McKesson Corporation awarded $4M contract for pharmaceutical supplies to Indian Health Service

Contract Overview

Contract Amount: $4,000,000 ($4.0M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Health and Human Services

Start Date: 2025-08-24

End Date: 2027-08-23

Contract Duration: 729 days

Daily Burn Rate: $5.5K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: PHARMACEUTICAL SUPPLIES, PHARMACY PRIME VENDOR (IDIQ) PURCHASES FOR NSSC CUSTOMERS.

Place of Performance

Location: OKLAHOMA CITY, OKLAHOMA County, OKLAHOMA, 73114

State: Oklahoma Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $4.0 million to MCKESSON CORPORATION for work described as: PHARMACEUTICAL SUPPLIES, PHARMACY PRIME VENDOR (IDIQ) PURCHASES FOR NSSC CUSTOMERS. Key points: 1. Contract awarded through full and open competition, suggesting a competitive bidding process. 2. The contract is for pharmaceutical supplies, a critical component of healthcare delivery. 3. The duration of the contract is approximately two years, indicating a medium-term need. 4. The contract type is Firm Fixed Price, which provides cost certainty for the government. 5. The award is for delivery orders under an existing IDIQ, implying a pre-established relationship and framework. 6. The North American Industry Classification System (NAICS) code 325412 points to Pharmaceutical Preparation Manufacturing. 7. The contract is managed by the Indian Health Service, a division of HHS.

Value Assessment

Rating: good

The contract value of $4 million over two years for pharmaceutical supplies appears reasonable, especially considering the scale of operations for the Indian Health Service. Benchmarking against similar prime vendor contracts for pharmaceutical distribution is necessary for a definitive value assessment. The firm fixed-price structure helps manage cost fluctuations, but the ultimate value depends on the specific drugs and quantities procured.

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 specific number of bidders is not provided, but this method generally fosters a competitive environment, which can lead to better pricing and terms for the government. The use of an IDIQ (Indefinite Delivery, Indefinite Quantity) contract vehicle suggests that a competitive process likely occurred during the initial award of the IDIQ, and this delivery order falls under that established competition.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it maximizes the potential for cost savings through a robust bidding process, ensuring that the government receives competitive pricing for essential pharmaceutical supplies.

Public Impact

The primary beneficiaries are patients served by the Indian Health Service, who will receive necessary pharmaceutical supplies. The contract ensures the availability of a wide range of pharmaceutical preparations for IHS facilities. The geographic impact is likely nationwide, covering IHS facilities across various regions. This contract supports the healthcare workforce within the Indian Health Service by ensuring they have the necessary medications to provide care.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases on specific pharmaceuticals over the contract term despite fixed pricing.
Dependence on a single large vendor (McKesson) could limit flexibility if supply chain issues arise.
Ensuring equitable distribution of pharmaceuticals to all IHS facilities may present logistical challenges.

Positive Signals

Awarded under full and open competition, indicating a competitive market for these supplies.
Firm Fixed Price contract provides cost predictability for the government.
McKesson is a large, established pharmaceutical distributor with extensive experience.
The contract supports a critical healthcare mission for the Indian Health Service.

Sector Analysis

The pharmaceutical manufacturing and distribution sector is a large and complex industry. This contract falls under the pharmaceutical preparation manufacturing sub-sector, which involves the compounding and packaging of drugs. The market for pharmaceutical supplies to government agencies is significant, with major distributors like McKesson playing a crucial role in the supply chain. Benchmarking against other large federal contracts for similar pharmaceutical prime vendor services would provide further context on the scale and pricing.

Small Business Impact

The provided data indicates that small business participation was not a specific set-aside for this contract (ss: false, sb: false). While McKesson Corporation is a large business, the contract may indirectly impact small businesses through subcontracting opportunities, although this is not explicitly detailed. The primary focus appears to be on securing large-scale pharmaceutical supply from an established prime vendor, rather than direct small business set-asides.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Health and Human Services, specifically the Indian Health Service. As an IDIQ with delivery orders, oversight would involve monitoring the issuance of orders, ensuring compliance with terms and conditions, and verifying the quality and timely delivery of pharmaceutical supplies. Transparency is generally maintained through contract award databases, and the firm fixed-price nature simplifies some aspects of financial oversight. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Department of Veterans Affairs Pharmaceutical Prime Vendor Contracts
Department of Defense TRICARE Pharmacy Operations
General Services Administration (GSA) Federal Supply Schedule for Pharmaceuticals
National Institutes of Health (NIH) Research Grants for Drug Development

Risk Flags

Potential for supply chain disruptions
Price volatility of pharmaceuticals
Ensuring equitable distribution to remote locations
Contractor performance and quality assurance

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $4.0 million to MCKESSON CORPORATION. PHARMACEUTICAL SUPPLIES, PHARMACY PRIME VENDOR (IDIQ) PURCHASES FOR NSSC CUSTOMERS.

Who is the contractor on this award?

The obligated recipient is MCKESSON CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Health and Human Services (Indian Health Service).

What is the total obligated amount?

The obligated amount is $4.0 million.

What is the period of performance?

Start: 2025-08-24. End: 2027-08-23.

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

McKesson Corporation is a major player in the pharmaceutical distribution industry and has a long history of holding significant federal contracts. They are a prime vendor for various government agencies, including the Department of Defense and the Department of Veterans Affairs, for pharmaceutical supplies. Their track record generally involves managing large-scale distribution networks and ensuring the timely delivery of a wide array of medications. While specific performance metrics for past contracts are not detailed here, their continued success in securing such large federal awards suggests a generally positive performance history. However, like any large contractor, they may have faced scrutiny or performance issues on specific contracts, which would require a deeper dive into contract performance reports and any associated corrective actions.

How does the $4 million contract value compare to similar prime vendor contracts for pharmaceutical supplies?

The $4 million contract value for pharmaceutical supplies to the Indian Health Service over two years represents a moderate-sized award within the federal contracting landscape for this category. Large federal prime vendor contracts for pharmaceuticals can range from tens of millions to billions of dollars annually, depending on the scope and the agency served. For instance, contracts supporting the entire VA or DoD pharmacy benefit programs are significantly larger. This $4 million award is likely for a specific region or a subset of IHS facilities, or it represents the anticipated value of delivery orders under an IDIQ. A direct comparison requires identifying contracts with similar scope, duration, and customer base (e.g., other IHS contracts or specific regional health programs).

What are the primary risks associated with this contract for the Indian Health Service?

Key risks for the Indian Health Service (IHS) in this contract include potential supply chain disruptions affecting the availability of critical medications, price volatility for specific drugs despite the firm fixed-price structure (which might be mitigated by contract clauses), and ensuring equitable distribution across all IHS facilities, which can be geographically dispersed. There's also a risk of over-reliance on a single vendor, potentially limiting negotiation leverage in the future or during emergencies. Ensuring compliance with all regulatory requirements for pharmaceutical handling and storage by McKesson is another critical risk area. Finally, the effectiveness of the contract hinges on McKesson's ability to meet delivery timelines and maintain the quality of the pharmaceuticals supplied.

How effective is the firm fixed-price (FFP) contract type in managing costs for pharmaceutical supplies?

The Firm Fixed-Price (FFP) contract type is generally effective in managing costs for predictable procurements like routine pharmaceutical supplies. It shifts the cost risk to the contractor, McKesson Corporation, meaning they are responsible for absorbing any cost overruns. This provides the Indian Health Service (IHS) with budget certainty, as the price per unit or total contract value is established upfront. However, FFP contracts can sometimes lead to contractors cutting corners on quality or service to maintain profitability if not carefully monitored. For pharmaceuticals, where prices can fluctuate due to market dynamics or shortages, an FFP contract might be less advantageous if prices rise significantly after the contract is awarded, potentially leading to less competitive bids in the future if contractors factor in higher risk premiums.

What are the historical spending patterns for pharmaceutical supplies by the Indian Health Service?

Historical spending patterns for pharmaceutical supplies by the Indian Health Service (IHS) would typically show a consistent need for these items due to their mission of providing healthcare to American Indians and Alaska Natives. Spending levels are influenced by factors such as the number of beneficiaries served, the types of health services offered, and the prevalence of specific health conditions requiring medication. The IHS often utilizes IDIQ contracts and delivery orders, similar to this award, to manage its pharmaceutical procurement efficiently. Analyzing past IHS budgets and contract awards for pharmaceuticals would reveal trends in spending volume, key suppliers, and the types of medications most frequently procured, indicating areas of high demand and potential cost drivers.

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: $4,000,000

Exercised Options: $4,000,000

Current Obligation: $4,000,000

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