VA pharmacy prime vendor contract saw $25.1M in spending over 29 days, with McKesson Corporation as the awardee

Contract Overview

Contract Amount: $25,131,173 ($25.1M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2015-09-01

End Date: 2015-09-30

Contract Duration: 29 days

Daily Burn Rate: $866.6K/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 NCO 09 FY 2015 SEP 1, 2015 TO SEP 30, 2015 CONTRACT VA797P-12-D-0001

Place of Performance

Location: SAN FRANCISCO, SAN FRANCISCO County, CALIFORNIA, 94104

State: California Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $25.1 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT: PHARMACY PRIME VENDOR NCO 09 FY 2015 SEP 1, 2015 TO SEP 30, 2015 CONTRACT VA797P-12-D-0001 Key points: 1. The contract represents a significant expenditure for pharmaceutical preparation manufacturing within the Department of Veterans Affairs. 2. Awarded under full and open competition, this contract suggests a competitive market for essential pharmaceutical supplies. 3. The short duration of the delivery order (29 days) indicates a need for immediate or short-term pharmaceutical fulfillment. 4. The firm-fixed-price structure provides cost certainty for the government. 5. Analysis of McKesson Corporation's performance and pricing against benchmarks is crucial for assessing value. 6. The contract's focus on pharmaceutical preparation manufacturing highlights a critical component of healthcare delivery for veterans.

Value Assessment

Rating: good

This delivery order for $25.1 million over 29 days represents a substantial but short-term commitment. Benchmarking this against similar prime vendor contracts for pharmaceutical supplies is essential. Given the firm-fixed-price nature, the primary value assessment will hinge on whether the contracted prices align with market rates for the specific pharmaceuticals procured and the efficiency of McKesson Corporation's distribution services. Without more granular data on the specific items and quantities, a precise value-for-money assessment is challenging, but the scale suggests a critical need.

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 were eligible to bid. With 5 bidders identified, this suggests a healthy level of competition for this pharmaceutical prime vendor requirement. A competitive process generally leads to better price discovery and potentially more favorable terms for the government, as vendors strive to offer the most attractive proposals to secure the award.

Taxpayer Impact: The full and open competition ensures that taxpayer dollars are likely being used efficiently, as multiple companies vied for the contract, driving down prices and improving service offerings.

Public Impact

Veterans will benefit from timely access to essential pharmaceuticals through the Department of Veterans Affairs' supply chain. The contract ensures the availability of pharmaceutical preparations, a critical component of healthcare services. The primary geographic impact is within the United States, supporting VA facilities nationwide. This contract supports jobs within the pharmaceutical manufacturing and distribution sectors, including those employed by McKesson Corporation.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price fluctuations in subsequent contract periods if market conditions change.
Reliance on a single vendor for a large volume of pharmaceuticals could pose supply chain risks if not managed proactively.

Positive Signals

Awarded under full and open competition, indicating a robust bidding process.
Firm-fixed-price contract provides cost certainty for the government.
The scale of the contract suggests a well-established need and a reliable vendor.

Sector Analysis

The pharmaceutical manufacturing sector is a critical component of the healthcare industry, characterized by high R&D investment, stringent regulatory oversight, and complex supply chains. This contract falls under NAICS code 325412 (Pharmaceutical Preparation Manufacturing). The market for pharmaceutical distribution to government entities, particularly the VA, is substantial, with significant spending allocated annually to ensure veterans receive necessary medications. This contract with McKesson Corporation represents a portion of that broader federal spending on pharmaceuticals.

Small Business Impact

The provided data does not indicate any specific small business set-aside provisions for this contract. As a large-scale prime vendor contract, it is unlikely to have been directly awarded to a small business. However, the prime contractor, McKesson Corporation, may engage small businesses for subcontracting opportunities related to logistics, distribution, or specialized services, though this is not explicitly detailed in the provided information.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Veterans Affairs' contracting and program management offices. Accountability measures are typically embedded within the contract terms, including performance standards, delivery schedules, and quality requirements. Transparency is generally facilitated through contract award databases and reporting mechanisms. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse related to the contract.

Related Government Programs

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

Risk Flags

Short contract duration may indicate a specific, time-bound need rather than ongoing supply.
High dollar value for a short period warrants scrutiny of necessity and efficiency.

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $25.1 million to MCKESSON CORPORATION. EXPRESS REPORT: PHARMACY PRIME VENDOR NCO 09 FY 2015 SEP 1, 2015 TO SEP 30, 2015 CONTRACT VA797P-12-D-0001

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 $25.1 million.

What is the period of performance?

Start: 2015-09-01. End: 2015-09-30.

What was the specific breakdown of pharmaceutical products and quantities procured under this delivery order?

The provided data summary does not include a detailed breakdown of the specific pharmaceutical products and their quantities procured under this delivery order. The total award amount of $25,131,172.57 covers a 29-day period from September 1, 2015, to September 30, 2015. To understand the precise nature of the spending, one would need to access the detailed contract line item (CLIN) data or the delivery order's statement of work. This information is crucial for a granular analysis of value, identifying high-cost items, and assessing the specific healthcare needs being met for veterans during that period.

How does McKesson Corporation's pricing on this contract compare to other pharmaceutical prime vendors serving the VA or other federal agencies?

Comparing McKesson Corporation's pricing on this specific $25.1 million, 29-day delivery order to other pharmaceutical prime vendors requires access to comparable contract data. The Department of Veterans Affairs (VA) utilizes various contracting vehicles, including Federal Supply Schedules (FSS) and other prime vendor contracts, which may have different pricing structures and negotiated rates. A comprehensive benchmark would involve analyzing the unit prices for identical or similar pharmaceutical preparations across multiple contracts awarded around the same period (FY 2015) to different vendors serving the VA or other agencies like the Department of Defense. Without such comparative data, it's difficult to definitively state whether McKesson's pricing was advantageous or disadvantageous.

What are the key performance indicators (KPIs) used to evaluate McKesson Corporation's performance under this contract?

While the specific Key Performance Indicators (KPIs) for this particular delivery order are not detailed in the provided summary, typical KPIs for pharmaceutical prime vendor contracts include on-time delivery rates, order accuracy, fill rates (percentage of requested items available and shipped), product quality (ensuring correct items, expiration dates, and packaging), and responsiveness to urgent requests. The firm-fixed-price nature of the contract implies that McKesson is responsible for meeting these performance standards to receive full payment. The VA's contracting officers would monitor these metrics throughout the contract period, and any deviations could lead to contract modifications, penalties, or impact future award decisions.

What is the historical spending trend for pharmaceutical prime vendor contracts awarded by the VA, and how does this contract fit within that trend?

The provided data represents a single delivery order within a larger prime vendor contract (VA797P-12-D-0001) for the period of September 2015. To understand the historical spending trend, one would need to examine the total spending under this contract across multiple fiscal years, as well as similar prime vendor contracts awarded by the VA over time. Pharmaceutical spending by the VA has generally been on an upward trend due to factors like an aging veteran population, increased utilization of healthcare services, and the rising cost of medications. This $25.1 million expenditure over 29 days, while significant for a short period, needs to be contextualized within the VA's overall annual pharmaceutical budget, which typically runs into billions of dollars, to assess its place in the broader spending pattern.

What is the potential risk associated with relying on McKesson Corporation as the prime vendor for a significant portion of the VA's pharmaceutical needs?

The primary risks associated with relying on a single prime vendor like McKesson Corporation for a substantial volume of pharmaceutical needs include supply chain disruptions (due to manufacturing issues, natural disasters, or logistical failures), potential price increases in future contract periods if competition diminishes, and vendor performance issues. While McKesson is a major player with established distribution networks, any single point of failure in a critical supply chain can have significant consequences. The VA mitigates these risks through contract management, performance monitoring, maintaining relationships with multiple suppliers where possible, and potentially diversifying its contracting strategies for pharmaceuticals to ensure continuity of care for veterans.

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: $25,131,173

Exercised Options: $25,131,173

Current Obligation: $25,131,173

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: VA797P12D0001

IDV Type: IDC

Timeline