HHS awarded Merck $1.33B for pediatric vaccines, with 6 bids received

Contract Overview

Contract Amount: $1,327,365,536 ($1.3B)

Contractor: Merck Sharp & Dohme Corp.

Awarding Agency: Department of Health and Human Services

Start Date: 2010-04-01

End Date: 2011-03-31

Contract Duration: 364 days

Daily Burn Rate: $3.6M/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 6

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: TAS::75 0512::TAS 00HCVGBC-2010-82343 - MERCK PEDIATRIC VACCINE CONTRACT

Place of Performance

Location: WEST POINT, MONTGOMERY County, PENNSYLVANIA, 19486, UNITED STATES OF AMERICA

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $1.33 billion to MERCK SHARP & DOHME CORP. for work described as: TAS::75 0512::TAS 00HCVGBC-2010-82343 - MERCK PEDIATRIC VACCINE CONTRACT Key points: 1. The contract value represents a significant investment in public health, specifically pediatric immunization. 2. With six bids, the competition appears robust, suggesting potential for competitive pricing. 3. The firm-fixed-price structure shifts risk to the contractor, Merck. 4. This award falls within the pharmaceutical preparation manufacturing sector. 5. The contract duration of one year (364 days) is typical for vaccine procurement. 6. The geographic focus is Pennsylvania, where Merck operates.

Value Assessment

Rating: good

The contract value of $1.33 billion for pediatric vaccines is substantial. Benchmarking against similar large-scale vaccine procurements is difficult without more specific product details. However, the presence of six bidders suggests that the pricing was likely competitive within the market for such essential public health supplies. The firm-fixed-price nature of the contract provides cost certainty for the government.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, with six bids received. This indicates a healthy level of interest from potential suppliers in providing pediatric vaccines. A higher number of bidders generally leads to more competitive pricing and a wider selection of qualified contractors, benefiting the government's procurement objectives.

Taxpayer Impact: The robust competition for this pediatric vaccine contract is beneficial for taxpayers as it likely drove down the unit cost of vaccines and ensured the government secured a reliable supply at a fair market price.

Public Impact

Children across the United States benefit from access to essential pediatric vaccines. The contract ensures the supply of critical pharmaceutical products for public health initiatives. The primary impact is national, ensuring vaccine availability for the pediatric population. The contract supports jobs within the pharmaceutical manufacturing sector, particularly in Pennsylvania.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases in future contract renewals if competition diminishes.
Dependence on a single supplier for a critical vaccine could pose supply chain risks.
Ensuring the long-term availability and affordability of pediatric vaccines requires ongoing market monitoring.

Positive Signals

Awarded under full and open competition, indicating a competitive market.
Firm-fixed-price contract provides cost certainty for the government.
Significant investment in pediatric vaccines demonstrates commitment to public health.
Contract duration of one year allows for regular reassessment of needs and market conditions.

Sector Analysis

This contract falls within the Pharmaceutical Preparation Manufacturing industry, a critical sector for public health. The market for vaccines is characterized by high research and development costs, stringent regulatory requirements, and significant economies of scale. Major pharmaceutical companies dominate this space, and government contracts are essential for ensuring broad access to essential medicines and vaccines. Comparable spending benchmarks would depend on the specific vaccine type and quantity procured.

Small Business Impact

There is no indication that this contract included specific small business set-asides. Given the nature of large-scale vaccine manufacturing, it is likely that the prime contractor, Merck, is a large business. Subcontracting opportunities for small businesses may exist within the supply chain for raw materials or ancillary services, but these are not explicitly detailed in the provided data.

Oversight & Accountability

Oversight for this contract would typically fall under the Centers for Disease Control and Prevention (CDC) within HHS. Accountability measures would include adherence to delivery schedules, quality control of the vaccines, and compliance with contract terms. Transparency is generally maintained through federal procurement databases, though specific performance metrics may not always be publicly disclosed. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Pediatric Vaccine Programs
National Vaccine Injury Compensation Program
HHS Public Health Initiatives
CDC Procurement Contracts
Pharmaceutical Manufacturing Contracts

Risk Flags

Potential supply chain vulnerability if contractor faces production issues.
Long-term affordability dependent on sustained competition.
Need for ongoing monitoring of vaccine efficacy and safety.

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $1.33 billion to MERCK SHARP & DOHME CORP.. TAS::75 0512::TAS 00HCVGBC-2010-82343 - MERCK PEDIATRIC VACCINE CONTRACT

Who is the contractor on this award?

The obligated recipient is MERCK SHARP & DOHME CORP..

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 $1.33 billion.

What is the period of performance?

Start: 2010-04-01. End: 2011-03-31.

What specific pediatric vaccines were procured under this contract?

The provided data does not specify the exact types of pediatric vaccines procured under TAS 00HCVGBC-2010-82343. The contract falls under the broader category of 'Pharmaceutical Preparation Manufacturing' and is associated with Merck Pediatric Vaccine Contract. To determine the specific vaccines, one would need to consult the detailed contract award documents or the CDC's procurement history for this period, looking for line items related to specific vaccine products like MMR, DTaP, Polio, or others recommended for pediatric immunization schedules.

How does the $1.33 billion contract value compare to annual federal spending on pediatric vaccines?

The $1.33 billion awarded to Merck represents a significant portion of federal spending on pediatric vaccines for the fiscal year 2010 (contract period April 1, 2010, to March 31, 2011). Federal spending on vaccines fluctuates annually based on public health needs, new vaccine introductions, and procurement strategies. For context, the CDC's Vaccines for Children (VFC) program alone purchases hundreds of millions of vaccine doses annually. While this single contract is substantial, it is one component of a larger federal effort to ensure vaccine availability, and annual total spending can vary widely, often reaching several billion dollars across all vaccine types and programs.

What is Merck's track record in supplying vaccines to the federal government?

Merck & Co., Inc. (through its subsidiary Merck Sharp & Dohme Corp.) has a long-standing and significant track record as a major supplier of vaccines to the U.S. federal government, including the Department of Health and Human Services (HHS) and the Centers for Disease Control and Prevention (CDC). They are a key provider of various childhood and adult vaccines, including those for HPV, MMR, rotavirus, and pneumococcal disease. Their history includes numerous large-scale contracts for vaccine procurement, underscoring their capacity and established relationship with government health agencies. This extensive experience suggests a reliable capacity to meet federal demands for vaccine supply.

What are the potential risks associated with a single large contract for a critical vaccine supply?

A primary risk associated with a single large contract for a critical vaccine supply is the potential for supply chain disruption. If the sole contractor faces manufacturing issues, quality control problems, or unforeseen events (like natural disasters or pandemics affecting their facilities), the entire supply chain for that vaccine could be jeopardized, impacting public health programs. Another risk is reduced leverage for the government in future negotiations if competition is limited in subsequent procurement cycles. Over-reliance on one supplier can also reduce flexibility in adapting to changing public health needs or adopting newer vaccine technologies.

How does the firm-fixed-price (FFP) contract type impact risk and cost for this vaccine procurement?

The firm-fixed-price (FFP) contract type is generally advantageous for the government in procurements where the scope of work is well-defined and risks are predictable, such as vaccine manufacturing and delivery. Under an FFP contract, the contractor (Merck) assumes the majority of the financial risk. This means Merck is obligated to provide the specified vaccines at the agreed-upon price, regardless of their actual costs incurred. This structure provides the government with cost certainty and protects against cost overruns. For Merck, it incentivizes efficient production and cost management to maximize profit margins.

What is the typical duration for federal vaccine procurement contracts, and how does this one compare?

Federal vaccine procurement contracts can vary significantly in duration, often ranging from one to five years, with options for extension. Contracts like this one, with a base duration of 364 days (just under a year), are common for annual supply needs or initial procurements where requirements might be re-evaluated. Longer-term contracts (multi-year) may be used for strategic stockpiling or when significant upfront investment by the contractor is required. A one-year duration allows the government flexibility to adjust quantities or re-compete the contract based on evolving public health priorities, vaccine availability, and market conditions.

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

Offers Received: 6

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Merck & CO., Inc. (UEI: 054554290)

Address: 770 SUMNEYTOWN PIKE, WEST POINT, PA, 19486

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

Financial Breakdown

Contract Ceiling: $39,055,333,995

Exercised Options: $21,885,577,894

Current Obligation: $1,327,365,536

Timeline