VA's Pharmacy Prime Vendor contract awarded to McKesson Corporation for $20.7M in FY2014

Contract Overview

Contract Amount: $20,679,753 ($20.7M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2014-09-01

End Date: 2014-09-30

Contract Duration: 29 days

Daily Burn Rate: $713.1K/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) FY2014 SEP

Place of Performance

Location: DULUTH, GWINNETT County, GEORGIA, 30096

State: Georgia Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $20.7 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT PHARMACY PRIME VENDOR (PPV) FY2014 SEP Key points: 1. The contract represents a significant portion of the VA's pharmaceutical spending. 2. Competition dynamics for this large contract are crucial for ensuring fair pricing. 3. Performance context is essential to understand the value delivered by McKesson. 4. The sector positioning highlights the VA's reliance on major pharmaceutical distributors. 5. Risk indicators may include supply chain disruptions and price volatility. 6. The firm-fixed-price structure aims to provide cost certainty.

Value Assessment

Rating: good

The award of $20.7 million for a one-month period (September 2014) suggests a substantial ongoing program. Benchmarking this specific award is challenging without more granular data on the scope of services and the specific pharmaceuticals procured. However, the VA's Pharmacy Prime Vendor program is a critical and large-scale initiative, implying that competitive pricing is sought. The firm-fixed-price contract type indicates an agreed-upon cost, but the value-for-money assessment would depend on the volume and type of pharmaceuticals dispensed and the associated service levels.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple bidders were likely considered. The presence of a competitive process is generally positive for price discovery and ensuring the government receives competitive offers. The number of bidders and the specifics of the solicitation would provide a clearer picture of the intensity of the competition and its impact on the final award price.

Taxpayer Impact: Full and open competition for such a large contract helps ensure that taxpayer dollars are used efficiently by driving down costs through market forces.

Public Impact

Veterans across the nation benefit from timely access to prescription medications. The contract supports the delivery of pharmaceutical services to VA healthcare facilities. Geographic impact is nationwide, covering all VA medical centers and clinics. Workforce implications include roles in pharmacy operations, logistics, and administration within the VA and its contractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases in subsequent contract periods if competition wanes.
Dependence on a single vendor for a critical supply chain component.
Risk of service disruptions if the vendor faces operational challenges.

Positive Signals

Established vendor with a track record in pharmaceutical distribution.
Firm-fixed-price contract provides budget predictability.
Full and open competition suggests a competitive award process.

Sector Analysis

The pharmaceutical distribution sector is characterized by large, established players managing complex supply chains. The VA's Pharmacy Prime Vendor program is a significant contract within this sector, representing a substantial portion of the federal government's pharmaceutical procurement. Comparable spending benchmarks would involve looking at other large federal agencies or private healthcare systems' pharmaceutical distribution contracts, which often run into hundreds of millions or billions of dollars annually.

Small Business Impact

There is no explicit indication of small business set-asides for this particular contract award. However, large prime vendors like McKesson are often required to meet subcontracting goals with small businesses. The impact on the small business ecosystem would depend on the specific subcontracting plan and opportunities created by the prime vendor.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Veterans Affairs' procurement and program management offices. Accountability measures are embedded in the contract terms, including performance standards and reporting requirements. Transparency is generally facilitated through contract award databases, though detailed performance metrics may not always be publicly available. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Department of Defense Pharmacy Contracts
Federal Supply Schedule (FSS) Pharmaceutical Contracts
Medicaid Drug Rebate Program
Medicare Part D Prescription Drug Benefit

Risk Flags

Potential for price increases in future contract periods.
Dependence on a single vendor for critical pharmaceutical supply.
Risk of supply chain disruptions impacting medication availability.

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $20.7 million to MCKESSON CORPORATION. EXPRESS REPORT PHARMACY PRIME VENDOR (PPV) FY2014 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 $20.7 million.

What is the period of performance?

Start: 2014-09-01. End: 2014-09-30.

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 been a significant awardee of Pharmacy Prime Vendor (PPV) contracts for many years, often holding multiple regional or national contracts. Their track record includes managing the complex logistics of delivering a wide range of pharmaceuticals to numerous VA medical facilities nationwide. While specific performance metrics for past contracts are not detailed here, their continued success in winning these large, competitive contracts suggests a generally satisfactory performance history in terms of reliability, delivery, and compliance with VA requirements. However, like any large government contractor, they may have faced scrutiny or performance reviews on specific aspects of their service over time.

How does the $20.7 million award compare to previous or subsequent VA Pharmacy Prime Vendor contracts?

The $20.7 million award for a single month (September 2014) represents a substantial monthly expenditure for pharmaceutical distribution. To compare, one would need to examine the annual spending for the PPV program in FY2014 and surrounding years. The VA's total pharmaceutical spending is in the billions annually, with the PPV program being a cornerstone. Awards for the PPV contracts are often multi-year and can range from tens to hundreds of millions of dollars per year, depending on the scope (national vs. regional) and the specific contract period. This $20.7 million figure likely represents a portion of the total annual PPV expenditure, possibly for a specific region or a transition period, indicating the significant scale of the program.

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

The primary risks associated with this Pharmacy Prime Vendor contract include supply chain disruptions, price volatility, and vendor performance issues. A disruption in McKesson's distribution network could lead to shortages of critical medications for veterans. While the contract is firm-fixed-price, the underlying costs of pharmaceuticals can fluctuate, potentially impacting future contract renewals or the vendor's profitability, which could indirectly affect service. Furthermore, any degradation in McKesson's service levels, such as delivery delays or inaccuracies, could impact patient care within the VA system. Ensuring robust contingency plans and continuous performance monitoring are key mitigation strategies for the VA.

How effective is the Pharmacy Prime Vendor program in ensuring access to necessary medications for veterans?

The Pharmacy Prime Vendor (PPV) program is generally considered effective in ensuring access to necessary medications for veterans by providing a centralized and efficient distribution channel. By consolidating pharmaceutical procurement and distribution through prime vendors, the VA can achieve economies of scale, negotiate competitive pricing, and ensure a consistent supply of a wide formulary of drugs to its facilities nationwide. This system streamlines logistics, reduces the burden on individual VA medical centers for direct procurement, and helps maintain adequate inventory levels. While challenges can arise, the program's structure is designed to support the VA's mission of providing comprehensive healthcare, including timely access to prescription drugs.

What has been the historical spending trend for the VA's Pharmacy Prime Vendor program?

Historical spending for the VA's Pharmacy Prime Vendor (PPV) program has shown a consistent upward trend over the years, reflecting increasing pharmaceutical costs, an expanding veteran population, and potentially an increase in the scope of services covered. Annual spending has grown from hundreds of millions to well over a billion dollars in recent fiscal years. This growth is driven by factors such as the development of new, often more expensive, medications, an aging veteran population requiring more complex care, and the VA's continuous efforts to modernize and expand its healthcare services. The PPV program remains a critical component of the VA's healthcare budget, underscoring its importance in the delivery of care.

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: $20,679,753

Exercised Options: $20,679,753

Current Obligation: $20,679,753

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: VA797P12D0001

IDV Type: IDC

Timeline