VA's Pharmacy Prime Vendor contract for Dec 2012-Jan 2013 awarded to McKesson Corporation for $25.9M

Contract Overview

Contract Amount: $25,912,345 ($25.9M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2012-12-01

End Date: 2013-01-31

Contract Duration: 61 days

Daily Burn Rate: $424.8K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 5

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: EXPRESS REPORT PHARMACY PRIME VENDOR (PPV) DEC 2012 AND JAN 2013 PPV

Place of Performance

Location: BAY PINES, PINELLAS County, FLORIDA, 33744

State: Florida Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $25.9 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT PHARMACY PRIME VENDOR (PPV) DEC 2012 AND JAN 2013 PPV Key points: 1. The contract utilized a firm fixed-price structure, aiming to control costs. 2. Awarded via full and open competition, suggesting a competitive bidding process. 3. The short duration of two months may indicate a bridge contract or specific project need. 4. The contract was a delivery order, suggesting it was part of a larger indefinite-delivery contract. 5. The vendor, McKesson Corporation, is a major player in the pharmaceutical distribution market. 6. The contract's value is significant, reflecting the scale of VA's pharmaceutical needs.

Value Assessment

Rating: good

The contract value of $25.9 million for a two-month period represents a substantial expenditure for pharmaceutical supplies. Benchmarking this against similar, longer-term Pharmacy Prime Vendor contracts would provide a clearer picture of value for money. However, the firm fixed-price nature suggests an attempt to lock in costs. The specific per-unit costs for pharmaceuticals are not detailed here, but the overall contract value is a key indicator of the scale of services provided.

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 data shows five bidders participated in this competition. A higher number of bidders generally suggests a more robust competition, which can lead to better pricing and terms for the government. The specific details of the bidding process and the evaluation criteria are not provided, but the presence of multiple bidders is a positive sign for price discovery.

Taxpayer Impact: The full and open competition likely resulted in a more competitive price for taxpayers by encouraging multiple pharmaceutical distributors to offer their best terms.

Public Impact

Veterans across Florida benefit from timely access to necessary pharmaceuticals. The contract ensures the supply of a wide range of pharmaceutical preparations. Geographic impact is focused on Florida, serving VA facilities within the state. The contract supports the pharmaceutical supply chain workforce, including logistics and distribution personnel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Short contract duration (2 months) could indicate a temporary solution or potential for future re-competition with different vendors.
Lack of detailed performance metrics makes it difficult to assess the quality of service beyond timely delivery.

Positive Signals

Awarded through full and open competition, suggesting a competitive market for these services.
Firm fixed-price contract type helps in budget predictability and cost control.
The vendor, McKesson Corporation, is a well-established entity in pharmaceutical distribution.

Sector Analysis

The pharmaceutical preparation manufacturing sector is a critical component of the healthcare industry, involving the production and distribution of medications. This contract falls under the broader category of pharmaceutical supply chain management. The market is characterized by large distributors, such as McKesson, who manage vast networks to ensure timely delivery of drugs to healthcare providers. Spending in this sector by government agencies like the VA is substantial, reflecting the ongoing need for pharmaceuticals to serve beneficiaries.

Small Business Impact

The provided data does not indicate any specific small business set-aside provisions for this contract. Given the nature of large-scale pharmaceutical distribution, it is common for prime contracts to be awarded to major corporations. However, analysis of subcontracting opportunities for small businesses within McKesson's operations would be necessary to fully assess the impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Veterans Affairs' contracting officers and program managers. The firm fixed-price nature provides some level of cost control. Transparency is generally facilitated through contract award databases like FPDS. Specific Inspector General (IG) jurisdiction would depend on whether any fraud, waste, or abuse was suspected or reported related to the contract's execution.

Related Government Programs

Pharmacy Prime Vendor (PPV) Program
Department of Veterans Affairs Pharmaceutical Contracts
Federal Supply Schedule (FSS) for Pharmaceuticals

Risk Flags

Short contract duration may indicate a temporary solution or bridge contract.
Potential for supply chain disruptions impacting medication availability.
Dependence on a single large vendor for critical pharmaceutical supplies.

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $25.9 million to MCKESSON CORPORATION. EXPRESS REPORT PHARMACY PRIME VENDOR (PPV) DEC 2012 AND JAN 2013 PPV

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 $25.9 million.

What is the period of performance?

Start: 2012-12-01. End: 2013-01-31.

What is McKesson Corporation's track record with VA pharmaceutical contracts prior to and following this award?

McKesson Corporation has a long-standing and significant history of contracting with the Department of Veterans Affairs (VA) for pharmaceutical prime vendor services. Prior to the December 2012 - January 2013 contract, McKesson was a primary awardee of VA Pharmacy Prime Vendor (PPV) contracts for many years, often holding large portions of the national distribution network. Following this specific two-month delivery order, McKesson continued to be a major player in subsequent PPV contract cycles. Their extensive experience in pharmaceutical logistics, established distribution centers, and existing relationships with drug manufacturers have made them a consistent and often dominant vendor for the VA's substantial pharmaceutical needs. The VA's PPV program relies on a few large distributors to manage the complex supply chain for thousands of medications across numerous facilities, and McKesson has been a cornerstone of this system.

How does the $25.9 million value for a two-month period compare to other VA pharmaceutical contracts?

The $25.9 million value for a two-month period for the Pharmacy Prime Vendor (PPV) contract is substantial and indicative of the scale of the VA's pharmaceutical procurement. Annualized, this contract would represent approximately $155.4 million ($25.9M * 6). VA PPV contracts are typically multi-year, multi-billion dollar agreements, often divided geographically. For instance, a single large regional PPV contract can exceed $1 billion annually. Therefore, this specific $25.9 million award, while large in absolute terms for a short duration, likely represents a portion of a larger contract or a specific delivery order within a broader PPV framework. It highlights the significant operational costs associated with maintaining a consistent supply of pharmaceuticals to VA medical centers and pharmacies nationwide.

What are the primary risks associated with a contract of this nature and duration?

The primary risks associated with a contract of this nature and duration (two months) include potential supply chain disruptions, price volatility if not adequately fixed, and the risk of inadequate service levels if the vendor is not fully committed due to the short term. For a pharmaceutical prime vendor contract, disruptions could lead to shortages of critical medications for veterans. Price volatility is a concern, although mitigated by the firm fixed-price (FFP) contract type, which shifts most of the risk to the contractor. A short duration also poses a risk of vendor complacency or a lack of incentive for long-term service improvement. Furthermore, if this was a bridge contract, there's a risk of extended reliance on it, delaying a more strategic, longer-term solution. Ensuring adequate inventory management and timely delivery across potentially numerous VA facilities within Florida is also a key operational risk.

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

The firm fixed-price (FFP) contract type is generally considered effective for managing costs in stable markets with predictable demand, such as pharmaceutical distribution, especially when dealing with established vendors like McKesson. Under an FFP contract, the price is set and not subject to adjustment based on the contractor's cost experience. This provides the government, in this case the VA, with cost certainty and budget predictability. It incentivizes the contractor to control its own costs efficiently to maximize profit. For pharmaceutical distribution, where the cost of goods can fluctuate but the service component is relatively stable, FFP helps shield the government from unexpected cost increases. The primary risk is borne by the contractor; if their costs rise unexpectedly, their profit margin shrinks, or they could incur a loss. This encourages careful planning and efficient operations by the vendor.

What does the number of bidders (5) suggest about the competition for this specific contract?

The fact that five bidders participated in the competition for this Pharmacy Prime Vendor (PPV) delivery order suggests a healthy level of competition for this particular contract. In the pharmaceutical distribution market, particularly for large government contracts, the number of major players is limited. Having five distinct entities willing to bid indicates that the market is not overly concentrated with a single dominant supplier and that other significant distributors were interested and capable of meeting the VA's requirements. This level of competition generally leads to more favorable pricing and terms for the government, as bidders strive to differentiate themselves and secure the award. It also implies that the barriers to entry or participation were not prohibitively high for these five firms.

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: 5

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: ONE POST ST, SAN FRANCISCO, CA, 94104

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

Financial Breakdown

Contract Ceiling: $25,912,345

Exercised Options: $25,912,345

Current Obligation: $25,912,345

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: VA797P12D0001

IDV Type: IDC

Timeline