VA's Pharmacy Prime Vendor contract for NCO 11 saw $28.6M in spending over 29 days in FY15

Contract Overview

Contract Amount: $28,597,416 ($28.6M)

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: $986.1K/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 NCO 11 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 $28.6 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT: PHARMACY PRIME VENDOR NCO 11 FY 2015 SEP 1, 2015 TO SEP 30, 2015 CONTRACT VA797P-12-D-0001 Key points: 1. The contract represents a significant portion of the VA's pharmaceutical spending for the region. 2. McKesson Corporation was the sole awardee, indicating a concentrated market for this service. 3. The short duration of the delivery order suggests a need for rapid fulfillment or a specific period of demand. 4. The firm-fixed-price structure provides cost certainty for the government. 5. Analysis of this contract's value requires comparison to similar prime vendor agreements across the VA. 6. The absence of small business set-asides is noted, with no indication of subcontracting plans. 7. Performance context is limited to the specified 29-day period, making long-term trend analysis difficult.

Value Assessment

Rating: fair

The reported spending of $28.6 million over 29 days for a pharmacy prime vendor contract is substantial. Benchmarking this against similar contracts for other VA networks or for comparable periods would be necessary to assess value for money. Without broader context on the volume of pharmaceuticals procured and the specific services rendered, a definitive value assessment is challenging. The firm-fixed-price nature of the contract offers predictability, but the efficiency and cost-effectiveness relative to market rates for pharmaceutical distribution services remain to be fully evaluated.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, with 5 bidders participating. This level of competition is generally positive for price discovery and ensuring the government receives competitive pricing. The presence of multiple bidders suggests a healthy market for pharmaceutical prime vendor services. However, the specific details of the bidding process and the reasons for McKesson Corporation's selection are not provided, which would offer further insight into the effectiveness of the competition.

Taxpayer Impact: A full and open competition with multiple bidders is beneficial for taxpayers as it drives down prices through competitive pressure, ensuring that the government is not overpaying for essential pharmaceutical supplies.

Public Impact

Veterans in the NCO 11 region benefit from timely access to necessary pharmaceuticals. The contract ensures the supply chain for a wide range of pharmaceutical preparations. The geographic impact is concentrated within the NCO 11 service area, likely covering multiple states or a significant portion of a state. The contract supports the pharmaceutical supply chain workforce, including logistics, warehousing, and distribution personnel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited performance data due to the short 29-day duration.
Lack of transparency regarding the specific pharmaceuticals procured and their unit costs.
No explicit mention of small business subcontracting, potentially limiting opportunities for smaller firms.

Positive Signals

Awarded through full and open competition, indicating a competitive process.
Firm-fixed-price contract provides cost certainty for the government.
Ensures critical pharmaceutical supply for veterans in the NCO 11 region.

Sector Analysis

The pharmaceutical preparation manufacturing sector (NAICS 325412) is a critical component of the healthcare industry, involving the production and distribution of drugs and medicines. Prime vendor contracts like this are essential for large healthcare providers, such as the VA, to manage their pharmaceutical supply chains efficiently. The market is characterized by large distributors and manufacturers, with significant regulatory oversight. Spending benchmarks for such contracts can vary widely based on the volume, type of pharmaceuticals, and geographic scope of service.

Small Business Impact

This contract does not appear to have been set aside for small businesses, nor is there any explicit mention of subcontracting requirements. This suggests that the primary awardee, McKesson Corporation, is a large business. The lack of small business participation in the prime contract could mean missed opportunities for smaller pharmaceutical distributors or related service providers to engage with the VA. Further investigation into the subcontracting plans, if any, would be needed to fully assess the impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Veterans Affairs' procurement and program management offices. The firm-fixed-price nature provides some level of cost control. Transparency regarding the specific items procured and their pricing would be key to assessing accountability. Inspector General involvement would likely be triggered by allegations of fraud, waste, or abuse, but routine oversight is managed internally by the VA.

Related Government Programs

VA Pharmaceutical Prime Vendor Contracts
Department of Veterans Affairs Medical Supplies
Federal Pharmaceutical Procurement
Healthcare Supply Chain Management

Risk Flags

Single Vendor Dependence
Limited Performance Window
Lack of Granular Cost Data

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $28.6 million to MCKESSON CORPORATION. EXPRESS REPORT: PHARMACY PRIME VENDOR NCO 11 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 $28.6 million.

What is the period of performance?

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

What was the historical spending pattern for this specific Pharmacy Prime Vendor contract (VA797P-12-D-0001) prior to and after the FY 2015 delivery order?

The provided data only covers a 29-day period in FY 2015 for delivery order VA797P-12-D-0001. To understand historical spending patterns, one would need to examine the contract's full performance history, including previous delivery orders under the base contract (VA797P-12-D-0001) and potentially predecessor contracts. This would involve querying federal procurement databases for all obligations against this contract ID over its lifespan. Analyzing these historical data points would reveal trends in annual spending, identify any significant fluctuations, and provide context for the $28.6 million expenditure in FY 2015. Without this broader historical view, it's difficult to determine if this period represented typical spending or an anomaly.

How does the per-unit cost of pharmaceuticals procured under this contract compare to market rates or other VA contracts?

Determining the precise per-unit cost comparison is challenging with the provided summary data. The contract value ($28.6M) represents the total obligation for a 29-day period, not itemized pharmaceutical costs. To perform a per-unit cost analysis, detailed line-item data for the pharmaceuticals purchased (e.g., National Drug Code, quantity, unit price) would be required. This data would then need to be benchmarked against publicly available pricing databases (like First Databank or Red Book) or compared against similar VA prime vendor contracts that specify unit pricing for the same or comparable drugs. The firm-fixed-price nature suggests McKesson bid a price, but the underlying unit economics are not visible here. Without granular data, a robust per-unit cost comparison is not feasible.

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

McKesson Corporation is a major pharmaceutical distributor and has a significant history of contracting with the Department of Veterans Affairs for prime vendor services. They are one of the largest players in this market. Analyzing their broader track record would involve reviewing their performance on other VA prime vendor contracts across different networks and fiscal years. Key aspects to examine would include past performance evaluations, any documented disputes or contract breaches, their success rate in competitive bidding processes, and their overall volume of business with the VA. Generally, large, established companies like McKesson have extensive experience, but specific contract performance can vary. A review of their history would indicate reliability, competitive pricing, and adherence to VA requirements.

What specific types and quantities of pharmaceuticals were procured under this $28.6 million delivery order?

The provided data summary does not specify the exact types and quantities of pharmaceuticals procured under this $28.6 million delivery order. This level of detail is typically found in the contract's line-item details or delivery schedules, which are not included in the Express Report. A Pharmacy Prime Vendor contract generally covers a broad formulary of drugs, ranging from generics to specialty medications. The total value suggests a high volume of diverse pharmaceutical products were supplied to VA medical facilities within the NCO 11 jurisdiction during that 29-day period. To ascertain the specifics, one would need to access the detailed contract award files or transaction reports associated with VA797P-12-D-0001 for the period September 1-30, 2015.

What are the potential risks associated with relying on a single large vendor like McKesson for pharmaceutical prime vendor services?

Relying on a single large vendor like McKesson Corporation presents several potential risks. Firstly, there's a risk of vendor lock-in, where switching vendors could be costly and disruptive. Secondly, a lack of ongoing competition could potentially lead to less aggressive pricing over time, even if the initial award was competitive. Thirdly, supply chain disruptions affecting McKesson (e.g., logistical issues, recalls, or financial instability) could have a significant impact on the VA's ability to procure necessary medications. Finally, dependence on one vendor might reduce the VA's leverage in negotiating terms and conditions. Mitigating these risks often involves robust contract management, performance monitoring, and contingency planning.

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: $28,597,416

Exercised Options: $28,597,416

Current Obligation: $28,597,416

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: VA797P12D0001

IDV Type: IDC

Timeline