VA awards $26.3M pharmacy prime vendor contract to McKesson Corporation for 30-day period

Contract Overview

Contract Amount: $26,331,476 ($26.3M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2015-03-01

End Date: 2015-03-31

Contract Duration: 30 days

Daily Burn Rate: $877.7K/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 VA256PPVFY2015MAR

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $26.3 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT PHARMACY PRIME VENDOR VA256PPVFY2015MAR Key points: 1. Contract awarded via full and open competition, suggesting a robust market. 2. The contract value represents a significant portion of pharmaceutical spending for the period. 3. Delivery order award indicates a specific, short-term need for pharmaceutical supplies. 4. The fixed-price contract type aims to control costs for the government. 5. The contractor, McKesson Corporation, is a major player in the pharmaceutical distribution market. 6. The contract's short duration suggests it may be a bridge or a specific project need.

Value Assessment

Rating: good

The contract value of $26.3 million for a 30-day period is substantial. Benchmarking this against similar pharmacy prime vendor contracts would require access to a broader dataset of VA pharmaceutical procurements. However, given the scale of the Department of Veterans Affairs' healthcare system, this award appears to be within a reasonable range for a prime vendor supporting a large patient population. The firm fixed-price structure is a positive indicator for cost control, assuming the initial pricing was competitive.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple vendors were likely solicited and had the opportunity to bid. The presence of 5 bidders (no=5) suggests a healthy level of competition for this pharmaceutical prime vendor requirement. A competitive bidding process generally leads to better price discovery and potentially more favorable terms for the government.

Taxpayer Impact: The full and open competition ensures that taxpayer dollars are being used efficiently by leveraging market forces to secure competitive pricing for essential pharmaceutical supplies.

Public Impact

Veterans will benefit from timely access to a wide range of pharmaceuticals. The contract ensures the continuous supply of medications to VA healthcare facilities. Services delivered include the distribution and management of prescription drugs. The geographic impact is likely nationwide, supporting VA facilities across the country. This contract supports jobs within the pharmaceutical distribution and logistics sectors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Short contract duration may indicate potential for future re-competition and price fluctuations.
Reliance on a single large vendor for critical pharmaceutical needs carries inherent supply chain risks.
The specific value for a 30-day period is high, warranting scrutiny of unit costs if possible.

Positive Signals

Awarded through full and open competition, indicating a competitive market.
Firm fixed-price contract type helps manage cost certainty.
Contractor is a well-established entity in pharmaceutical distribution.

Sector Analysis

The pharmaceutical distribution sector is a critical component of the healthcare industry, ensuring that medications reach patients and healthcare providers. The Department of Veterans Affairs is a major consumer of pharmaceuticals, and prime vendor contracts are essential for managing the complex logistics of drug supply. This contract fits within the broader category of healthcare services and logistics, where efficiency and reliability are paramount. Comparable spending benchmarks would typically be assessed against other large federal healthcare procurements or private sector equivalents for similar distribution services.

Small Business Impact

There is no indication that this contract included a small business set-aside. Given the nature of pharmaceutical prime vendor services, which often require extensive infrastructure and established supply chains, it is common for such contracts to be awarded to large, experienced companies. Subcontracting opportunities may exist for smaller businesses within specific logistical or support functions, but the primary award is to a large corporation.

Oversight & Accountability

The Department of Veterans Affairs has established oversight mechanisms for its contracts, including performance monitoring and financial accountability. As a delivery order under a larger contract vehicle, its execution would be subject to the terms and conditions of that parent contract. Transparency is generally maintained through contract databases like FPDS. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse related to this award.

Related Government Programs

VA Pharmacy Prime Vendor Program
Federal Supply Schedule (FSS) contracts for pharmaceuticals
Department of Defense pharmaceutical procurements
Medicaid Drug Rebate Program

Risk Flags

High contract value for a short duration warrants scrutiny of unit pricing.
Potential for supply chain disruption in pharmaceutical distribution.
Reliance on a single large vendor for critical supplies.

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $26.3 million to MCKESSON CORPORATION. EXPRESS REPORT PHARMACY PRIME VENDOR VA256PPVFY2015MAR

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 $26.3 million.

What is the period of performance?

Start: 2015-03-01. End: 2015-03-31.

What is McKesson Corporation's track record with the Department of Veterans Affairs for pharmaceutical prime vendor services?

McKesson Corporation has a long-standing relationship with the Department of Veterans Affairs (VA) as a major pharmaceutical distributor and prime vendor. They have historically been awarded significant contracts to supply medications to VA medical centers and other facilities. Their track record generally includes the ability to manage large-scale distribution networks and maintain a broad formulary of drugs. However, like any large contractor, they may have faced scrutiny or performance issues on specific contracts over time, which would be detailed in performance evaluations and contract dispute records. The VA's Vendor Performance Information (VPI) system and contract databases would provide more granular details on their past performance ratings and any significant issues encountered.

How does the $26.3 million value for a 30-day period compare to typical VA pharmacy prime vendor contracts?

The value of $26.3 million for a single 30-day period is substantial and suggests this contract covers a significant volume of pharmaceutical needs, likely for a large region or a substantial number of VA facilities. Typical VA pharmacy prime vendor contracts are often multi-year agreements with significant annual values, often in the hundreds of millions or even billions of dollars, depending on the scope and duration. A 30-day delivery order of this magnitude might represent a peak demand period, a specific project, or a bridge to a new, larger contract. Without knowing the specific scope of this delivery order (e.g., which facilities it serves, the exact product mix), direct comparison is difficult, but it indicates a high level of activity for the period.

What are the primary risks associated with this contract, and how are they mitigated?

The primary risks associated with this contract include potential supply chain disruptions (e.g., drug shortages, transportation issues), price volatility for pharmaceuticals, and contractor performance issues. Supply chain risks are inherent in pharmaceutical distribution; mitigation often involves the VA maintaining relationships with multiple distributors and having contingency plans. Price volatility is managed through the firm fixed-price contract type, which locks in prices for the contract period, and potentially through negotiated rebates or price caps. Contractor performance is monitored through performance metrics, quality assurance surveillance plans, and regular communication. The VA's ability to enforce contract terms and penalties also serves as a mitigation factor.

What is the expected program effectiveness and impact on veteran healthcare?

The expected program effectiveness is high, as a reliable supply of pharmaceuticals is critical for the continuity and quality of care provided to veterans. This contract ensures that VA healthcare facilities have access to the necessary medications to treat a wide range of conditions, thereby supporting the VA's mission to provide comprehensive healthcare. Effective execution of this contract directly translates to veterans receiving timely and appropriate medical treatment, improving health outcomes and overall satisfaction with VA services. The efficiency of the distribution process also impacts the cost-effectiveness of healthcare delivery within the VA system.

How has VA spending on pharmaceutical prime vendors trended over the past five years?

VA spending on pharmaceutical prime vendors has generally trended upwards over the past five years, reflecting increasing healthcare demands and pharmaceutical costs. While specific figures fluctuate based on contract awards, competition, and the scope of services, the overall trajectory indicates a sustained and significant investment in ensuring pharmaceutical availability for veterans. Factors contributing to this trend include an expanding veteran population, advancements in medical treatments requiring new and often more expensive drugs, and the VA's continuous efforts to modernize its supply chain and healthcare delivery systems. Detailed analysis would require examining annual spending reports and contract award data across multiple prime vendor contracts.

What is the significance of the 'Pharmaceutical Preparation Manufacturing' NAICS code in relation to this contract?

The North American Industry Classification System (NAICS) code 325412, 'Pharmaceutical Preparation Manufacturing,' is somewhat tangential to a prime vendor contract, which primarily focuses on distribution and logistics rather than manufacturing. While the contractor, McKesson Corporation, may have some manufacturing capabilities or affiliations, this specific contract is for the 'Pharmacy Prime Vendor' service. This service involves procuring, storing, and distributing pharmaceuticals manufactured by various entities to VA facilities. The NAICS code might be associated with the overall business classification of the awardee or a broader contract category, but the core function of this award is distribution, not the creation of pharmaceutical preparations.

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: $26,331,476

Exercised Options: $26,331,476

Current Obligation: $26,331,476

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: VA797P12D0001

IDV Type: IDC

Timeline