VA's $25.9M Pharmacy Prime Vendor contract awarded to McKesson Corporation in June 2016

Contract Overview

Contract Amount: $25,907,611 ($25.9M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2016-06-01

End Date: 2016-06-30

Contract Duration: 29 days

Daily Burn Rate: $893.4K/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 JUN

Place of Performance

Location: BAY PINES, PINELLAS County, FLORIDA, 33744

State: Florida Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $25.9 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT: PHARMACY PRIME VENDOR (PPV) FY2016 JUN Key points: 1. The contract represents a significant portion of the VA's pharmaceutical spending. 2. Competition dynamics for this large-scale contract are crucial for ensuring fair pricing. 3. Performance context is vital to understand the effectiveness of pharmaceutical supply chain management. 4. The sector positioning highlights the VA's reliance on major pharmaceutical distributors. 5. Risk indicators may include supply chain disruptions and price volatility for essential medications.

Value Assessment

Rating: good

This contract, valued at approximately $25.9 million for the specified period, is a delivery order under a larger prime vendor program. Benchmarking its value requires comparison to similar large-scale pharmaceutical distribution contracts within the federal government and the broader healthcare industry. The firm-fixed-price structure suggests that pricing was determined at the time of award, with potential for savings if actual costs are lower than anticipated. However, the overall value proposition depends on the efficiency and reliability of McKesson's distribution services.

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. The presence of 5 bidders suggests a competitive landscape for this essential service. A competitive process generally leads to better price discovery and potentially more favorable terms for the government. The specific details of the bidding process and the number of proposals received would provide further insight into the intensity of the competition.

Taxpayer Impact: Full and open competition for this contract is beneficial for taxpayers as it drives down costs through market forces and encourages efficient service delivery from multiple potential providers.

Public Impact

Veterans across the nation benefit from timely access to a wide range of pharmaceuticals. The contract ensures the reliable supply of medications to VA healthcare facilities. Geographic impact is nationwide, supporting VA medical centers and clinics. Workforce implications include the logistics and administrative personnel required for pharmaceutical distribution.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases on essential medications if market conditions change.
Risk of supply chain disruptions affecting medication availability for veterans.
Dependence on a single contractor for a critical service.

Positive Signals

Awarded through full and open competition, suggesting competitive pricing.
Firm-fixed-price contract provides cost certainty for the government.
Established contractor with experience in pharmaceutical distribution.

Sector Analysis

The pharmaceutical distribution sector is characterized by large, established players managing complex supply chains. Federal contracts like this are critical for ensuring the availability of medications to government healthcare systems. The VA's Pharmacy Prime Vendor program is a significant component of its healthcare spending, aiming to streamline procurement and ensure cost-effectiveness. Comparable spending benchmarks would involve analyzing other large federal agencies' pharmaceutical contracts and the overall market size for drug distribution services.

Small Business Impact

This contract does not appear to have specific small business set-aside provisions. However, large prime vendors like McKesson often engage small businesses as subcontractors for various support services, including logistics, transportation, and administrative functions. The subcontracting plan, if applicable, would detail the extent of small business participation and its potential impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract is likely managed by the Department of Veterans Affairs' procurement and program management offices. Accountability measures would include performance metrics, delivery schedules, and quality control standards outlined in the contract. Transparency is generally maintained through contract award databases and public reporting, though specific operational details may be proprietary.

Related Government Programs

VA Pharmaceutical Prime Vendor Program
Federal Supply Schedule (FSS) for Pharmaceuticals
Department of Defense TRICARE Pharmacy Program

Risk Flags

Potential for price increases
Supply chain vulnerability
Contractor performance risk

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $25.9 million to MCKESSON CORPORATION. EXPRESS REPORT: PHARMACY PRIME VENDOR (PPV) FY2016 JUN

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 $25.9 million.

What is the period of performance?

Start: 2016-06-01. End: 2016-06-30.

What is McKesson Corporation's track record with the VA for pharmaceutical prime vendor services?

McKesson Corporation has a long-standing relationship with the Department of Veterans Affairs as a prime vendor for pharmaceuticals. They have consistently been awarded significant contracts within the Pharmacy Prime Vendor (PPV) program over multiple fiscal years. Their track record generally indicates a capacity to manage large-scale pharmaceutical distribution for the VA's extensive network of medical centers and clinics. Performance evaluations and past performance reviews within VA's contracting system would provide more granular detail on their specific performance metrics, such as on-time delivery rates, order fill rates, and adherence to quality standards. Historical data suggests they are a primary contractor in this space, reflecting a level of trust and demonstrated capability in meeting the VA's complex pharmaceutical needs.

How does the pricing of this contract compare to similar pharmaceutical distribution contracts?

Direct comparison of this specific $25.9 million delivery order's pricing to other contracts is challenging without access to detailed pricing structures and the specific pharmaceutical products covered. However, the Pharmacy Prime Vendor (PPV) program itself is designed to achieve economies of scale and competitive pricing through a large, consolidated contract vehicle. McKesson, as a major distributor, operates on established margins within the pharmaceutical supply chain. Benchmarking would involve analyzing the average percentage discounts off manufacturer prices or the per-unit dispensing fees compared to other federal or large commercial healthcare systems. The firm-fixed-price nature of this order suggests that pricing was negotiated and agreed upon, aiming for cost certainty for the VA, but the true value is realized through efficient delivery and product availability.

What are the primary risks associated with this contract for the VA?

The primary risks associated with this contract for the VA revolve around supply chain reliability, price volatility, and potential service disruptions. Given the scale of pharmaceutical distribution, any interruption in McKesson's operations, whether due to logistical issues, natural disasters, or internal challenges, could impact the availability of critical medications for veterans. Price volatility is another concern; while the contract is firm-fixed-price for this order, future renewals or broader market fluctuations in drug prices could affect the VA's overall pharmaceutical budget. Furthermore, over-reliance on a single large vendor, even one selected through competition, introduces a degree of dependency. Ensuring robust contingency planning and continuous performance monitoring by the VA are key to mitigating these risks.

How effective is the Pharmacy Prime Vendor program in meeting the VA's pharmaceutical needs?

The Pharmacy Prime Vendor (PPV) program, of which this contract is a part, is generally considered an effective mechanism for the VA to manage its vast pharmaceutical requirements. It consolidates purchasing power, streamlines the procurement process, and aims to ensure a consistent supply of medications to its nationwide network. The program's effectiveness is measured by its ability to provide a broad formulary of drugs at competitive prices, maintain high fill rates, and ensure timely delivery. While specific performance metrics for this June 2016 delivery order are not detailed here, the VA's continued reliance on the PPV model and contractors like McKesson suggests a high degree of satisfaction with its overall effectiveness in supporting veteran healthcare.

What are the historical spending patterns for the VA's Pharmacy Prime Vendor program?

Historical spending patterns for the VA's Pharmacy Prime Vendor program show a consistent and substantial investment in pharmaceutical procurement. The program typically accounts for billions of dollars annually, reflecting the significant healthcare needs of the veteran population. Spending has generally trended upwards over the years, influenced by factors such as an expanding veteran population, increased utilization of healthcare services, and rising pharmaceutical costs. The VA utilizes competitive bidding processes to award these large contracts, with major pharmaceutical distributors like McKesson, Cardinal Health, and AmerisourceBergen frequently securing significant portions of this business. The PPV program represents a core element of the VA's strategy to efficiently manage its drug supply chain.

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: $25,907,611

Exercised Options: $25,907,611

Current Obligation: $25,907,611

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: VA797P12D0001

IDV Type: IDC

Timeline