VA's Pharmacy Prime Vendor contract awarded to McKesson Corporation for over $38.5 million

Contract Overview

Contract Amount: $38,589,388 ($38.6M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2009-06-01

End Date: 2009-06-30

Contract Duration: 29 days

Daily Burn Rate: $1.3M/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: EXPRESS REPORT PHARMACY PRIME VENDOR

Place of Performance

Location: CHARLESTON, CHARLESTON County, SOUTH CAROLINA, 29407

State: South Carolina Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $38.6 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT PHARMACY PRIME VENDOR Key points: 1. The contract represents a significant expenditure for pharmaceutical distribution services. 2. Competition dynamics for this contract are crucial for ensuring cost-effectiveness. 3. Performance context is vital to understand the reliability of pharmaceutical supply chains. 4. Sector positioning highlights the VA's reliance on major pharmaceutical wholesalers. 5. Risk indicators may include supply chain disruptions and price volatility.

Value Assessment

Rating: good

The contract value of over $38.5 million for a 29-month period suggests a substantial volume of pharmaceutical goods procured by the VA. Benchmarking this against similar large-scale prime vendor contracts would provide a clearer picture of value for money. The fixed-price nature of the contract offers some cost certainty, but the overall value is contingent on the efficiency of McKesson's distribution and the VA's utilization rates.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders likely had the opportunity to submit proposals. The presence of robust competition at this scale is generally expected to drive competitive pricing and encourage efficient service delivery. The number of bidders and the specifics of the evaluation process would further illuminate the strength of the competition.

Taxpayer Impact: Full and open competition for such a large contract is beneficial for taxpayers as it increases the likelihood of securing favorable pricing and terms, maximizing the value of federal dollars spent on essential pharmaceuticals.

Public Impact

Veterans across the nation benefit from timely access to prescription medications. The contract ensures the supply of a wide range of pharmaceuticals to VA healthcare facilities. Geographic impact is nationwide, supporting VA medical centers and clinics. Workforce implications include roles in logistics, pharmacy, and administration within the VA and at McKesson.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases over the contract term if not adequately managed.
Dependence on a single vendor for a critical supply chain component.
Risk of supply chain disruptions impacting patient care.

Positive Signals

Awarded through full and open competition, suggesting competitive pricing.
Long-standing relationship with a major pharmaceutical distributor can imply operational efficiencies.
Fixed-price contract provides budget predictability.

Sector Analysis

The pharmaceutical distribution sector is characterized by large, established players like McKesson Corporation, which manage complex supply chains to deliver medications to healthcare providers. This contract fits within the broader category of federal healthcare procurement, specifically focusing on the wholesale distribution of drugs and sundries. Comparable spending benchmarks would involve analyzing other large federal contracts for similar pharmaceutical prime vendor services.

Small Business Impact

While this contract is awarded to a large prime vendor, it's essential to understand if there are subcontracting opportunities for small businesses within the pharmaceutical supply chain. The contract's structure may or may not include specific set-asides or requirements for small business participation, which could impact the broader small business ecosystem involved in healthcare logistics.

Oversight & Accountability

Oversight for this contract would typically fall under 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 maintained through contract award databases and reporting requirements, with potential for Inspector General reviews if performance issues arise.

Related Government Programs

Federal Supply Schedule (FSS) contracts for pharmaceuticals
Department of Defense (DoD) pharmaceutical procurement
TRICARE Pharmacy Program

Risk Flags

Potential for supply chain vulnerability
Dependence on a single large contractor
Price escalation risk in fixed-price contracts over long durations

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $38.6 million to MCKESSON CORPORATION. EXPRESS REPORT PHARMACY PRIME VENDOR

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 $38.6 million.

What is the period of performance?

Start: 2009-06-01. End: 2009-06-30.

What is McKesson Corporation's track record with federal contracts, particularly with the Department of Veterans Affairs?

McKesson Corporation is a major player in the pharmaceutical distribution industry and has a long history of holding significant federal contracts, including those with the Department of Veterans Affairs (VA). They have served as a Pharmacy Prime Vendor for the VA for many years, managing the distribution of pharmaceuticals to VA medical facilities nationwide. Their track record generally indicates experience in handling large-scale logistics and supply chain management for government healthcare systems. However, like any large contractor, they may have faced scrutiny or performance reviews related to specific contract terms, delivery issues, or pricing adjustments over time. A detailed review of past performance evaluations and any corrective actions would provide a more comprehensive understanding of their specific history with the VA.

How does the pricing structure of this contract compare to other large federal pharmaceutical distribution contracts?

The pricing structure of this contract, being a Firm Fixed Price (FFP) award, aims to provide cost certainty for the VA. To compare its value, one would need to analyze the per-unit costs of common pharmaceuticals distributed under this contract against similar FFP contracts awarded by other federal agencies, such as the Department of Defense or the Bureau of Prisons, for comparable services. Factors like volume discounts, contract duration, and the specific mix of drugs procured significantly influence overall pricing. Without access to the detailed pricing schedules and specific drug volumes, a direct comparison is challenging, but the FFP nature is generally favored for predictable budgeting. Benchmarking against market rates for wholesale drug distribution services would also be informative.

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

The primary risks associated with relying on a single prime vendor like McKesson for pharmaceutical distribution include potential supply chain disruptions, price volatility, and reduced negotiating leverage for the VA. A disruption at McKesson's facilities, a transportation issue, or a natural disaster could severely impact the availability of essential medications for veterans. Dependence on one vendor can also limit the VA's ability to secure the most competitive pricing over time, as the vendor may face less pressure to offer deep discounts. Furthermore, if performance issues arise, the process of switching to an alternative vendor can be lengthy and complex, potentially leading to extended periods of suboptimal service delivery.

How effective is the VA's Pharmacy Prime Vendor program in ensuring timely access to medications for veterans?

The VA's Pharmacy Prime Vendor (PPV) program is generally considered effective in ensuring timely access to medications for veterans, given its scale and the critical nature of its mission. The program leverages large distributors to manage the complex logistics of supplying a vast network of VA medical centers and outpatient clinics across the country. McKesson's role as a prime vendor is crucial in maintaining inventory, ensuring prompt delivery, and providing a wide formulary of drugs. Effectiveness is typically measured by metrics such as fill rates, delivery timeliness, and medication availability. While the program aims for high effectiveness, occasional challenges related to specific drug shortages or logistical hurdles can occur, necessitating robust oversight and contingency planning by the VA.

What has been the historical spending trend for the VA's Pharmacy Prime Vendor contracts over the past decade?

Historical spending trends for the VA's Pharmacy Prime Vendor (PPV) contracts have likely shown a consistent and significant increase over the past decade, mirroring the overall growth in healthcare spending and the expanding population of veterans seeking care. While the specific data for this $38.5 million contract covers a 29-month period starting in 2009, broader VA pharmaceutical spending has been substantial. Factors contributing to this trend include an aging veteran population, advancements in medical treatments requiring more expensive medications, and the VA's commitment to providing comprehensive healthcare services. Analyzing aggregate spending data for the PPV program across multiple contract cycles would reveal the magnitude of this growth and inform future budget projections.

Industry Classification

NAICS: Wholesale Trade › Drugs and Druggists' Sundries Merchant Wholesalers › Drugs and Druggists' Sundries Merchant Wholesalers

Product/Service Code: MEDICAL/DENTAL/VETERINARY EQPT/SUPP

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 1 POST ST, SAN FRANCISCO, CA, 90

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $38,589,388

Exercised Options: $38,589,388

Current Obligation: $38,589,388

Parent Contract

Parent Award PIID: V797P1020

IDV Type: IDC

Timeline