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Executive Summary

McKESSON's DoD PRIME VENDOR CONTRACT VALUED AT $100 MIL. OVER FIVE YEARS and designates McKesson as the sole distributor of pharmaceuticals for 11 military hospitals in the National Capital (Washington, D.C.) region. Announced by the Department of Defense Feb. 10, the contract is the first in the department's pilot project to use one prime vendor for pharmaceuticals and one for medical/surgical supplies in each of DoD's 22 regions of the U.S. ("The Pink Sheet" Aug. 17, 1992, T&G-2). The med/surg distributor for the National Capital region is expected to be named by early March. DoD is expected to make its next awards for the Philadelphia- area region, followed by the San Francisco and San Diego regions in late April and the Tidewater/North Carolina region sometime later. D.C., San Francisco, San Diego and Tidewater together account for about $90 mil. in annual DoD drug purchases. DoD went forward with the McKesson award despite a pending protest filed by Renow, a Norfolk, Va.-based wholesaler. The General Accounting Office is reviewing Renow's contention that DoD's selection process favors large wholesalers ("The Pink Sheet" Dec. 7, 1992, In Brief). DoD's contract procedures allow top officials to permit a contract to be awarded in the face of a protest if the matter is considered to have some urgency. DoD also indicated that it believes it has made a strong case to GAO. San Francisco-based McKesson has operations in all 50 states and is bidding on additional DoD regions for both drug and med/surg prime vendor contracts. McKesson also is the prime vendor for the Veterans Affairs Department's Northwest region, a contract valued at $12 mil. annually. The DoD program will allow military hospitals to consolidate pharmaceutical purchases and deliveries and will move to totally electronic ordering and payment procedures within about two years. The department will maintain a central "computer catalog" of products and alert hospitals to interim discounts and special offers from manufacturers.

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