VA's Pharmaceutical Prime Vendor Contract with McKesson Corporation Reached $716M in June 2022

Contract Overview

Contract Amount: $716,027,151 ($716.0M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2022-06-01

End Date: 2022-06-30

Contract Duration: 29 days

Daily Burn Rate: $24.7M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

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

Place of Performance

Location: IRVING, DALLAS County, TEXAS, 75039

State: Texas Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $716.0 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT: PHARMACEUTICAL PRIME VENDOR (PPV)FY2022 JUNE Key points: 1. The Department of Veterans Affairs (VA) spent over $716 million on pharmaceuticals through its Prime Vendor program in June 2022. 2. McKesson Corporation, a major player in pharmaceutical distribution, holds this contract. 3. The contract was awarded under full and open competition, suggesting a competitive bidding process. 4. The spending represents a significant portion of the VA's pharmaceutical procurement for the month.

Value Assessment

Rating: good

The contract utilizes a Firm Fixed Price (FFP) structure, which provides cost certainty for the VA. Benchmarking FFP contracts for pharmaceutical distribution services is complex due to varying product mixes and service levels, but the reported spend aligns with the scale of national pharmaceutical prime vendor agreements.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded through full and open competition, indicating that multiple qualified vendors had the opportunity to bid. This competitive process is designed to ensure fair pricing and access to the best available services for the government.

Taxpayer Impact: The competitive nature of the award aims to secure favorable pricing, ultimately benefiting taxpayers by ensuring efficient use of funds for essential pharmaceutical supplies.

Public Impact

Ensures timely access to a wide range of pharmaceuticals for veterans. Supports the VA's mission to provide comprehensive healthcare services. Contributes to the stability of the pharmaceutical supply chain for federal agencies.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Positive Signals

Full and open competition utilized.
Firm Fixed Price contract type provides cost predictability.
Significant spending indicates critical service provision.

Sector Analysis

The pharmaceutical distribution sector is characterized by large, established players like McKesson, Cardinal Health, and AmerisourceBergen. Federal contracts for pharmaceutical prime vendors are crucial for ensuring the supply of medications to government healthcare facilities and beneficiaries. Spending benchmarks vary widely based on agency needs and contract scope.

Small Business Impact

While this specific contract is with a large prime vendor, the pharmaceutical supply chain involves numerous small businesses in manufacturing, logistics, and specialized services. The VA's overall procurement strategy often includes provisions to support small business participation in various capacities.

Oversight & Accountability

The Department of Veterans Affairs is responsible for overseeing this contract to ensure compliance with terms, conditions, and performance expectations. Regular performance reviews and audits are standard practices to maintain accountability and ensure value for taxpayer dollars.

Related Government Programs

Pharmaceutical Preparation Manufacturing
Department of Veterans Affairs Contracting
Department of Veterans Affairs Programs

Risk Flags

Potential for price increases in future contract periods.
Dependence on a single large vendor for critical supplies.
Vulnerability to supply chain disruptions affecting McKesson.

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $716.0 million to MCKESSON CORPORATION. EXPRESS REPORT: PHARMACEUTICAL PRIME VENDOR (PPV)FY2022 JUNE

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 $716.0 million.

What is the period of performance?

Start: 2022-06-01. End: 2022-06-30.

What is the typical profit margin for pharmaceutical prime vendors on contracts of this scale?

Profit margins for pharmaceutical prime vendors can vary based on contract specifics, competition, and operational efficiencies. While exact figures are proprietary, industry analysis suggests margins typically range from 1-3% on revenue. The VA's competitive bidding process aims to secure pricing that reflects these market realities while ensuring reliable service delivery.

What are the key performance indicators (KPIs) used to evaluate McKesson's performance under this contract?

Key performance indicators likely include on-time delivery rates, order accuracy, inventory management, product quality, and responsiveness to VA needs. The VA would monitor these metrics to ensure McKesson meets contractual obligations and provides high-quality pharmaceutical distribution services essential for veteran care.

How does this contract contribute to the VA's overall pharmaceutical spending strategy?

This contract represents a significant component of the VA's strategy to ensure a consistent and cost-effective supply of pharmaceuticals. By consolidating procurement through a prime vendor, the VA can leverage economies of scale, streamline logistics, and maintain access to a broad formulary, supporting its extensive healthcare network.

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: $716,027,151

Exercised Options: $716,027,151

Current Obligation: $716,027,151

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