VA's Pharmacy Prime Vendor contract awarded to McKesson Corporation for $29M in FY13, serving Florida

Contract Overview

Contract Amount: $29,010,914 ($29.0M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2013-09-01

End Date: 2013-09-30

Contract Duration: 29 days

Daily Burn Rate: $1.0M/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) FY 2013 SEP

Place of Performance

Location: BAY PINES, PINELLAS County, FLORIDA, 33744

State: Florida Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $29.0 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT PHARMACY PRIME VENDOR (PPV) FY 2013 SEP Key points: 1. Contract value represents a significant investment in pharmaceutical supply chain management for veterans. 2. Full and open competition suggests a potentially competitive pricing environment. 3. The contract's duration and scope indicate a critical role in ensuring medication availability. 4. Performance context is crucial for understanding the effectiveness of pharmaceutical distribution. 5. Sector positioning highlights the importance of reliable pharmaceutical vendors for government health services.

Value Assessment

Rating: good

The contract value of approximately $29 million for a one-month period (September 2013) appears substantial, reflecting the scale of pharmaceutical distribution. Benchmarking this against similar prime vendor contracts would provide a clearer picture of value for money. Given the fixed-price nature, the VA is shielded from cost overruns, but the initial pricing strategy is key to ensuring cost-effectiveness.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders were likely considered. This competitive process is designed to drive down prices and ensure the government receives the best value. The number of bidders, if available, would further illuminate the intensity of the competition.

Taxpayer Impact: A competitive award process generally benefits taxpayers by fostering price discovery and potentially leading to lower overall costs for essential pharmaceutical supplies.

Public Impact

Veterans in Florida and potentially other regions served by this contract benefit from timely access to necessary medications. The contract ensures the reliable supply of pharmaceuticals, a critical service for healthcare delivery. Geographic impact is focused on Florida, supporting the healthcare needs of veterans in that state. Workforce implications include roles in logistics, distribution, and pharmacy support services.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price fluctuations if not locked in effectively during the fixed-price contract.
Dependence on a single vendor for a critical supply chain element carries inherent risk.
Ensuring consistent quality and timely delivery across all contracted services is paramount.

Positive Signals

Awarded through full and open competition, suggesting a robust selection process.
Fixed-price contract type provides cost certainty for the government.
The contract's existence indicates a structured approach to pharmaceutical procurement.

Sector Analysis

The pharmaceutical distribution sector is a critical component of the healthcare industry, characterized by complex logistics and stringent regulatory requirements. Government contracts like this represent a significant portion of the market, ensuring access to medications for beneficiaries. Benchmarking against other large-scale federal pharmaceutical contracts would reveal cost efficiencies and operational standards within this sector.

Small Business Impact

Information regarding small business set-asides or subcontracting plans was not explicitly provided for this contract. Analysis would require further details on whether small businesses were involved in the subcontracting chain or if specific set-aside goals were established during the procurement process.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Veterans Affairs' procurement and program management offices. Accountability measures would be tied to contract performance clauses, delivery schedules, and quality standards. Transparency is generally facilitated through contract award databases, though detailed performance reports may be internal.

Related Government Programs

Department of Defense Pharmacy Contracts
Federal Supply Schedule (FSS) Pharmaceutical Contracts
Veterans Health Administration (VHA) Medical Supplies

Risk Flags

Contract Value
Contract Duration
Competition Level

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $29.0 million to MCKESSON CORPORATION. EXPRESS REPORT PHARMACY PRIME VENDOR (PPV) FY 2013 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 $29.0 million.

What is the period of performance?

Start: 2013-09-01. End: 2013-09-30.

What is McKesson Corporation's track record with VA pharmaceutical contracts prior to this award?

McKesson Corporation has a long-standing history as a major pharmaceutical distributor and has been a significant contractor for the Department of Veterans Affairs (VA) for many years, often serving as a Pharmacy Prime Vendor (PPV). Prior to this specific FY13 contract, McKesson likely held similar large-scale agreements with the VA, managing the distribution of pharmaceuticals to VA medical facilities. Their extensive experience in the federal market and established distribution network would have been key factors in their continued selection. Analyzing past performance data, including any past performance evaluations or disputes, would provide a more comprehensive view of their reliability and effectiveness in fulfilling previous VA contracts.

How does the $29 million value for a one-month contract compare to typical VA Pharmacy Prime Vendor contracts?

The $29 million value for a single month's contract (September 2013) for the Pharmacy Prime Vendor (PPV) program is substantial and indicative of the significant volume of pharmaceuticals distributed by the VA. PPV contracts are typically large, covering a broad range of medications and serving numerous VA medical centers. While this figure represents a single month, it aligns with the high expenditure expected for such a critical supply chain function. To provide a precise comparison, one would need to analyze the average monthly spending across multiple years for this specific contract and compare it to similar PPV contracts awarded to other vendors or for different geographic regions. The duration of the contract (29 months total, with this being a portion) also influences the total value and annualization.

What are the primary risks associated with a sole-source or limited competition award for pharmaceutical distribution?

This contract was awarded under 'FULL AND OPEN COMPETITION,' which mitigates the risks typically associated with sole-source or limited competition. In a sole-source or limited competition scenario, the primary risks include potentially higher prices due to lack of robust competition, reduced incentive for the contractor to innovate or improve services, and a narrower range of potential solutions or specialized capabilities. For pharmaceutical distribution, these risks could translate to increased costs for taxpayers, potential disruptions if the single awarded vendor faces operational issues, and less flexibility in adapting to changing healthcare needs. The full and open competition for this VA contract suggests these risks were actively managed through the procurement process.

How effective is the fixed-price contract type in managing pharmaceutical costs for the VA?

The Firm Fixed Price (FFP) contract type is generally considered effective for managing pharmaceutical costs for the VA because it shifts the risk of cost overruns to the contractor, McKesson Corporation. Under an FFP agreement, the price is set and is not subject to adjustment based on the contractor's cost experience. This provides budget certainty for the VA. However, the effectiveness hinges on the initial price being fair and reasonable, determined through a competitive bidding process. If the initial price is too high, the VA may overpay despite the fixed-price structure. Conversely, if the competition is robust, the FFP structure incentivizes the contractor to be efficient to maximize their profit margin, potentially leading to cost savings for the government.

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

Historical spending patterns for the VA Pharmacy Prime Vendor (PPV) program show a consistent and significant investment in pharmaceutical distribution. The VA relies heavily on these contracts to ensure a steady supply of medications to its vast network of healthcare facilities serving millions of veterans. Annual spending on PPV contracts has historically been in the hundreds of millions, if not billions, of dollars, reflecting the scale of the program. Factors influencing these patterns include the number of veterans served, changes in healthcare utilization, the introduction of new pharmaceuticals, and the competitive landscape among major distributors. The $29 million figure for September 2013 fits within this broader historical context of substantial, ongoing federal investment in pharmaceutical supply chain management.

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: $29,010,914

Exercised Options: $29,010,914

Current Obligation: $29,010,914

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: VA797P12D0001

IDV Type: IDC

Timeline