VA's Pharmacy Prime Vendor contract awarded to McKesson Corporation for $20.9M in FY2015

Contract Overview

Contract Amount: $20,943,770 ($20.9M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2014-12-01

End Date: 2014-12-31

Contract Duration: 30 days

Daily Burn Rate: $698.1K/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) FY2015 DEC

Place of Performance

Location: BAY PINES, PINELLAS County, FLORIDA, 33744

State: Florida Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $20.9 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT PHARMACY PRIME VENDOR (PPV) FY2015 DEC 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 metrics and on-time delivery are key indicators of contractor reliability. 4. This contract falls within the broader context of federal healthcare procurement. 5. The pharmaceutical sector is characterized by complex supply chains and regulatory oversight.

Value Assessment

Rating: good

The award of $20.9 million for a one-month delivery order appears reasonable given the scale of the VA's pharmaceutical needs. Benchmarking against similar large-scale pharmaceutical prime vendor contracts would provide a more precise value-for-money assessment. The firm-fixed-price structure suggests predictable costs for the government, but the ultimate value depends on McKesson's ability to manage its supply chain efficiently and pass those savings on.

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 multiple bidders generally fosters price discovery and encourages competitive pricing. The specific number of bidders (5) suggests a healthy level of interest in this significant contract, which is positive for the government's ability to secure favorable terms.

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

Public Impact

Veterans across Florida will benefit from timely access to essential pharmaceuticals. The contract ensures the supply of a wide range of pharmaceutical preparations. The geographic impact is focused on Florida, supporting healthcare delivery within the state. This contract supports jobs within McKesson Corporation's pharmaceutical distribution network.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price fluctuations in pharmaceutical markets impacting long-term value.
Dependence on a single vendor for a critical supply chain element.
Ensuring consistent quality and availability of all required pharmaceuticals.

Positive Signals

Awarded through full and open competition, indicating a competitive bidding process.
Firm-fixed-price contract provides cost certainty for the government.
Contractor (McKesson) is a major player with established distribution capabilities.

Sector Analysis

The pharmaceutical manufacturing and distribution sector is a critical component of the healthcare industry, characterized by high regulatory standards and complex logistics. Federal contracts like this are essential for ensuring the supply of medications to government entities, including the Department of Defense and the Department of Veterans Affairs. Spending in this category is substantial, reflecting the ongoing demand for pharmaceuticals. Comparable spending benchmarks would involve analyzing other large prime vendor contracts within the federal government and the broader healthcare market.

Small Business Impact

While this contract is with a large prime vendor, McKesson Corporation, it's important to assess subcontracting opportunities for small businesses within the pharmaceutical supply chain. Federal regulations often encourage or mandate small business participation. The absence of specific small business set-aside information for this particular award requires further investigation into McKesson's subcontracting plans to understand the broader impact on the small business ecosystem.

Oversight & Accountability

The Department of Veterans Affairs has established oversight mechanisms for its procurement processes, including contracts like the Pharmacy Prime Vendor. Accountability is typically managed through performance metrics, delivery schedules, and contract compliance reviews. Transparency is generally maintained through public contract databases, although specific details of performance may be internal. The VA Office of Inspector General would have jurisdiction to investigate any potential fraud, waste, or abuse related to this contract.

Related Government Programs

Department of Defense Pharmacy Prime Vendor Program
Federal Supply Schedule (FSS) for Pharmaceuticals
VA Medical Care Programs
National Acquisition Center (NAC) Contracts

Risk Flags

Potential for supply chain disruption
Dependence on single large vendor
Price volatility in pharmaceutical market

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $20.9 million to MCKESSON CORPORATION. EXPRESS REPORT PHARMACY PRIME VENDOR (PPV) FY2015 DEC

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 $20.9 million.

What is the period of performance?

Start: 2014-12-01. End: 2014-12-31.

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

McKesson Corporation has a long-standing relationship with the Department of Veterans Affairs as a primary pharmaceutical supplier. They have historically held significant contracts for the Pharmacy Prime Vendor (PPV) program, often competing against other major pharmaceutical distributors. Their track record generally includes managing large-scale distribution networks and meeting delivery requirements for a wide array of medications. However, like any large contractor, there may have been instances of performance issues or contract disputes that would be detailed in past performance reviews and contract award histories. Analyzing their historical performance on similar contracts, including on-time delivery rates, order fill rates, and any penalties incurred, would provide a comprehensive view of their reliability and capability in fulfilling the VA's needs.

How does the $20.9 million award compare to previous or subsequent Pharmacy Prime Vendor contracts for the VA?

The $20.9 million award for the FY2015 December delivery order represents a specific, short-term expenditure within the broader Pharmacy Prime Vendor (PPV) program. The total annual spending for the PPV program is significantly higher, often in the billions of dollars, as it covers a continuous supply of pharmaceuticals nationwide. This particular award reflects a monthly requirement for a specific region or set of facilities. To compare, one would need to examine the total contract values for the entire FY2015 PPV contract, as well as the monthly or annual values of contracts awarded in preceding and subsequent fiscal years. These comparisons would reveal trends in spending, potential price escalations or reductions, and the overall scale of the VA's pharmaceutical procurement over time.

What are the primary risks associated with relying on a single vendor for a large portion of pharmaceutical supply?

Relying on a single vendor, even a large and established one like McKesson Corporation, introduces several risks. Supply chain disruptions are a primary concern; unforeseen events such as natural disasters, labor strikes, or manufacturing issues affecting the vendor could lead to critical shortages of essential medications for veterans. There's also a risk of price gouging or reduced negotiation leverage for the VA over time, as the vendor may face less competitive pressure once established. Furthermore, dependence on a single entity can create vulnerabilities in quality control and regulatory compliance, as oversight becomes concentrated. Ensuring robust contingency plans, backup suppliers, and strong contract enforcement mechanisms are crucial to mitigate these risks.

What is the typical performance context for large federal pharmaceutical contracts like this?

The performance context for large federal pharmaceutical contracts typically revolves around ensuring the timely and accurate delivery of a wide range of medications to government facilities. Key performance indicators (KPIs) often include on-time delivery rates, order fill rates (the percentage of ordered items successfully supplied), accuracy of shipments, and adherence to temperature control and handling requirements for sensitive drugs. For the Pharmacy Prime Vendor (PPV) program, maintaining a comprehensive formulary and ensuring availability of both common and specialized pharmaceuticals are critical. The VA closely monitors these metrics, and performance failures can result in penalties, contract modifications, or even termination. The firm-fixed-price nature of this contract emphasizes the importance of McKesson managing its costs effectively while meeting these stringent performance expectations.

How does the VA ensure competition and value for money in its ongoing pharmaceutical procurement?

The VA employs several strategies to ensure competition and value for money in its pharmaceutical procurement. The Pharmacy Prime Vendor (PPV) program itself is typically awarded through full and open competition, allowing multiple qualified vendors to bid. This competitive process is designed to drive down prices and improve service levels. Beyond the initial competition, the VA utilizes mechanisms like the Federal Supply Schedule (FSS) for certain drugs, which offers pre-negotiated pricing. They also conduct market research and engage in strategic sourcing to identify cost-saving opportunities. Furthermore, the VA's National Acquisition Center (NAC) plays a crucial role in consolidating purchasing power and negotiating favorable terms. Performance-based contracting and regular reviews of market prices help ensure that the VA continues to receive good value throughout the contract lifecycle.

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: $20,943,770

Exercised Options: $20,943,770

Current Obligation: $20,943,770

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: VA797P12D0001

IDV Type: IDC

Timeline