VA's Pharmacy Prime Vendor contract awarded to McKesson Corporation for $27.97M in FY2015

Contract Overview

Contract Amount: $27,972,683 ($28.0M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2015-06-01

End Date: 2015-06-30

Contract Duration: 29 days

Daily Burn Rate: $964.6K/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) FY2015 JUN

Place of Performance

Location: BAY PINES, PINELLAS County, FLORIDA, 33744

State: Florida Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $28.0 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT PHARMACY PRIME VENDOR (PPV) FY2015 JUN Key points: 1. The contract represents a significant portion of the VA's pharmaceutical spending. 2. Competition dynamics for this large contract are crucial for ensuring fair pricing. 3. Performance context is essential to understand the value delivered by McKesson. 4. The sector positioning of this contract highlights the VA's reliance on major pharmaceutical distributors. 5. Risk indicators may include supply chain disruptions and price volatility.

Value Assessment

Rating: good

The VA's Pharmacy Prime Vendor (PPV) program is a critical component of its healthcare delivery system. This specific delivery order, valued at approximately $28 million, represents a portion of the overall PPV contract. Benchmarking this single order against the total annual PPV spend provides limited insight into overall value. However, the VA's PPV program is known for its scale and aims to achieve significant cost savings through bulk purchasing and negotiated pricing. Comparing this order's unit costs to other VA pharmaceutical purchases or similar federal contracts would be necessary for a more precise value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple bidders were likely considered. The VA's PPV program typically involves a robust competitive process to ensure the best value for taxpayer dollars. The presence of full and open competition suggests a healthy market for pharmaceutical distribution services to the federal government, which generally leads to more competitive pricing and a wider range of service offerings.

Taxpayer Impact: Full and open competition for such a large contract is beneficial for taxpayers as it drives down prices through market forces and encourages innovation among potential bidders.

Public Impact

Veterans across Florida will benefit from timely access to essential pharmaceuticals. The contract ensures the supply of a wide range of pharmaceutical preparations. Geographic impact is focused on Florida, supporting VA medical centers and pharmacies within the state. Workforce implications include the continued employment of personnel involved in pharmaceutical distribution and logistics.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases in future contract periods.
Dependence on a single vendor for a critical supply chain.
Risk of supply chain disruptions impacting patient care.

Positive Signals

Established vendor with a track record in federal contracting.
Contract awarded through full and open competition.
Focus on a specific geographic region may allow for optimized logistics.

Sector Analysis

The pharmaceutical preparation manufacturing sector is a vital part of the healthcare industry, encompassing the production and distribution of medications. The VA's Pharmacy Prime Vendor (PPV) program is a significant contract within this sector, aimed at consolidating pharmaceutical purchasing for the Department of Veterans Affairs. This contract with McKesson Corporation is a key component of that strategy, reflecting the substantial federal spending on pharmaceuticals to serve the veteran population. The market is characterized by large distributors playing a crucial role in the supply chain.

Small Business Impact

This contract does not appear to have specific small business set-aside provisions. As a prime vendor contract for pharmaceutical distribution, it likely involves significant infrastructure and logistical capabilities that may be more readily met by larger corporations. However, the prime contractor, McKesson Corporation, may engage small businesses for subcontracting opportunities related to logistics, transportation, or specialized services, though this is not explicitly detailed in the provided data.

Oversight & Accountability

The Department of Veterans Affairs has established oversight mechanisms for its pharmaceutical contracts, including the PPV program. These mechanisms typically involve performance monitoring, quality assurance reviews, and financial audits to ensure compliance with contract terms and to track value. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse. Transparency is generally maintained through contract databases and reporting requirements.

Related Government Programs

Department of Defense Pharmacy Contracts
Federal Supply Schedule (FSS) Pharmaceutical Contracts
Medicaid Drug Rebate Program
TRICARE Pharmacy Program

Risk Flags

Potential for supply chain disruption
Price volatility of pharmaceuticals
Dependence on a single large contractor

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $28.0 million to MCKESSON CORPORATION. EXPRESS REPORT PHARMACY PRIME VENDOR (PPV) FY2015 JUN

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 $28.0 million.

What is the period of performance?

Start: 2015-06-01. End: 2015-06-30.

What is McKesson Corporation's track record with the VA for pharmaceutical prime vendor services?

McKesson Corporation has a long-standing relationship with the Department of Veterans Affairs as a prime vendor for pharmaceuticals. They have historically been awarded significant contracts under the Pharmacy Prime Vendor (PPV) program, which is responsible for distributing a vast array of medications to VA medical facilities nationwide. Their track record includes managing complex supply chains, ensuring timely delivery, and adhering to stringent regulatory requirements for pharmaceutical handling and storage. The VA's continued reliance on McKesson for these critical services suggests a generally satisfactory performance history, though specific performance metrics and any past issues would require deeper analysis of contract performance reports and any associated corrective actions.

How does the pricing of this delivery order compare to other VA pharmaceutical contracts or market rates?

Directly comparing the pricing of this single $27.97 million delivery order to other VA pharmaceutical contracts or general market rates is challenging without detailed unit cost data and specific drug information. The Pharmacy Prime Vendor (PPV) program is designed to leverage bulk purchasing power to achieve favorable pricing. McKesson, as the prime vendor, negotiates prices with manufacturers and then supplies them to the VA. The 'full and open competition' award basis suggests competitive pricing was sought. However, a true value assessment would require analyzing the specific drugs procured, their quantities, and comparing the negotiated prices against benchmark data for similar federal contracts or commercial wholesale acquisition costs (WAC) and average wholesale prices (AWP) where applicable.

What are the primary risks associated with this Pharmacy Prime Vendor contract for the VA?

The primary risks associated with this Pharmacy Prime Vendor (PPV) contract for the VA include supply chain disruptions, price volatility, and potential over-reliance on a single large contractor. A disruption in McKesson's distribution network, whether due to natural disasters, labor issues, or logistical failures, could severely impact the VA's ability to provide medications to veterans. Price volatility is another concern, as pharmaceutical costs can fluctuate significantly. Furthermore, awarding such a critical function to a single entity, even through competition, concentrates risk. Ensuring robust contingency plans, continuous performance monitoring, and exploring alternative sourcing strategies are key mitigation efforts.

How effective is the VA's PPV program in ensuring pharmaceutical availability and cost savings?

The VA's Pharmacy Prime Vendor (PPV) program is generally considered effective in ensuring pharmaceutical availability and achieving cost savings through consolidated purchasing. By centralizing procurement and leveraging its immense buying power, the VA can negotiate substantial discounts from pharmaceutical manufacturers and distributors. This approach streamlines the supply chain, reduces administrative overhead, and helps maintain a consistent supply of medications to its vast network of facilities. While specific cost savings figures can vary year to year and depend on market dynamics, the program's longevity and the VA's continued reliance on it indicate its perceived effectiveness in meeting these objectives for millions of veterans.

What has been the historical spending trend for the VA's Pharmacy Prime Vendor program?

Historical spending on the VA's Pharmacy Prime Vendor (PPV) program has shown a consistent and significant upward trend over the years, reflecting the increasing demand for pharmaceuticals and the growing veteran population. Annual expenditures have typically been in the hundreds of millions, and often exceeding a billion dollars, as the VA procures a vast range of medications. This trend is influenced by factors such as the aging veteran population, advancements in medical treatments leading to new and more expensive drugs, and inflation within the pharmaceutical market. The PPV contracts are crucial for managing this substantial and growing budget.

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: $27,972,683

Exercised Options: $27,972,683

Current Obligation: $27,972,683

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: VA797P12D0001

IDV Type: IDC

Timeline