HHS awards $375M contract to McKesson for vaccine distribution, impacting pharmaceutical manufacturing

Contract Overview

Contract Amount: $375,268,719 ($375.3M)

Contractor: Mckesson Specialty Distribution LLC

Awarding Agency: Department of Health and Human Services

Start Date: 2022-08-02

End Date: 2024-01-31

Contract Duration: 547 days

Daily Burn Rate: $686.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: VACCINE DISTRIBUTION

Place of Performance

Location: MEMPHIS, SHELBY County, TENNESSEE, 38115

State: Tennessee Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $375.3 million to MCKESSON SPECIALTY DISTRIBUTION LLC for work described as: VACCINE DISTRIBUTION Key points: 1. Significant contract value of $375M for vaccine distribution services. 2. Sole-source award to McKesson Specialty Distribution LLC raises competition concerns. 3. Potential risks associated with single-vendor reliance and price discovery. 4. Spending falls within the pharmaceutical preparation manufacturing sector.

Value Assessment

Rating: fair

The contract value of $375M is substantial. Without competitive bidding, it's difficult to assess if this price represents fair market value compared to similar distribution contracts.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This limits price discovery and may result in higher costs for taxpayers.

Taxpayer Impact: The lack of competition could lead to suboptimal pricing, potentially increasing the financial burden on taxpayers for essential vaccine distribution.

Public Impact

Ensures continued availability and distribution of vaccines nationwide. Supports public health initiatives by maintaining a robust supply chain. Potential for increased costs due to lack of competitive bidding.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competition.
Lack of price transparency.
Potential for cost overruns.

Positive Signals

Ensures critical vaccine distribution.
Established vendor with existing infrastructure.

Sector Analysis

The pharmaceutical preparation manufacturing sector is critical for public health. Spending benchmarks for distribution services can vary widely based on volume and complexity, but a $375M sole-source award warrants scrutiny.

Small Business Impact

The data does not indicate any specific provisions or considerations for small businesses in this sole-source contract award.

Oversight & Accountability

Oversight is crucial for sole-source contracts to ensure fair pricing and performance. The CDC should provide detailed justification for the lack of competition and monitor contract execution closely.

Related Government Programs

Pharmaceutical Preparation Manufacturing
Department of Health and Human Services Contracting
Centers for Disease Control and Prevention Programs

Risk Flags

Sole-source award
Lack of competition
Potential for price inflation
Limited transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $375.3 million to MCKESSON SPECIALTY DISTRIBUTION LLC. VACCINE DISTRIBUTION

Who is the contractor on this award?

The obligated recipient is MCKESSON SPECIALTY DISTRIBUTION LLC.

Which agency awarded this contract?

Awarding agency: Department of Health and Human Services (Centers for Disease Control and Prevention).

What is the total obligated amount?

The obligated amount is $375.3 million.

What is the period of performance?

Start: 2022-08-02. End: 2024-01-31.

What was the justification for awarding this contract on a sole-source basis instead of competing it?

The justification for a sole-source award typically involves unique capabilities, urgent needs, or a lack of viable alternatives. Without further documentation, it's impossible to determine the specific rationale. However, sole-source awards bypass the competitive process, potentially leading to higher costs and reduced innovation compared to competed contracts.

What are the primary risks associated with a sole-source contract of this magnitude for vaccine distribution?

The primary risks include inflated pricing due to the absence of competitive pressure, potential for complacency from the awarded vendor, and a lack of incentive for innovation. Furthermore, reliance on a single provider can create vulnerabilities in the supply chain if the vendor faces operational issues or if demand significantly exceeds projections.

How does this contract's pricing compare to industry benchmarks for similar vaccine distribution services?

Without access to competitive bidding data or detailed cost breakdowns, a direct comparison to industry benchmarks is challenging. The contract's firm fixed price structure provides some cost certainty, but the absence of competition means it may not reflect the most cost-effective market rate available.

Industry Classification

NAICS: Manufacturing › Pharmaceutical and Medicine Manufacturing › Pharmaceutical Preparation Manufacturing

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › ADMINISTRATIVE SUPPORT SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: 75D301-22-Q-74302

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Mckesson Corporation

Address: 4100 QUEST WAY, MEMPHIS, TN, 38115

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

Financial Breakdown

Contract Ceiling: $899,768,719

Exercised Options: $375,268,719

Current Obligation: $375,268,719

Actual Outlays: $375,268,719

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Timeline