VA Pharmacy Prime Vendor contract awarded to McKesson Corporation for over $182 million

Contract Overview

Contract Amount: $182,453,799 ($182.5M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2014-12-01

End Date: 2014-12-30

Contract Duration: 29 days

Daily Burn Rate: $6.3M/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 VA760PPVFY2015DEC

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $182.5 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT PHARMACY PRIME VENDOR VA760PPVFY2015DEC Key points: 1. The contract represents a significant investment in pharmaceutical supply chain management for the VA. 2. Competition dynamics for this large-scale contract are crucial for ensuring cost-effectiveness. 3. Performance metrics and delivery timelines are key indicators of contractor reliability. 4. This contract positions McKesson as a critical supplier within the healthcare sector. 5. The fixed-price nature of the contract aims to provide cost certainty. 6. Oversight of this contract is essential to manage risks and ensure value.

Value Assessment

Rating: good

The awarded amount of $182.4 million over a 29-day period suggests a high-value, ongoing service. Benchmarking against similar large-scale pharmaceutical prime vendor contracts within the federal government would be necessary for a precise value-for-money assessment. However, given the scale and the nature of pharmaceutical distribution, the pricing is likely competitive, assuming a robust bidding process. The fixed-price contract type helps in managing cost predictability.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders had the opportunity to submit proposals. The presence of multiple bidders typically fosters a competitive environment, which can lead to better pricing and service offerings for the government. The number of bidders (5) suggests a healthy level of interest and competition for this significant contract.

Taxpayer Impact: Full and open competition generally benefits taxpayers by driving down costs through competitive bidding and encouraging innovation from multiple providers.

Public Impact

Veterans will benefit from timely and reliable access to pharmaceuticals. The contract ensures the supply of pharmaceutical preparations to VA facilities. The geographic impact is nationwide, supporting VA medical centers and clinics across the country. This contract supports jobs within the pharmaceutical distribution and logistics sectors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases in future contract periods if competition diminishes.
Reliance on a single prime vendor could create supply chain vulnerabilities.
Ensuring consistent quality and availability of a wide range of pharmaceuticals is a continuous challenge.

Positive Signals

Awarded through full and open competition, indicating a competitive market.
Fixed-price contract type provides cost certainty for the government.
The scale of the contract suggests McKesson's capacity to meet significant demand.

Sector Analysis

The pharmaceutical manufacturing and distribution sector is a critical component of the healthcare industry, with significant federal spending allocated to ensuring access to medications. This contract falls within the broader healthcare and pharmaceutical supply chain, a market characterized by large, established players and complex regulatory requirements. Comparable spending benchmarks would involve looking at other large federal prime vendor contracts for pharmaceuticals or medical supplies.

Small Business Impact

While this contract is awarded to a large corporation (McKesson), the analysis of small business participation is crucial. It's important to determine if there are subcontracting opportunities for small businesses in areas such as logistics, specialized delivery, or support services. The absence of explicit small business set-aside information suggests that the primary award was not directed towards small businesses, but subcontracting plans should be reviewed.

Oversight & Accountability

Oversight for this contract would typically be managed by the Department of Veterans Affairs contracting officers and program managers. Accountability measures would include performance monitoring, adherence to delivery schedules, and quality control of pharmaceutical products. Transparency is generally maintained through contract award databases and public reporting, though specific operational details may be sensitive. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Federal Supply Schedule (FSS) contracts
Department of Defense (DoD) pharmaceutical contracts
Other agency prime vendor agreements

Risk Flags

Potential for supply chain disruption
Price volatility of pharmaceuticals
Contractor performance risk
Dependence on a single large supplier

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $182.5 million to MCKESSON CORPORATION. EXPRESS REPORT PHARMACY PRIME VENDOR VA760PPVFY2015DEC

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 $182.5 million.

What is the period of performance?

Start: 2014-12-01. End: 2014-12-30.

What is McKesson Corporation's track record with the Department of Veterans Affairs and other federal agencies for similar pharmaceutical prime vendor contracts?

McKesson Corporation has a long-standing and extensive history of serving as a prime vendor for pharmaceuticals to the Department of Veterans Affairs (VA) and other federal agencies, including the Department of Defense. Their track record includes managing complex supply chains, ensuring timely delivery of a vast array of medications, and adapting to evolving healthcare needs. Past performance evaluations, available through federal contract databases and agency reports, generally indicate their capability to handle large-scale pharmaceutical distribution. However, like any large contractor, there may have been instances of performance issues or disputes that would be documented in their contract history. Understanding the specifics of their past performance, including any corrective actions taken or penalties incurred, is vital for assessing the risk associated with this current contract.

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

Determining the precise per-unit cost comparison is challenging without access to the detailed pricing structure of the contract and specific pharmaceutical line items. However, federal prime vendor contracts, especially those awarded under full and open competition, are generally expected to yield competitive pricing due to the scale of the orders and the bidding process. The VA often leverages its significant purchasing power to negotiate favorable rates. Benchmarking against other federal contracts, such as those awarded through the Federal Supply Schedule (FSS) or other agency-specific prime vendor agreements, would provide a more concrete comparison. Market rates can fluctuate significantly based on drug type, manufacturer, and volume. The fixed-price nature of this contract suggests an effort to stabilize these costs over the contract period.

What are the primary risks associated with relying on a single prime vendor for such a large volume of pharmaceutical needs?

The primary risks associated with relying on a single prime vendor like McKesson for a large volume of pharmaceutical needs include supply chain disruptions, potential for price increases in future contract renewals if competition is limited, and over-reliance leading to reduced leverage for the government. A significant disruption, such as a natural disaster affecting McKesson's distribution centers, a major cyberattack, or labor disputes, could severely impact the VA's ability to procure essential medications. Furthermore, if McKesson becomes the sole dominant provider in subsequent bidding rounds, the government might face less favorable pricing. Ensuring robust contingency plans, maintaining strong oversight, and fostering an environment that encourages continued competition are key mitigation strategies.

How effective is the current contract structure in ensuring the availability and timely delivery of critical medications to veterans?

The effectiveness of the contract structure in ensuring availability and timely delivery hinges on several factors, including the performance metrics stipulated in the contract, the VA's oversight mechanisms, and McKesson's operational capabilities. The contract's fixed-price nature aims to incentivize efficient delivery. The Department of Veterans Affairs likely has performance standards and penalties in place to ensure McKesson meets delivery schedules and maintains adequate stock levels for a wide range of pharmaceuticals. Regular performance reviews and data analysis on fill rates, delivery times, and stock availability are crucial for assessing effectiveness. The fact that this is a recurring contract suggests a level of satisfaction with its effectiveness, but continuous monitoring is essential.

What has been the historical spending trend for the VA's Pharmacy Prime Vendor program over the last five years?

Historical spending trends for the VA's Pharmacy Prime Vendor program would reveal the program's growth or contraction over time. This specific contract, awarded in late 2014 for a period ending in 2014 (likely a short-term or initial award), represents a snapshot. To understand the trend, one would need to examine the total value of all Pharmacy Prime Vendor contracts awarded by the VA annually over the past five years. Factors influencing spending include the number of veterans served, changes in pharmaceutical costs, expansion of VA healthcare services, and shifts in contracting strategies (e.g., moving towards longer-term contracts or different vendor models). Analyzing this trend provides context for the significance and scale of the current award.

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: $182,453,799

Exercised Options: $182,453,799

Current Obligation: $182,453,799

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: VA797P12D0001

IDV Type: IDC

Timeline