VA's $40.4M Pharmacy Prime Vendor contract awarded to McKesson Corporation for September 2015

Contract Overview

Contract Amount: $40,450,078 ($40.5M)

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: $1.4M/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 22

Place of Performance

Location: LONG BEACH, LOS ANGELES County, CALIFORNIA, 90801

State: California Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $40.5 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT PHARMACY PRIME VENDOR (PPV) FY2015SEPT NCO 22 Key points: 1. The contract represents a significant expenditure for pharmaceutical preparation manufacturing. 2. Competition dynamics for this contract are crucial for ensuring fair pricing. 3. Performance context is essential to understand the value delivered by McKesson. 4. Sector positioning highlights the VA's reliance on large vendors for essential supplies. 5. Risk indicators may include supply chain disruptions and price volatility.

Value Assessment

Rating: fair

The contract value of $40.4 million for a single month of pharmaceutical supply is substantial. Benchmarking this against similar prime vendor contracts for the Department of Veterans Affairs (VA) or other federal agencies would be necessary to assess value for money. Without comparative data on per-unit costs or overall program efficiency, it is difficult to definitively assess if this represents excellent value. The firm fixed-price structure provides cost certainty but may limit flexibility.

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 5 bidders suggests a competitive marketplace for pharmaceutical prime vendor services. A robust competition typically leads to better price discovery and potentially more favorable terms for the government.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it drives down prices through market forces, ensuring that the government is not overpaying for essential pharmaceutical supplies.

Public Impact

Veterans across the nation benefit from timely access to prescribed medications. The contract ensures the supply of pharmaceutical preparations to VA medical facilities. Geographic impact is nationwide, supporting VA healthcare delivery across all states. Workforce implications include support for pharmacy technicians and logistics personnel within the VA system.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases in subsequent contract periods.
Dependence on a single vendor could create supply chain vulnerabilities.
Ensuring consistent quality of pharmaceuticals across all deliveries.

Positive Signals

Awarded through full and open competition, suggesting competitive pricing.
Firm fixed-price contract provides cost predictability.
Established vendor with significant experience in pharmaceutical distribution.

Sector Analysis

The pharmaceutical prime vendor market is a critical component of the healthcare sector, ensuring the availability of medications. Large federal contracts like this represent significant portions of the market for major distributors. The VA's spending on pharmaceuticals is substantial, reflecting its commitment to veteran healthcare. Comparable spending benchmarks would involve analyzing other large federal healthcare procurements for similar services.

Small Business Impact

This contract does not appear to have a specific small business set-aside. However, large prime vendors often engage small businesses as subcontractors for specialized services or distribution within their network. The impact on the small business ecosystem would depend on the extent to which McKesson utilizes small business partners in fulfilling this contract.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Veterans Affairs' procurement and program management offices. Accountability measures are embedded in the contract terms, including delivery schedules and quality standards. Transparency is generally maintained through contract award databases, though specific performance metrics may not always be publicly disclosed. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Department of Defense Pharmacy Prime Vendor Program
Federal Supply Schedule (FSS) for Pharmaceuticals
TRICARE Pharmacy Program

Risk Flags

Potential for supply chain disruption
Price volatility of pharmaceuticals
Dependence on large prime vendors

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $40.5 million to MCKESSON CORPORATION. EXPRESS REPORT PHARMACY PRIME VENDOR (PPV) FY2015SEPT NCO 22

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 $40.5 million.

What is the period of performance?

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

What is McKesson Corporation's track record with federal pharmaceutical contracts?

McKesson Corporation is a major player in the pharmaceutical distribution industry and has a long history of holding significant federal contracts, including Pharmacy Prime Vendor (PPV) agreements with the Department of Veterans Affairs (VA) and other agencies. Their track record generally indicates substantial capacity and experience in managing large-scale pharmaceutical supply chains. However, like any large contractor, they may have faced scrutiny or performance issues on specific contracts over time. Analyzing past performance evaluations, contract modifications, and any disputes or investigations related to their federal contracts would provide a more comprehensive view of their reliability and effectiveness in fulfilling government requirements.

How does the $40.4 million monthly value compare to other VA pharmaceutical contracts?

The $40.4 million monthly expenditure for the Pharmacy Prime Vendor (PPV) contract awarded to McKesson Corporation in September 2015 is a substantial figure. To benchmark this value, it's essential to compare it with similar PPV contracts awarded by the VA during that period or in subsequent years. The VA operates multiple prime vendor contracts to serve different regions or needs, and their total annual pharmaceutical spending runs into billions of dollars. A direct comparison would involve looking at the average monthly spend across all VA PPV contracts, the value of contracts awarded to other major pharmaceutical distributors (like Cardinal Health or AmerisourceBergen), and the per-unit costs for common medications. Without this comparative data, it's difficult to definitively state whether $40.4 million per month represents high or low value.

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

Several risks are associated with large pharmaceutical supply contracts like the VA's Pharmacy Prime Vendor (PPV) agreement. A primary risk is supply chain disruption, which could stem from manufacturing issues, natural disasters, or geopolitical events affecting the availability of critical medications. Price volatility is another concern; even with a firm fixed-price contract for a specific period, future contract renewals could see significant price increases, especially for specialized or newly developed drugs. Dependence on a single large vendor, even if awarded through competition, can create a vulnerability if that vendor experiences operational failures or financial instability. Furthermore, ensuring the quality and authenticity of pharmaceuticals distributed on such a large scale is paramount to patient safety, and risks related to counterfeit or substandard drugs must be mitigated through rigorous quality control measures.

How effective is the full and open competition process in securing favorable terms for the VA?

The full and open competition process is generally considered the most effective method for the VA to secure favorable terms on pharmaceutical supply contracts. By allowing all responsible sources to submit bids, the VA maximizes the potential pool of offerors, thereby increasing the likelihood of receiving competitive pricing. The presence of multiple bidders, as indicated by the 5 bidders for this contract, intensifies this competition, driving down profit margins for contractors and encouraging them to offer their best prices and terms. This process also promotes innovation and efficiency as contractors vie for the award. While full and open competition is robust, the VA must still ensure its solicitation requirements are clear and comprehensive to elicit truly comparable and value-driven proposals.

What is the historical spending trend for the VA's Pharmacy Prime Vendor program?

The Department of Veterans Affairs (VA) has consistently allocated substantial funding to its Pharmacy Prime Vendor (PPV) program over the years, reflecting the critical need to supply medications to millions of veterans. Historical spending data indicates a general upward trend in pharmaceutical expenditures, driven by factors such as an aging veteran population, the introduction of new and often more expensive therapies, and inflation. The PPV program itself has evolved, with contract values often in the tens of billions of dollars annually when aggregated across all contracts and regions. Analyzing year-over-year spending for the PPV program, including the number of contracts awarded and the average contract value, would reveal the scale and growth trajectory of this essential healthcare procurement.

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: $40,450,078

Exercised Options: $40,450,078

Current Obligation: $40,450,078

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: VA797P12D0001

IDV Type: IDC

Timeline