DoD's $96M Pharmacy Benefit Management contract awarded to Wisconsin Physicians Service Insurance Corp

Contract Overview

Contract Amount: $96,195,577 ($96.2M)

Contractor: Wisconsin Physicians Service Insurance Corp.

Awarding Agency: Department of Defense

Start Date: 2011-06-30

End Date: 2012-06-30

Contract Duration: 366 days

Daily Burn Rate: $262.8K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIXED PRICE INCENTIVE

Sector: Healthcare

Official Description: THIS DELIVERY ORDER ORDERS SERVICES AND PROVIDES FY11 FUNDING FOR THE EXERISE OF OPTION 4 FOR THE PERIOD OF JULY 1, 2011 THROUGH SEPTEMBER 30, 2011.

Place of Performance

Location: MONONA, DANE County, WISCONSIN, 53713, UNITED STATES OF AMERICA

State: Wisconsin Government Spending

Plain-Language Summary

Department of Defense obligated $96.2 million to WISCONSIN PHYSICIANS SERVICE INSURANCE CORP. for work described as: THIS DELIVERY ORDER ORDERS SERVICES AND PROVIDES FY11 FUNDING FOR THE EXERISE OF OPTION 4 FOR THE PERIOD OF JULY 1, 2011 THROUGH SEPTEMBER 30, 2011. Key points: 1. Contract value of $96.2M for a 1-year period, representing a significant investment in pharmacy benefit management. 2. Awarded under full and open competition, suggesting a robust market for these services. 3. The contract type is Fixed Price Incentive, which aims to align contractor performance with government objectives. 4. This contract is part of a larger framework, indicated by the 'DO' award type, suggesting it's a delivery order against a larger contract. 5. The services provided are crucial for the Defense Health Agency's operational efficiency and beneficiary care. 6. The duration of 366 days aligns with typical annual service contracts for ongoing operational needs.

Value Assessment

Rating: good

The contract's value of $96.2 million for a one-year period for Pharmacy Benefit Management appears reasonable given the scope of services for a large federal agency like the Department of Defense. Benchmarking against similar large-scale PBM contracts within the federal government or large private sector entities would provide a more precise value assessment. The Fixed Price Incentive (FPI) contract type suggests an effort to control costs while incentivizing performance, which is a positive indicator for value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple qualified vendors had the opportunity to bid. The presence of multiple bidders generally leads to more competitive pricing and a wider range of innovative solutions. The specific number of bidders is not provided, but the 'full and open' designation is a strong positive signal for market competitiveness.

Taxpayer Impact: Full and open competition typically benefits taxpayers by driving down costs through market forces and ensuring the government receives the best possible value for its investment.

Public Impact

Beneficiaries of this contract include active duty military personnel, retirees, and their families who rely on the Defense Health Agency for their healthcare needs. The services delivered encompass pharmacy benefit management, ensuring efficient and cost-effective dispensing of prescription medications. The geographic impact is nationwide, covering all eligible beneficiaries of the Department of Defense. Workforce implications include the potential for jobs within Wisconsin Physicians Service Insurance Corp. and its subcontractors, as well as indirect impacts on healthcare providers and pharmacies.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if incentive targets are not met or if unforeseen circumstances arise in pharmacy benefit management.
Reliance on a single contractor for a critical function like PBM could pose a risk if performance issues emerge.
The complexity of managing pharmaceutical benefits requires robust oversight to ensure compliance and effectiveness.

Positive Signals

Awarded through full and open competition, suggesting a competitive market and potentially favorable pricing.
The use of a Fixed Price Incentive contract type indicates a structured approach to managing performance and costs.
The contractor, Wisconsin Physicians Service Insurance Corp., likely has established expertise in managing large-scale insurance and benefit programs.

Sector Analysis

The Pharmacy Benefit Management (PBM) sector is a critical component of the healthcare industry, managing prescription drug benefits on behalf of health insurers, Medicare Part D drug plans, and other payers. The federal government is a significant player in this market, contracting for PBM services to manage costs and ensure access to medications for its beneficiaries. Spending in this sector is substantial, driven by the rising cost of pharmaceuticals and the need for efficient drug utilization programs. This contract fits within the broader landscape of federal healthcare spending, specifically supporting the Defense Health Agency's mission.

Small Business Impact

The provided data does not indicate any specific small business set-aside provisions for this contract. As a large-scale contract for pharmacy benefit management, it is likely that the prime contractor, Wisconsin Physicians Service Insurance Corp., may engage subcontractors. Analysis of subcontracting plans would be necessary to determine the extent of small business participation and its impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting officer and the Defense Contract Management Agency (DCMA) or a similar entity within the Department of Defense. Accountability measures are embedded within the Fixed Price Incentive contract structure, which links payment to performance against defined targets. Transparency is generally maintained through contract awards databases and reporting requirements, though specific performance metrics and oversight reports may not always be publicly accessible.

Related Government Programs

TRICARE Pharmacy Program
Department of Veterans Affairs Pharmacy Benefits Management
Federal Employees Health Benefits Program (FEHBP) Pharmacy Services

Risk Flags

Contract performance risk
Cost overrun potential
Reliance on single contractor

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $96.2 million to WISCONSIN PHYSICIANS SERVICE INSURANCE CORP.. THIS DELIVERY ORDER ORDERS SERVICES AND PROVIDES FY11 FUNDING FOR THE EXERISE OF OPTION 4 FOR THE PERIOD OF JULY 1, 2011 THROUGH SEPTEMBER 30, 2011.

Who is the contractor on this award?

The obligated recipient is WISCONSIN PHYSICIANS SERVICE INSURANCE CORP..

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Health Agency).

What is the total obligated amount?

The obligated amount is $96.2 million.

What is the period of performance?

Start: 2011-06-30. End: 2012-06-30.

What is the historical spending trend for Pharmacy Benefit Management services by the Department of Defense?

Analyzing historical spending for PBM services by the DoD requires examining contract awards over several fiscal years. While this specific delivery order represents $96.2 million for FY11, understanding the broader trend involves looking at the total obligated amounts for PBM contracts awarded by the Defense Health Agency and other relevant DoD components. Trends may show increases due to rising drug costs, changes in beneficiary populations, or shifts in healthcare policy. For instance, if previous contracts were significantly lower or higher, it could indicate a change in scope, market pricing, or strategic focus. A comprehensive review would involve aggregating data from similar contracts to identify patterns in annual spending, contract durations, and the number of awarded contracts over time.

How does the pricing structure of this Fixed Price Incentive (FPI) contract compare to other PBM contracts?

The Fixed Price Incentive (FPI) contract type is designed to share cost risks and benefits between the government and the contractor. In an FPI contract, a target cost, target profit, and a price ceiling are established. If the final cost is below the target cost, both parties share in the savings. If the final cost exceeds the target cost but remains below the ceiling, the contractor's profit is reduced. If the cost exceeds the ceiling, the contractor absorbs the excess cost. Comparing this to other PBM contracts, some might use Firm-Fixed-Price (FFP) contracts, where the price is set and not subject to adjustment, or Cost-Plus-Incentive-Fee (CPIF) contracts, which have a higher degree of cost sharing. The FPI structure here suggests a balance, aiming for cost efficiency while allowing for some flexibility and performance-based rewards.

What are the key performance indicators (KPIs) used to measure the success of this Pharmacy Benefit Management contract?

Key performance indicators (KPIs) for a Pharmacy Benefit Management contract typically focus on cost savings, access to medications, quality of service, and administrative efficiency. For this specific contract, KPIs might include metrics such as formulary compliance rates, generic dispensing rates, drug cost per prescription, turnaround times for claims processing, beneficiary satisfaction scores, and adherence to established clinical guidelines. The 'incentive' aspect of the FPI contract implies that specific performance targets related to these KPIs would be set, and the contractor's profit would be adjusted based on their achievement. Detailed KPIs are usually outlined in the contract's Performance Work Statement (PWS).

What is the track record of Wisconsin Physicians Service Insurance Corp. in managing federal healthcare contracts?

Wisconsin Physicians Service Insurance Corp. (WPS) has a significant history of managing healthcare contracts, including those with federal agencies. They are a major provider of health insurance and administrative services, including for Medicare Part A and Part B programs, and have experience with TRICARE. Their track record involves managing large member populations, processing claims, and administering benefits. Assessing their specific performance on federal contracts would involve reviewing past contract performance evaluations, any reported disputes or contract modifications, and their overall reputation within the federal healthcare contracting space. Their longevity and continued awards suggest a generally positive performance history.

What is the potential impact of this contract on the overall healthcare spending of the Department of Defense?

This contract, valued at $96.2 million, represents a significant portion of the Defense Health Agency's budget allocated to pharmacy benefit management for the specified period. Its impact on overall DoD healthcare spending is substantial, as effective PBM services are designed to control pharmaceutical costs, which are a major component of healthcare expenditures. By managing drug formularies, negotiating rebates with manufacturers, and promoting the use of generics, the contractor aims to achieve cost savings. The success of this contract in meeting its cost-efficiency targets directly influences the DoD's ability to manage its healthcare budget and provide comprehensive benefits to its beneficiaries within financial constraints.

Industry Classification

NAICS: Finance and Insurance › Agencies, Brokerages, and Other Insurance Related Activities › Pharmacy Benefit Management and Other Third Party Administration of Insurance and Pension Funds

Product/Service Code: MEDICAL SERVICES › OTHER MEDICAL SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 2

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Address: 1717 W BROADWAY, MADISON, WI, 53713

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $98,557,952

Exercised Options: $98,557,952

Current Obligation: $96,195,577

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: H9400207D0001

IDV Type: IDC

Timeline