DoD's $50M Pharmacy Benefit Management contract awarded to Wisconsin Physicians Service Insurance Corp. for 6 months

Contract Overview

Contract Amount: $49,849,228 ($49.8M)

Contractor: Wisconsin Physicians Service Insurance Corp.

Awarding Agency: Department of Defense

Start Date: 2014-06-18

End Date: 2014-12-31

Contract Duration: 196 days

Daily Burn Rate: $254.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: IGF::OT::IGF A. THE PURPOSE OF THIS TASK ORDER IS THE FISCAL YEAR 2014 FUNDING FOR THE OPTION TO EXTEND SERVICES OF THE CONTRACT FROM JULY 1, 2014 THROUGH SEPTEMBER 30, 2014.

Place of Performance

Location: MONONA, DANE County, WISCONSIN, 53713

State: Wisconsin Government Spending

Plain-Language Summary

Department of Defense obligated $49.8 million to WISCONSIN PHYSICIANS SERVICE INSURANCE CORP. for work described as: IGF::OT::IGF A. THE PURPOSE OF THIS TASK ORDER IS THE FISCAL YEAR 2014 FUNDING FOR THE OPTION TO EXTEND SERVICES OF THE CONTRACT FROM JULY 1, 2014 THROUGH SEPTEMBER 30, 2014. Key points: 1. Contract awarded via full and open competition, suggesting a competitive bidding process. 2. The contract duration is relatively short (6 months), potentially indicating a need for ongoing re-evaluation of services. 3. The fixed-price contract type shifts risk to the contractor, which can be beneficial for the government if costs are well-managed. 4. The agency is the Defense Health Agency, a significant entity within the Department of Defense. 5. The service category is Pharmacy Benefit Management, crucial for healthcare cost control. 6. The contract value is substantial, requiring careful monitoring of performance and value.

Value Assessment

Rating: fair

The contract value of approximately $50 million for a six-month period for Pharmacy Benefit Management services appears to be within a reasonable range for a federal contract of this nature. Benchmarking against similar contracts is challenging without more specific details on the scope of services and patient population covered. However, the fixed-price nature of the contract suggests that the government has negotiated a set cost for the services, which can provide cost certainty. Further analysis would require comparing the per-member-per-month costs or specific service utilization rates against industry averages.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. The presence of two bidders suggests a moderate level of competition for this specific task order. While two bidders are better than one, a higher number of bidders typically leads to more robust price discovery and potentially lower prices for the government. The specifics of the bidding process and the evaluation criteria would determine if the competition was truly effective in securing the best value.

Taxpayer Impact: Full and open competition is generally favorable for taxpayers as it encourages multiple companies to vie for the contract, potentially driving down costs through competitive pricing. Even with two bidders, the process aims to ensure the government receives competitive offers.

Public Impact

Beneficiaries include active duty military personnel, retirees, and their families who rely on the TRICARE pharmacy benefit. Services delivered include the administration and management of pharmacy benefits, ensuring access to prescription medications. The geographic impact is nationwide, covering all eligible TRICARE beneficiaries. Workforce implications are primarily related to the contractor's internal operations and administrative staff managing the pharmacy benefit program.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if the fixed-price contract does not adequately account for fluctuating prescription drug costs.
Risk of service disruptions if the contractor's performance is suboptimal during the contract period.
Ensuring continued access to a wide network of pharmacies and medications under the managed benefit.

Positive Signals

Awarded through full and open competition, indicating a structured and transparent procurement process.
Fixed-price contract type provides cost certainty for the government.
The Defense Health Agency's oversight is expected to ensure service delivery meets requirements.

Sector Analysis

The Pharmacy Benefit Management (PBM) sector is a critical component of the healthcare industry, focused on managing prescription drug benefits for health plans, employers, and government programs. The market is characterized by a few large PBMs that handle a significant volume of prescription drugs. Federal spending in this area is substantial, driven by programs like TRICARE, Medicare Part D, and the VA. This contract fits within the broader landscape of federal healthcare procurement, aiming to control pharmaceutical costs and ensure beneficiary access to medications.

Small Business Impact

There is no explicit indication of small business set-asides for this particular task order. The nature of Pharmacy Benefit Management services often involves large-scale operations that may be better suited for larger prime contractors. However, the prime contractor, Wisconsin Physicians Service Insurance Corp., may engage small businesses for subcontracting opportunities related to specific administrative or support functions, though this is not detailed in the provided data.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Health Agency (DHA), which is responsible for managing the TRICARE program. Accountability measures would be defined in the contract's performance work statement (PWS), outlining specific deliverables and service level agreements. Transparency is generally maintained through contract awards databases and reporting requirements. The DHA's Inspector General may also have jurisdiction for audits and investigations related to contract performance and financial integrity.

Related Government Programs

TRICARE Pharmacy Program
Department of Defense Healthcare Contracts
Pharmacy Benefit Management Services
Federal Health Insurance Administration

Risk Flags

Contract duration is short, requiring potential for frequent re-competition or extension.
Potential for cost escalation in pharmaceutical spending not fully captured by fixed price.
Ensuring robust competition with only two bidders requires careful evaluation of the bidding process.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $49.8 million to WISCONSIN PHYSICIANS SERVICE INSURANCE CORP.. IGF::OT::IGF A. THE PURPOSE OF THIS TASK ORDER IS THE FISCAL YEAR 2014 FUNDING FOR THE OPTION TO EXTEND SERVICES OF THE CONTRACT FROM JULY 1, 2014 THROUGH SEPTEMBER 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 $49.8 million.

What is the period of performance?

Start: 2014-06-18. End: 2014-12-31.

What is the historical spending pattern for Pharmacy Benefit Management services under TRICARE?

Historical spending on Pharmacy Benefit Management (PBM) services under TRICARE has been significant, reflecting the substantial costs associated with providing prescription drug benefits to military personnel and their families. While specific figures for this exact task order's predecessors are not provided, the overall TRICARE pharmacy budget has historically been in the billions of dollars annually. This spending covers drug costs, PBM administrative fees, and network pharmacy reimbursements. Fluctuations in spending are influenced by factors such as drug price inflation, utilization trends, formulary changes, and the introduction of new, often more expensive, medications. The DHA continuously seeks to optimize these costs through contract negotiations, preferred drug lists, and mail-order pharmacy programs to ensure cost-effectiveness while maintaining beneficiary access.

How does the per-unit cost of this contract compare to other federal PBM contracts?

Directly comparing the per-unit cost of this $50 million, six-month contract to other federal PBM contracts is challenging without detailed metrics such as per-member-per-month (PMPM) costs, drug cost savings achieved, or specific administrative fees. Federal PBM contracts vary widely in scope, patient population, and the specific services included. For instance, contracts covering Medicare Part D beneficiaries or the VA system may have different cost structures due to varying benefit designs and patient demographics. However, the fact that this contract was awarded under full and open competition with two bidders suggests a degree of market pricing influence. A thorough benchmark would require access to the contractor's proposed pricing structure and a comparison against industry benchmarks for similar PBM services provided to large government health programs.

What are the key performance indicators (KPIs) used to evaluate the contractor's performance?

Key Performance Indicators (KPIs) for Pharmacy Benefit Management contracts typically focus on ensuring cost efficiency, beneficiary access, and quality of service. For this contract, likely KPIs would include metrics related to drug cost containment (e.g., formulary compliance, generic dispensing rates, negotiated rebates), network adequacy (e.g., percentage of beneficiaries within a certain distance of a network pharmacy), prescription fulfillment rates, turnaround times for claims processing, and member satisfaction scores. Adherence to clinical guidelines and the effectiveness of drug utilization review programs would also be critical. The Defense Health Agency would monitor these KPIs closely to ensure the contractor is meeting the performance standards outlined in the Performance Work Statement (PWS) and delivering value for the government.

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 track record in managing federal healthcare contracts, particularly within the Department of Defense's TRICARE program. WPS has historically served as a major contractor for various aspects of TRICARE, including claims processing and benefit administration. Their experience spans many years, indicating a deep understanding of the complex regulatory environment and operational requirements of federal healthcare programs. While this specific task order focuses on Pharmacy Benefit Management, WPS's broader experience in managing large-scale government health benefits suggests a capacity to handle such responsibilities. Past performance evaluations and contract awards databases would provide more granular detail on their specific performance history and any potential concerns or commendations.

What are the potential risks associated with a fixed-price contract for PBM services?

While fixed-price contracts offer cost certainty to the government, they can introduce risks related to PBM services if not structured carefully. A primary risk is that the contractor may prioritize cost savings in ways that could negatively impact beneficiary access or quality of care, such as overly restrictive formularies or limited pharmacy networks, if the contract terms do not adequately safeguard against this. Another risk is related to managing volatile drug prices; if the contract doesn't include mechanisms to adjust for significant, unforeseen increases in drug costs, the contractor might face financial strain, potentially impacting service delivery. Conversely, if the fixed price is set too high relative to the actual costs and savings achieved, the government may not be realizing optimal value for its investment. Effective contract management and oversight 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: FIRM FIXED PRICE (J)

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: $52,928,497

Exercised Options: $52,928,497

Current Obligation: $49,849,228

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: H9400207D0001

IDV Type: IDC

Timeline