VA's Pharmacy Prime Vendor contract awarded to McKesson Corporation for $26.8M in FY2015

Contract Overview

Contract Amount: $26,782,897 ($26.8M)

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: $923.5K/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) FY2015SEPT NCO 18

Place of Performance

Location: PHOENIX, MARICOPA County, ARIZONA, 85001

State: Arizona Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $26.8 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT PHARMACY PRIME VENDOR (PPV) FY2015SEPT NCO 18 Key points: 1. The contract represents a significant portion of the VA's pharmaceutical spending. 2. Competition dynamics for this contract are crucial for ensuring cost-effectiveness. 3. Performance context is vital to understand the reliability of pharmaceutical supply. 4. The sector positioning highlights the VA's reliance on large pharmaceutical distributors. 5. Risk indicators may include supply chain disruptions and price volatility.

Value Assessment

Rating: good

The award of $26.8 million for a one-month delivery order appears to be a standard operational expenditure for the VA's Pharmacy Prime Vendor program. Benchmarking against similar, longer-term contracts would provide a clearer picture of value for money. However, given the scale of the VA's pharmaceutical needs, this amount is likely competitive within the context of national pharmaceutical distribution.

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 had the opportunity to submit proposals. The presence of multiple bidders generally fosters price discovery and encourages competitive pricing. The specific number of bidders (5) suggests a healthy level of competition for this essential service.

Taxpayer Impact: A full and open competition process is beneficial for taxpayers as it is designed to secure the best possible pricing and terms by leveraging market forces.

Public Impact

Veterans across Arizona and potentially nationwide benefit from timely access to pharmaceuticals. The contract ensures the supply of essential medications for healthcare facilities. Geographic impact is primarily focused on Arizona, where the delivery order was placed. Workforce implications include roles in pharmaceutical logistics, distribution, and administration.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases in future contract periods.
Dependence on a single vendor for a critical supply chain.
Ensuring consistent quality and availability of pharmaceuticals.

Positive Signals

Awarded through full and open competition, suggesting competitive pricing.
The contract supports a vital healthcare service for veterans.
The vendor has a significant track record in pharmaceutical distribution.

Sector Analysis

The pharmaceutical distribution sector is characterized by large, established players managing complex supply chains. The VA's Pharmacy Prime Vendor program is a critical component of its healthcare system, ensuring access to medications. Comparable spending benchmarks would involve analyzing other large federal agencies or healthcare systems' pharmaceutical procurement strategies.

Small Business Impact

This contract does not appear to have a small business set-aside. Analysis of subcontracting opportunities for small businesses within McKesson's distribution network would be necessary to assess the impact on the small business ecosystem.

Oversight & Accountability

Oversight is likely managed by the Department of Veterans Affairs procurement and logistics departments. Accountability measures would be tied to contract performance metrics, delivery timelines, and quality standards. Transparency is generally maintained through federal procurement databases, though specific performance data 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

Potential for price escalation in future contract periods.
Dependence on a single large vendor for critical pharmaceutical supply.
Ensuring consistent quality and availability of a wide range of pharmaceuticals.

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $26.8 million to MCKESSON CORPORATION. EXPRESS REPORT PHARMACY PRIME VENDOR (PPV) FY2015SEPT NCO 18

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 $26.8 million.

What is the period of performance?

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

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

McKesson Corporation has a long-standing relationship with the Department of Veterans Affairs as a Pharmacy Prime Vendor (PPV). They have consistently been awarded major contracts to supply pharmaceuticals to VA medical centers and clinics across various regions. Their track record generally indicates a capacity to manage large-scale pharmaceutical distribution and meet the VA's complex logistical requirements. However, like any large government contractor, there may have been instances of performance reviews, audits, or contract modifications over the years that would warrant closer examination to fully assess their historical performance and reliability in fulfilling the VA's mission.

How does the $26.8 million award for a one-month period compare to typical monthly spending for the Pharmacy Prime Vendor program?

The $26.8 million award for a one-month period in FY2015 represents a substantial monthly expenditure. To accurately benchmark this, one would need to compare it to the average monthly spending across multiple years and contract periods for the Pharmacy Prime Vendor program. Given that the VA serves millions of veterans and operates numerous medical facilities, a monthly spend in the tens of millions for pharmaceuticals is not unexpected. However, analyzing trends over time and comparing this figure to the total annual pharmaceutical budget would provide better context on whether this represents efficient spending or potential areas for cost savings.

What are the primary risk indicators associated with this type of pharmaceutical supply contract?

Primary risk indicators for this type of pharmaceutical supply contract include supply chain disruptions, which can arise from manufacturing issues, natural disasters, or geopolitical events, leading to drug shortages. Price volatility is another significant risk, as pharmaceutical prices can fluctuate based on market demand, new drug introductions, and regulatory changes. Dependence on a single large vendor like McKesson also presents a risk, as any failure on their part could have widespread consequences for veteran healthcare. Furthermore, ensuring the integrity and security of the pharmaceutical supply chain against counterfeiting or diversion is a constant concern.

How effective is the full and open competition process in ensuring value for money for the VA's pharmaceutical needs?

The full and open competition process is generally considered effective in ensuring value for money for the VA's pharmaceutical needs. By allowing all responsible sources to submit bids, it fosters a competitive environment that drives down prices and encourages innovation in service delivery. The VA's solicitation documents typically outline detailed performance requirements, quality standards, and delivery schedules, allowing bidders to propose solutions that meet these needs at the most competitive price. The presence of multiple bidders, as indicated by the five proposals received for this contract, suggests that the process is attracting sufficient market interest to promote price discovery and achieve favorable terms for the government.

What are the historical spending patterns for the Pharmacy Prime Vendor program over the last five fiscal years prior to FY2015?

To determine historical spending patterns for the Pharmacy Prime Vendor program over the last five fiscal years prior to FY2015, one would need to access and analyze the VA's contract spending data. This would involve looking at total obligated amounts for the PPV contracts awarded to various vendors, including McKesson, over periods such as FY2010-FY2014. Such an analysis would reveal trends in overall spending, identify any significant year-over-year increases or decreases, and potentially highlight shifts in vendor market share. Understanding these patterns is crucial for budgeting, forecasting future needs, and identifying any anomalies that might warrant further investigation into cost drivers or program efficiency.

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: $26,782,897

Exercised Options: $26,782,897

Current Obligation: $26,782,897

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: VA797P12D0001

IDV Type: IDC

Timeline