Photographer: Christopher Dilts/Bloomberg

McKesson approaches option period 2 on $44B pharma contract

August 5, 2016 Daniel Snyder

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On Aug. 9, the first of three option periods for McKesson Corp.’s $44 billion Pharmaceutical Prime Vendor (PPV) contract runs out. The government will then have to decide whether to exercise the second two-year option period, covering August 2016 to August 2018. In 2018, the VA will once again choose whether to renew for the final option period, August 2018 to August 2020.

According to the Veterans Affairs Department (VA), the PPV “is a concept of support whereby a primary commercial distributor serves as the provider of a broad range of drugs and pharmaceuticals to the VA and other Government agencies,” and “is the largest contract within the National Acquisition Center (averaging $4 billion in annual sales).”

The contract has generated $19.2 billion for McKesson since its original two-year period of performance began in June 2012, according to Bloomberg Government data. It’s likely to continue to generate significant obligations for McKesson, since the VA will probably renew for the remaining option periods. The agency is expected to continue heavy use of the vehicle for pharmaceutical and medical products until August 2020.

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