DoD's Pharmacy Benefit Management contract saw $96.7M in FY13 funding, awarded via full and open competition

Contract Overview

Contract Amount: $96,720,785 ($96.7M)

Contractor: Wisconsin Physicians Service Insurance Corp.

Awarding Agency: Department of Defense

Start Date: 2013-06-28

End Date: 2014-12-31

Contract Duration: 551 days

Daily Burn Rate: $175.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIXED PRICE INCENTIVE

Sector: Healthcare

Official Description: FISCAL YEAR 2013 FUNDING FOR THE EXERCISE OF OPTION PERIOD 6 OF THE CONTRACT. OPTION PERIOD 6 7/1/2013 THROUGH 6/30/2014

Place of Performance

Location: MADISON, DANE County, WISCONSIN, 53707

State: Wisconsin Government Spending

Plain-Language Summary

Department of Defense obligated $96.7 million to WISCONSIN PHYSICIANS SERVICE INSURANCE CORP. for work described as: FISCAL YEAR 2013 FUNDING FOR THE EXERCISE OF OPTION PERIOD 6 OF THE CONTRACT. OPTION PERIOD 6 7/1/2013 THROUGH 6/30/2014 Key points: 1. The contract's value demonstrates significant investment in managing pharmaceutical benefits for military personnel and their families. 2. Awarded through full and open competition, suggesting a robust market for these services. 3. The fixed-price incentive contract type aims to align contractor performance with cost control objectives. 4. The duration of the contract and its option periods indicate a long-term need for these critical health services. 5. Performance context is crucial to understand if the awarded price reflects efficient service delivery. 6. The Defense Health Agency's reliance on this contract highlights its central role in military healthcare.

Value Assessment

Rating: good

The $96.7 million in FY13 funding for this option period represents a substantial investment in pharmacy benefit management. Benchmarking this against similar large-scale PBM contracts within the federal government or large private sector entities would provide a clearer picture of value for money. The fixed-price incentive structure suggests an effort to control costs while ensuring performance, but the ultimate value depends on the achieved performance metrics and the final negotiated price.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple capable vendors were likely solicited and submitted proposals. The presence of multiple bidders generally fosters price discovery and encourages competitive pricing. The specific number of bidders (2 in this case) is a key factor in assessing the intensity of the competition and its potential impact on the final award price.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it typically leads to more competitive pricing and a wider selection of qualified contractors, maximizing the use of public funds.

Public Impact

Beneficiaries include active duty military personnel, retirees, and their eligible family members who rely on prescription drug benefits. Services delivered include the administration and management of pharmacy benefits, ensuring access to medications. The geographic impact is nationwide, covering all eligible beneficiaries regardless of their location. Workforce implications may involve the contractor's personnel managing the PBM services and potentially impacting civilian healthcare roles.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if incentive targets are not met or if contract scope expands.
Dependence on a single contractor for a critical healthcare service raises concerns about continuity of care if issues arise.
Ensuring robust oversight is necessary to validate performance metrics and cost-effectiveness over the contract's life.

Positive Signals

Awarded through full and open competition, suggesting a competitive market and potentially favorable pricing.
The fixed-price incentive contract type is designed to incentivize cost control and performance.
The long-term nature of the contract and its option periods indicate a stable and ongoing need, suggesting a proven service provider.

Sector Analysis

The Pharmacy Benefit Management (PBM) sector within healthcare is a significant market, managing prescription drug benefits for millions. Federal spending in this area is substantial, driven by programs like TRICARE. This contract fits within the broader landscape of healthcare services procurement, where efficiency and cost-effectiveness are paramount. Comparable spending benchmarks would involve analyzing other large PBM contracts, both within the government and in the private sector, to assess pricing and service delivery models.

Small Business Impact

The provided data does not indicate any specific small business set-aside provisions for this contract. However, large prime contracts like this often have subcontracting requirements, which could present opportunities for small businesses to participate in delivering specific components of the pharmacy benefit management services. The extent of small business participation would depend on the prime contractor's subcontracting plan and adherence to federal small business goals.

Oversight & Accountability

Oversight for this contract would primarily fall under the Defense Health Agency (DHA) and potentially the Department of Defense's Inspector General. Mechanisms likely include performance reviews, audits, and monitoring of key performance indicators outlined in the contract. Transparency is facilitated through contract awards databases, but detailed operational oversight specifics are typically internal to the agency.

Related Government Programs

TRICARE Pharmacy Program
Federal Employee Health Benefits (FEHB) Program Pharmacy Services
Veterans Affairs (VA) Pharmacy Benefits Management
Medicaid Pharmacy Services Administration

Risk Flags

Potential for cost creep in fixed-price incentive contracts if not managed closely.
Long-term reliance on a single contractor may reduce competitive pressure.
Need for ongoing performance monitoring to ensure value for money.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $96.7 million to WISCONSIN PHYSICIANS SERVICE INSURANCE CORP.. FISCAL YEAR 2013 FUNDING FOR THE EXERCISE OF OPTION PERIOD 6 OF THE CONTRACT. OPTION PERIOD 6 7/1/2013 THROUGH 6/30/2014

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 $96.7 million.

What is the period of performance?

Start: 2013-06-28. End: 2014-12-31.

What is the historical spending trend for this specific contract over its entire duration?

The provided data focuses on Fiscal Year 2013 funding for Option Period 6, amounting to $96.7 million. To understand the historical spending trend, one would need to access data for all preceding and subsequent option periods and fiscal years. This would involve querying federal procurement databases for all awards and modifications related to contract number 524292. Analyzing this complete history would reveal the total lifecycle cost, identify any significant fluctuations in annual spending, and indicate whether the contract has been consistently funded or subject to budget changes. It would also help determine if the current funding level is representative of the contract's overall financial trajectory.

How does the per-unit cost of pharmacy benefit management services under this contract compare to industry benchmarks?

Determining the precise per-unit cost requires a clear definition of the 'unit' (e.g., per prescription, per member per month) and access to the contractor's detailed pricing structure, which is often proprietary. However, a comparison can be made by analyzing the total contract value ($96.7M for FY13) against the number of covered lives or prescriptions processed during that period. If data on these metrics is available, it can be benchmarked against industry reports from organizations like the Kaiser Family Foundation or private PBM analytics firms. The fixed-price incentive nature of the contract suggests that the government aims for cost-effectiveness, but without specific unit cost data and comparable benchmarks, a definitive assessment is challenging.

What are the key performance indicators (KPIs) for this contract, and how has Wisconsin Physicians Service Insurance Corp. performed against them?

Key performance indicators for a Pharmacy Benefit Management contract typically include metrics such as drug cost savings, formulary compliance, network adequacy, member satisfaction, claims processing accuracy, and turnaround times for authorizations. The specific KPIs for this contract would be detailed in the Performance Work Statement (PWS). To assess Wisconsin Physicians Service Insurance Corp.'s performance, one would need access to contract performance reports, quality assurance reviews, and any contractor performance assessment reporting (CPAR) data. Without this specific performance data, it's impossible to definitively state how well the contractor has met its obligations beyond the fact that the contract has been exercised through option periods.

What is the track record of Wisconsin Physicians Service Insurance Corp. with other federal contracts, particularly in healthcare administration?

Wisconsin Physicians Service Insurance Corp. (WPS) has a significant history of contracting with the federal government, particularly within the healthcare sector. They are a major contractor for Medicare administrative contracts (MACs) and have administered TRICARE benefits in the past. Examining their performance on these other large-scale federal contracts can provide insights into their capabilities, reliability, and past performance. A review of contract databases and CPARs for their other federal awards would reveal any patterns of success, challenges, or performance issues. Their continued success in securing and performing on large federal healthcare contracts suggests a generally positive track record, though specific contract performance can vary.

What are the potential risks associated with a long-term, sole-source or limited-competition contract for essential services like PBM?

While this contract was awarded under full and open competition, the exercise of option periods can sometimes lead to a de facto sole-source situation if the incumbent contractor is the only one capable or willing to continue services under the existing terms. Risks associated with long-term, limited-competition contracts include potential price escalation over time, reduced incentive for innovation, and a diminished ability for the government to switch providers if performance issues arise. This can lead to higher costs for taxpayers and potentially less efficient service delivery compared to a continuously competitive environment. Robust oversight and regular re-competition strategies are crucial to mitigate these risks.

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: $96,720,785

Exercised Options: $96,720,785

Current Obligation: $96,720,785

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: H9400207D0001

IDV Type: IDC

Timeline