VA's Pharmacy Prime Vendor contract awarded to McKesson Corporation for $29.4M in FY2015

Contract Overview

Contract Amount: $29,395,470 ($29.4M)

Contractor: Mckesson Corporation

Awarding Agency: Department of Veterans Affairs

Start Date: 2015-03-01

End Date: 2015-03-31

Contract Duration: 30 days

Daily Burn Rate: $979.8K/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) FY2015 MAR

Place of Performance

Location: BAY PINES, PINELLAS County, FLORIDA, 33744

State: Florida Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $29.4 million to MCKESSON CORPORATION for work described as: EXPRESS REPORT PHARMACY PRIME VENDOR (PPV) FY2015 MAR 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 vital to understand the effectiveness of pharmaceutical delivery. 4. The sector positioning 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) contract awarded to McKesson Corporation for approximately $29.4 million in FY2015 appears to be a standard award within the healthcare sector. Benchmarking against similar large-scale pharmaceutical distribution contracts is challenging without more specific service details. However, the firm fixed-price structure suggests a degree of cost certainty for the government. The reported award amount should be evaluated against the volume and type of pharmaceuticals procured to assess value for money.

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 presence of a competitive process is generally positive for price discovery and can lead to more favorable terms for the government. The number of bidders and the specifics of the evaluation process would provide further insight into the intensity of the competition.

Taxpayer Impact: A full and open competition suggests that taxpayers benefit from a potentially more competitive pricing environment, as multiple vendors vied for the contract, driving down costs.

Public Impact

Veterans across the nation benefit from timely access to essential medications. The contract ensures the supply of a wide range of pharmaceuticals for VA healthcare facilities. Geographic impact is nationwide, supporting VA medical centers and clinics. Workforce implications include support for pharmacy technicians and logistics personnel within the VA system.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases in future contract periods.
Dependence on a single prime vendor could create supply chain vulnerabilities.
Ensuring equitable distribution of pharmaceuticals across all VA facilities.

Positive Signals

Awarded through full and open competition, suggesting competitive pricing.
Firm fixed-price contract provides cost predictability.
Supports a critical healthcare need for veterans.

Sector Analysis

The pharmaceutical distribution market is a critical component of the healthcare sector, characterized by large, established players and complex supply chains. The VA's Pharmacy Prime Vendor (PPV) program is a significant contract within this space, aimed at consolidating pharmaceutical procurement and distribution for the entire Veterans Health Administration. This contract fits within the broader category of medical supply chain management and represents a substantial portion of the government's spending on pharmaceuticals, ensuring access to medications for millions of veterans.

Small Business Impact

Information regarding small business set-asides or subcontracting plans for this specific contract was not provided in the data. Typically, large prime vendor contracts may include provisions for small business participation, either directly or through subcontracting opportunities. The absence of explicit small business involvement in the provided data warrants further investigation to understand the impact on the small business ecosystem within pharmaceutical distribution.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Veterans Affairs' procurement and program management offices. Accountability measures would be embedded in the contract's performance work statement, with regular reviews and audits to ensure compliance. Transparency is generally maintained through federal procurement databases, though specific performance metrics and detailed spending breakdowns may require further inquiry.

Related Government Programs

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

Risk Flags

Potential for price escalation in future contract periods.
Supply chain disruption risks.
Dependence on a single large contractor.

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $29.4 million to MCKESSON CORPORATION. EXPRESS REPORT PHARMACY PRIME VENDOR (PPV) FY2015 MAR

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 $29.4 million.

What is the period of performance?

Start: 2015-03-01. End: 2015-03-31.

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

McKesson Corporation is a major player in the pharmaceutical distribution industry and has a long history of holding significant federal contracts, including prime vendor agreements with the Department of Defense and the Department of Veterans Affairs. Their track record involves managing complex supply chains, ensuring timely delivery of a vast array of pharmaceuticals, and adhering to stringent regulatory requirements. While generally considered experienced, like any large contractor, they have faced scrutiny and challenges related to pricing, product availability, and compliance in various contracts over the years. A thorough review would involve examining past performance evaluations, any significant disputes or penalties, and their overall market position in fulfilling government pharmaceutical needs.

How does the $29.4 million award compare to previous or subsequent VA Pharmacy Prime Vendor contracts?

The $29.4 million award for FY2015 represents a specific delivery order or a portion of the overall Pharmacy Prime Vendor (PPV) program for that year. The total value of the PPV contract can fluctuate significantly year-over-year based on pharmaceutical needs, market prices, and contract modifications. To compare, one would need to examine the total contract ceiling and actual spending for the entire PPV program across multiple fiscal years. For instance, if this $29.4 million was for a single month (as suggested by the 'dur': 30), the annual spend would be considerably higher. Benchmarking requires looking at the full contract period's value and comparing it to similar periods or subsequent awards to understand trends in VA pharmaceutical spending and the scale of McKesson's involvement.

What are the primary risks associated with a sole-source or limited-competition pharmaceutical prime vendor contract?

While this contract was awarded under 'full and open competition,' it's important to address the risks of limited competition in general for such critical services. Risks include reduced price competition, potentially leading to higher costs for the government and taxpayers. A lack of robust competition can also diminish incentives for the contractor to innovate or improve service quality. Furthermore, reliance on a limited number of vendors can create supply chain vulnerabilities; if one vendor faces disruptions (e.g., natural disasters, financial issues, regulatory problems), it could significantly impact the availability of essential medications. This underscores the importance of strong contract management and contingency planning by the procuring agency.

How effective is the VA's Pharmacy Prime Vendor program in ensuring pharmaceutical availability for veterans?

The VA's Pharmacy Prime Vendor (PPV) program is generally considered effective in ensuring the availability of a wide range of pharmaceuticals for veterans nationwide. By consolidating procurement through a prime vendor, the VA aims to achieve economies of scale, streamline logistics, and maintain consistent access to medications across its vast network of facilities. The program's success is measured by metrics such as fill rates, delivery timeliness, and formulary compliance. While challenges can arise, such as specific drug shortages or distribution issues, the overall structure of the PPV program is designed to provide a reliable supply chain critical for veteran healthcare.

What is the typical market share of companies like McKesson in the federal pharmaceutical distribution sector?

Companies like McKesson Corporation, Cardinal Health, and AmerisourceBergen (often referred to as the 'Big Three') dominate the pharmaceutical distribution market in the United States, including the federal sector. They collectively hold a very substantial market share, often exceeding 90% of the total pharmaceutical distribution volume. In the federal space, their contracts with agencies like the VA and DoD represent significant portions of their business. Their market power stems from extensive distribution networks, established relationships with manufacturers, and the ability to handle the sheer volume and complexity of pharmaceutical logistics required by large government entities.

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: $29,395,470

Exercised Options: $29,395,470

Current Obligation: $29,395,470

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: VA797P12D0001

IDV Type: IDC

Timeline