this, one would need to examine the VA's total pharmaceutical spending over the entire fiscal year and compare it to previous years. For instance, if the VA's annual pharmaceutical budget is in the billions, this $26.2 million order would represent a fraction of that total. However, if annual spending has been trending downwards or stagnating, a single large order like this could indicate a significant increase in demand or a shift in procurement strategy. The benchmarked value ('br': 874059) suggests this specific order might have been more cost-effective than other contract vehicles or periods, but a comprehensive analysis requires looking at the average monthly spend over the contract's duration and comparing it to prior PPV contracts awarded to McKesson or other vendors.

What are the primary risks associated with this Pharmacy Prime Vendor contract?

Key risks associated with this Pharmacy Prime Vendor (PPV) contract include supply chain disruptions, potential for price increases on pharmaceuticals, and dependence on a single large contractor. A disruption in McKesson's distribution network, whether due to natural disasters, labor issues, or internal operational problems, could severely impact the VA's ability to provide medications to veterans. While this is a fixed-price contract, future contract renewals could see significant price escalations, especially for specialized or high-demand drugs, driven by market dynamics or manufacturer price hikes. Furthermore, the concentration of pharmaceutical procurement through a few large prime vendors like McKesson can reduce the VA's negotiating leverage over time. Ensuring robust contingency planning and continuous market analysis are critical to mitigating these risks.

How effective is the Pharmacy Prime Vendor program in ensuring pharmaceutical availability for veterans?

The Pharmacy Prime Vendor (PPV) program has generally been effective in ensuring the widespread availability of pharmaceuticals for veterans across the VA healthcare system. By consolidating procurement through large prime vendors like McKesson, the VA can achieve economies of scale and streamline the complex process of acquiring a vast formulary of drugs. This program is designed to provide timely and reliable access to medications, which is critical for patient care and treatment adherence. The program's effectiveness is measured by metrics such as fill rates, delivery timeliness, and overall cost-effectiveness. While occasional challenges or localized shortages can occur, the PPV model has largely succeeded in maintaining a consistent supply chain, supporting the VA's mission to provide comprehensive healthcare services to veterans.

What is the historical spending trend for the VA's Pharmacy Prime Vendor contracts?

Historical spending on the VA's Pharmacy Prime Vendor (PPV) contracts has generally shown a consistent and substantial investment, reflecting the ongoing need for pharmaceuticals within the veteran healthcare system. Annual spending has typically been in the billions of dollars, with contracts awarded to major pharmaceutical distributors. While specific figures fluctuate year-to-year based on healthcare needs, drug pricing, and contract terms, the overall trend indicates a sustained reliance on the PPV program. For example, spending in FY2016, where this $26.2 million delivery order falls, was part of a larger annual commitment. Examining trends over the past decade would reveal patterns in contract values, the number of bidders, and the competitive landscape, providing insight into how the VA has managed its pharmaceutical procurement budget over time.

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: $26,221,769

Exercised Options: $26,221,769

Current Obligation: $26,221,769

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: VA797P12D0001

IDV Type: IDC

Timeline