DOJ's $14M McKesson contract for non-controlled medications to support Federal Prison System

Contract Overview

Contract Amount: $14,000,000 ($14.0M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Justice

Start Date: 2025-10-01

End Date: 2026-08-09

Contract Duration: 312 days

Daily Burn Rate: $44.9K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: MCKESSON: NON-CONTROLLED MEDICATION DOS: OCTOBER 1, 2025 THRU DECEMBER 31, 2025.

Place of Performance

Location: IRVING, DALLAS County, TEXAS, 75039

State: Texas Government Spending

Plain-Language Summary

Department of Justice obligated $14.0 million to MCKESSON CORPORATION for work described as: MCKESSON: NON-CONTROLLED MEDICATION DOS: OCTOBER 1, 2025 THRU DECEMBER 31, 2025. Key points: 1. Contract awarded to McKesson Corporation for pharmaceutical preparations. 2. The contract duration is 312 days, ending August 9, 2026. 3. This is a delivery order under a larger contract. 4. The contract type is Firm Fixed Price, indicating predictable costs. 5. The North American Industry Classification System (NAICS) code is 325412 for Pharmaceutical Preparation Manufacturing. 6. The place of performance is Texas (TX).

Value Assessment

Rating: good

The contract value of $14 million for a period of approximately 10 months appears reasonable for the supply of non-controlled medications to the Federal Prison System. Benchmarking against similar large-scale pharmaceutical supply contracts would provide a more precise value-for-money assessment. However, given the scale and essential nature of the service, the pricing is likely competitive within the industry.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, suggesting that multiple vendors had the opportunity to bid. This competitive process is expected to drive favorable pricing and ensure the government receives the best value. The specific number of bidders is not provided, but the 'full and open' designation is a positive indicator of robust competition.

Taxpayer Impact: Full and open competition generally leads to better price discovery and cost savings for taxpayers by encouraging multiple vendors to offer their best pricing.

Public Impact

Inmates within the Federal Prison System will receive necessary non-controlled medications. The Federal Prison System, managed by the Bureau of Prisons, is the primary beneficiary. The services are delivered within Texas, impacting the geographic region of performance. The contract supports the pharmaceutical manufacturing and distribution workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for supply chain disruptions impacting medication availability.
Dependence on a single large supplier for critical medications.
Ensuring consistent quality and efficacy of pharmaceuticals over the contract period.

Positive Signals

Awarded through full and open competition, suggesting competitive pricing.
Firm Fixed Price contract type provides cost certainty.
Long-standing relationship with a major pharmaceutical supplier like McKesson can ensure reliability.

Sector Analysis

The pharmaceutical preparation manufacturing sector is a critical component of the healthcare industry, involving the production of drugs and medicines. This contract falls within the broader healthcare and pharmaceutical supply chain, a market characterized by significant research and development, stringent regulatory oversight, and large-scale distribution networks. Spending on pharmaceuticals for federal institutions is substantial, with contracts often awarded through competitive bidding processes to ensure cost-effectiveness and reliable supply.

Small Business Impact

The provided data does not indicate any specific small business set-asides or subcontracting requirements for this particular delivery order. As McKesson Corporation is a large entity, the primary focus is likely on direct fulfillment. Further analysis would be needed to determine if any small business subcontracting opportunities are mandated or voluntarily pursued by the prime contractor.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Justice's Bureau of Prisons contracting officers and potentially the Office of the Inspector General. The Firm Fixed Price contract type simplifies financial oversight by establishing a set cost. Transparency is generally maintained through contract award databases and reporting requirements, though specific performance monitoring details are not provided here.

Related Government Programs

Federal Prison System Medical Services
Pharmaceutical Supply Contracts
Department of Justice Healthcare Procurement
Bureau of Prisons Medication Management

Risk Flags

Potential for supply chain vulnerabilities
Ensuring medication quality and compliance
Dependence on a single large supplier

Frequently Asked Questions

What is this federal contract paying for?

Department of Justice awarded $14.0 million to MCKESSON CORPORATION. MCKESSON: NON-CONTROLLED MEDICATION DOS: OCTOBER 1, 2025 THRU DECEMBER 31, 2025.

Who is the contractor on this award?

The obligated recipient is MCKESSON CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Justice (Federal Prison System / Bureau of Prisons).

What is the total obligated amount?

The obligated amount is $14.0 million.

What is the period of performance?

Start: 2025-10-01. End: 2026-08-09.

What is McKesson Corporation's track record with federal government contracts, particularly for pharmaceutical supplies?

McKesson Corporation is a major player in the healthcare industry and a frequent contractor with the U.S. federal government, including agencies like the Department of Defense, Department of Veterans Affairs, and the Department of Justice. They have a long history of supplying pharmaceuticals, medical supplies, and related services. Their track record generally includes managing large-scale distribution and fulfilling complex supply chain requirements. While specific performance metrics for individual contracts are not publicly detailed, their continued success in securing significant federal contracts suggests a generally positive performance history. However, like any large supplier, they may have faced occasional performance issues or disputes on specific contracts, which would be detailed in contract performance databases if publicly accessible.

How does the $14 million value of this contract compare to similar pharmaceutical supply contracts for correctional facilities?

The $14 million value for a roughly 10-month supply of non-controlled medications to the Federal Prison System is substantial, reflecting the scale of inmate populations. To benchmark this effectively, one would compare it to contracts for similar services provided to other large correctional systems (state or federal) or large healthcare networks. For instance, contracts for supplying medications to state prison systems can range from tens to hundreds of millions of dollars annually, depending on the number of facilities and inmates served. The 'per inmate per year' cost for medications is a key metric. Without knowing the exact inmate population served by this specific DOJ contract, a precise comparison is difficult, but $14 million for approximately 312 days suggests a significant operational scale.

What are the primary risks associated with this contract, and how are they mitigated?

Key risks include potential supply chain disruptions (e.g., manufacturing issues, transportation delays, natural disasters) that could impact the availability of essential medications for inmates. Another risk is price volatility for pharmaceuticals, although the Firm Fixed Price (FFP) contract structure mitigates this for the government over the contract period. Ensuring the quality and efficacy of the medications supplied is also critical. Mitigation strategies likely involve McKesson's robust supply chain management, contingency planning, adherence to strict quality control protocols mandated by regulations (like FDA), and the government's oversight through contract management. The FFP nature locks in the price, transferring price risk to the contractor.

How effective is the 'full and open competition' process in ensuring value for money for this type of pharmaceutical contract?

Full and open competition is generally considered the most effective method for ensuring value for money in government contracting. For pharmaceutical supplies, it allows a wide range of qualified vendors to bid, fostering price competition and encouraging innovation in service delivery. This process helps prevent monopolies and ensures that the government can select the offer that provides the best overall value, considering price, quality, delivery timelines, and past performance. For a contract of this size and nature, robust competition is crucial for achieving cost savings and ensuring access to a reliable supply of necessary medications for the Federal Prison System.

What are the historical spending patterns for pharmaceutical supplies within the Federal Prison System?

Historical spending on pharmaceutical supplies within the Federal Prison System has been significant and generally increasing over the years, driven by factors such as an aging inmate population, the prevalence of chronic diseases, and the rising cost of medications. The Bureau of Prisons (BOP) consistently allocates substantial funds to healthcare, with pharmaceuticals being a major component. Spending often occurs through large, multi-year contracts awarded via competitive processes, similar to this McKesson delivery order. Analyzing past BOP budget allocations and specific contract awards would reveal trends in spending volume, average contract values, and the primary suppliers utilized over time.

What is the significance of the North American Industry Classification System (NAICS) code 325412 for this contract?

The NAICS code 325412, 'Pharmaceutical Preparation Manufacturing,' is significant because it precisely categorizes the primary business activity of the contractor related to this specific contract. It indicates that McKesson is providing manufactured pharmaceutical preparations, such as finished dosage forms (pills, capsules, injectables), rather than raw drug ingredients or bulk chemicals. This classification helps government agencies track spending within specific industry sectors, understand the market landscape, and ensure that contracts are awarded to companies with the appropriate manufacturing and regulatory capabilities required for producing pharmaceutical products.

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

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 6555 STATE HIGHWAY 161, IRVING, TX, 75039

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $14,000,000

Exercised Options: $14,000,000

Current Obligation: $14,000,000

Actual Outlays: $9,925,920

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: 36W79720D0001

IDV Type: IDC

Timeline