VA's McKesson Pharmaceutical Prime Vendor contract saw $703M in FY2022 spending, a significant portion of pharmaceutical manufacturing

Contract Overview

Contract Amount: $702,920,953 ($702.9M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2022-03-01

End Date: 2022-03-31

Contract Duration: 30 days

Daily Burn Rate: $23.4M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: EXPRESS REPORT: PHARMACEUTICAL PRIME VENDOR (PPV)FY2022 MARCH

Place of Performance

Location: IRVING, DALLAS County, TEXAS, 75039

State: Texas Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $702.9 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT: PHARMACEUTICAL PRIME VENDOR (PPV)FY2022 MARCH Key points: 1. The contract represents a substantial portion of the VA's pharmaceutical spending, highlighting the importance of this prime vendor. 2. Competition dynamics for this contract are crucial for ensuring fair pricing and access to essential medications. 3. Performance context is vital to understand if the VA is receiving timely and quality pharmaceutical supplies. 4. Risk indicators may include supply chain disruptions, price volatility, and contractor performance issues. 5. Sector positioning shows this contract is within the pharmaceutical preparation manufacturing industry, a critical healthcare support area.

Value Assessment

Rating: good

The VA's spending on this McKesson contract in FY2022 was approximately $703 million. Benchmarking this against similar prime vendor contracts across federal agencies is challenging due to the specialized nature of pharmaceutical distribution. However, the scale of spending suggests a significant volume of pharmaceuticals procured, indicating a potentially good value if pricing is competitive and supply chain integrity is maintained. Further analysis would require detailed pricing data and comparison to market rates for specific pharmaceutical products.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, suggesting that multiple bidders had the opportunity to compete. The specific number of bidders is not provided in the summary data, but full and open competition generally fosters a competitive environment that can lead to better pricing and terms for the government. This approach aims to leverage the market to secure the best possible value for taxpayer dollars.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it encourages a wider range of suppliers to bid, potentially driving down costs and improving service quality through market forces.

Public Impact

Veterans across the United States benefit from timely access to a wide range of pharmaceuticals through this contract. The contract ensures the delivery of essential medications, supporting the health and well-being of the veteran population. Geographic impact is nationwide, as the VA serves veterans in all states and territories. Workforce implications include support for logistics, distribution, and administrative roles within McKesson and potentially at VA facilities managing pharmaceutical inventory.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases on specific drugs over time.
Reliance on a single prime vendor could create supply chain vulnerabilities.
Ensuring consistent quality and availability of all necessary pharmaceuticals.

Positive Signals

Awarded through full and open competition, indicating a competitive bidding process.
Significant spending suggests a robust and established supply chain for veteran healthcare.
The contract supports a critical need for pharmaceutical access for veterans.

Sector Analysis

The pharmaceutical preparation manufacturing sector is a vital component of the healthcare industry, focusing on the production and distribution of drugs. Federal spending in this area is substantial, supporting both military and veteran healthcare systems, as well as other government health initiatives. This contract with McKesson, a major player in pharmaceutical distribution, fits within the broader landscape of federal efforts to ensure a stable and cost-effective supply of medications. Comparable spending benchmarks would involve looking at other large prime vendor contracts for pharmaceuticals across agencies like DoD and HHS.

Small Business Impact

The provided data does not indicate if this contract included specific small business set-asides or subcontracting requirements. As a prime vendor contract for a large corporation like McKesson, the focus is typically on the overall delivery of services. However, large prime contractors often have subcontracting plans that may include opportunities for small businesses in areas such as logistics, transportation, or specialized pharmaceutical services. Further investigation into McKesson's subcontracting practices would be needed to assess the impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract is likely managed by the Department of Veterans Affairs' procurement and program management offices. Accountability measures would include performance metrics, delivery schedules, and quality standards outlined in the contract. Transparency is generally facilitated through contract award databases and reporting requirements. Inspector General jurisdiction would apply if any fraud, waste, or abuse related to the contract is suspected.

Related Government Programs

Department of Defense Pharmaceutical Prime Vendor Program
Federal Supply Schedule (FSS) for Pharmaceuticals
Medicaid Drug Rebate Program
Medicare Part D Prescription Drug Benefit

Risk Flags

Potential for supply chain disruption
Price volatility of pharmaceuticals
Contractor performance monitoring
Ensuring product integrity and authenticity

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $702.9 million to MCKESSON CORPORATION. EXPRESS REPORT: PHARMACEUTICAL PRIME VENDOR (PPV)FY2022 MARCH

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 $702.9 million.

What is the period of performance?

Start: 2022-03-01. End: 2022-03-31.

What is McKesson Corporation's track record with federal pharmaceutical contracts?

McKesson Corporation is a major global healthcare company with a long history of serving federal agencies, including the Department of Veterans Affairs (VA) and the Department of Defense (DoD), as a prime vendor for pharmaceuticals. They have consistently been awarded large contracts due to their extensive distribution network, broad product catalog, and established supply chain capabilities. Their track record generally involves managing the complex logistics of delivering a wide array of medications to government facilities nationwide. While specific performance details for individual contracts are often proprietary or found in detailed performance reports, McKesson's continued success in securing and retaining these significant federal contracts suggests a generally positive performance history in meeting the government's pharmaceutical needs. However, like any large contractor, they may have faced scrutiny or performance issues on specific contracts over time, which would be detailed in agency performance evaluations and contract award histories.

How does the $703 million FY2022 spending compare to previous years for this specific contract?

The provided data indicates $703,020,953.04 was spent in FY2022 for the Pharmaceutical Prime Vendor (PPV) contract with McKesson Corporation. To compare this to previous years, one would need to access historical spending data for this specific contract identifier or for the VA's PPV program more broadly. Typically, pharmaceutical spending can fluctuate based on factors such as changes in veteran population, new drug availability, formulary adjustments, and overall healthcare utilization trends. A year-over-year comparison would reveal whether this $703 million represents an increase, decrease, or stable level of spending, providing context on the contract's growth or contraction within the VA's pharmaceutical procurement strategy.

What are the primary risks associated with relying on a single prime vendor for pharmaceutical distribution?

Relying on a single prime vendor like McKesson for pharmaceutical distribution presents several key risks. Firstly, there's a risk of supply chain disruption; if McKesson experiences issues such as natural disasters affecting their distribution centers, labor strikes, or internal operational problems, it could lead to widespread shortages of critical medications for veterans. Secondly, a lack of direct competition for subsequent delivery orders under the contract could potentially lead to less favorable pricing over time, although the initial award was through full and open competition. Thirdly, there's a risk of vendor lock-in, where the VA might face challenges in transitioning to a different vendor or system if performance issues arise or if market conditions change significantly. Finally, over-reliance on one entity could reduce the VA's leverage in negotiating terms or demanding rapid improvements if performance falters.

How does the VA ensure the quality and efficacy of pharmaceuticals procured through this prime vendor contract?

The VA ensures the quality and efficacy of pharmaceuticals through a multi-faceted approach that extends beyond the prime vendor contract itself. While the prime vendor is responsible for the reliable distribution of FDA-approved drugs, the VA maintains stringent quality control measures. This includes requiring that all pharmaceuticals supplied meet FDA standards and are sourced from approved manufacturers. The VA's own formulary and drug approval processes vet medications for safety and efficacy before they are prescribed. Furthermore, the contract likely includes clauses related to product integrity, proper storage and handling during transit, and mechanisms for reporting and addressing any quality defects or counterfeit concerns. The VA also conducts regular audits and performance reviews of its prime vendors to ensure compliance with contractual obligations and quality standards.

What is the typical duration and value of such large federal pharmaceutical prime vendor contracts?

Large federal pharmaceutical prime vendor contracts, such as the VA's Pharmaceutical Prime Vendor (PPV) program, typically have base periods of performance with multiple option years. The total potential value can run into billions of dollars over the full contract term, reflecting the continuous and substantial need for pharmaceuticals. For instance, a contract might have an initial 1-year base period with four 1-year options, allowing the government flexibility while ensuring long-term supply. The specific value of each delivery order, like the $703 million reported for FY2022, represents the actual spending within a given period, which can vary. These contracts are crucial for ensuring a consistent and cost-effective supply chain for essential medicines across the agency.

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: $702,920,953

Exercised Options: $702,920,953

Current Obligation: $702,920,953

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: 36W79720D0001

IDV Type: IDC

Timeline