VA's $23.1M Pharmacy Prime Vendor contract awarded to McKesson Corporation in FY2016

Contract Overview

Contract Amount: $23,095,772 ($23.1M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2016-09-01

End Date: 2016-09-30

Contract Duration: 29 days

Daily Burn Rate: $796.4K/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 SEP

Place of Performance

Location: ALBANY, ALBANY County, NEW YORK, 12208

State: New York Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $23.1 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT: PHARMACY PRIME VENDOR (PPV) FY2016 SEP Key points: 1. The contract represents a significant portion of the VA's pharmaceutical spending. 2. McKesson Corporation, a major player in pharmaceutical distribution, secured this award. 3. The contract was awarded via full and open competition, suggesting a competitive bidding process. 4. The short duration of the award (29 days) indicates it may be a bridge or task order. 5. The firm-fixed-price contract type provides cost certainty for the government. 6. The contract's value is benchmarked against similar pharmaceutical prime vendor agreements.

Value Assessment

Rating: good

The contract value of approximately $23.1 million for a 29-day period suggests a substantial monthly expenditure for pharmaceutical supplies. Benchmarking against similar Pharmacy Prime Vendor (PPV) contracts would reveal if this rate is competitive. Given the scale, McKesson's pricing is expected to be aggressive, reflecting their market position. The firm-fixed-price structure helps manage cost fluctuations for the VA.

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 bids. The presence of 5 bidders suggests a healthy level of competition for this significant pharmaceutical supply contract. A competitive process generally leads to better price discovery and potentially more favorable terms for the government.

Taxpayer Impact: Taxpayers benefit from the competitive nature of this award, as it likely drove down prices and ensured the VA received value for its investment in essential pharmaceuticals.

Public Impact

Veterans across the nation benefit from timely access to necessary medications. The contract ensures the supply of a wide range of pharmaceuticals for VA healthcare facilities. This contract supports the VA's mission to provide comprehensive healthcare services to its beneficiaries. The efficient distribution of pharmaceuticals impacts the operational readiness of VA medical centers.

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 vendor for a critical supply chain component carries inherent risk.
Ensuring consistent quality and availability of all required pharmaceuticals can be challenging.

Positive Signals

Awarded through full and open competition, indicating a robust bidding process.
Firm-fixed-price contract provides cost predictability for the government.
McKesson Corporation is a well-established industry leader with extensive experience.

Sector Analysis

The pharmaceutical distribution sector is characterized by large, established players like McKesson, Cardinal Health, and AmerisourceBergen, who operate as prime vendors for major government healthcare providers. These contracts are crucial for ensuring the supply chain integrity of medications to federal agencies. Spending in this category is substantial, reflecting the ongoing need for pharmaceuticals across the Department of Defense and Veterans Affairs.

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 specialized services or regional distribution, contributing to the broader small business ecosystem.

Oversight & Accountability

The Department of Veterans Affairs has established oversight mechanisms for its procurement processes, including contract performance monitoring and compliance checks. The Inspector General's office provides an additional layer of accountability, investigating fraud, waste, and abuse within VA programs and contracts.

Related Government Programs

Pharmaceutical Prime Vendor Program
Department of Veterans Affairs Medical Supplies Contracts
Federal Supply Schedule (FSS) Pharmaceutical Contracts

Risk Flags

Potential for supply chain disruption
Vendor performance risk
Price volatility of pharmaceuticals

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $23.1 million to MCKESSON CORPORATION. EXPRESS REPORT: PHARMACY PRIME VENDOR (PPV) FY2016 SEP

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 $23.1 million.

What is the period of performance?

Start: 2016-09-01. End: 2016-09-30.

What is McKesson Corporation's track record with the VA for similar contracts?

McKesson Corporation has a long-standing relationship with the Department of Veterans Affairs, frequently serving as a Pharmacy Prime Vendor. Their track record typically involves managing large-scale pharmaceutical distribution, ensuring timely delivery, and maintaining compliance with stringent VA regulations. Historical data indicates McKesson has been a consistent awardee for such contracts, reflecting their established infrastructure and competitive pricing. However, like any large contractor, there may be instances of performance issues or disputes that would be documented in contract performance reports and agency databases.

How does the $23.1 million value compare to previous or subsequent VA Pharmacy Prime Vendor contracts?

The $23.1 million value for a 29-day period translates to a monthly expenditure of approximately $23.1 million, assuming consistent spending throughout the year. To provide a comprehensive comparison, one would need to analyze the average monthly spending for similar Pharmacy Prime Vendor (PPV) contracts awarded by the VA over several fiscal years. Factors such as the number of covered facilities, the scope of pharmaceuticals included, and overall market inflation would influence these values. Without direct comparative data for the same period, it's challenging to definitively state if this specific award was higher or lower than average, but it indicates a significant operational scale.

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

The primary risks associated with this contract include supply chain disruptions, potential price volatility for pharmaceuticals, and vendor performance issues. A disruption in McKesson's ability to deliver could impact patient care within VA facilities. While the contract is firm-fixed-price, market fluctuations in drug prices could still pose a challenge if not adequately managed within the contract terms. Furthermore, over-reliance on a single large vendor, even with competition, can create vulnerabilities. Ensuring consistent quality control and adherence to VA's strict regulatory requirements is also a continuous risk that requires diligent oversight.

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

The Pharmacy Prime Vendor (PPV) program is generally considered effective in meeting the VA's vast pharmaceutical needs by consolidating purchasing power and streamlining distribution. It allows the VA to secure a wide array of medications at competitive prices through large-volume contracts. The program's success hinges on strong vendor performance and robust competition. While the PPV model provides significant advantages in terms of cost savings and logistical efficiency, ongoing monitoring is crucial to ensure it continues to meet the evolving healthcare demands and supply chain challenges faced by the VA.

What is the historical spending trend for pharmaceutical prime vendors by the VA?

Historical spending trends for pharmaceutical prime vendors by the VA have generally shown a consistent and substantial investment in these contracts. The VA relies heavily on prime vendors to manage its complex pharmaceutical supply chain, leading to multi-million dollar annual awards. Over the years, spending has likely increased due to factors such as an expanding veteran population, advancements in medical treatments requiring new pharmaceuticals, and general inflation. The VA has consistently awarded these large contracts through competitive processes, aiming to leverage economies of scale and secure favorable pricing.

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: $23,095,772

Exercised Options: $23,095,772

Current Obligation: $23,095,772

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: VA797P12D0001

IDV Type: IDC

Timeline