Arguments in the March 11 court hearing on the Department of Veterans Affairs' wholesaler contract may focus on how the department assessed the savings from the bids it received.

AmerisourceBergen is suing the VA to retain the wholesaler contract after losing the bid to McKesson.

ABC will likely argue that VA did not accurately take into account the financial savings it could have achieved with the continued use of the wholesaler's established infrastructure. The company's complaint was filed under seal.

In its opposition brief, McKesson disagrees with ABC's contention that the VA should have considered an additional prompt payment discount in analyzing its bid.

"ABC contends that the VA failed to take into account that it would receive a 2% cash discount for prompt payment from manufacturers. However, again, the [request for proposal] does not provide for consideration of any such discount in calculating prices," McKesson said.

"In addition, ABC has not provided any basis to conclude that evaluation of this discount would have any disparate impact on the prices of the different offerors," the wholesaler added.

McKesson argued that price was by far the most important determining criteria in VA's evaluation of prime vendor bids.

"Price was the most important evaluation factor, and alone was equal to past/current performance and technical approach factors combined," the brief says.

Of VA's four evaluation criteria - price, past/current performance, technical approach, and small disadvantaged business participation - "price was...twice as important as either past/current performance or technical approach alone," McKesson noted.

McKesson's public statements about the VA contract have attributed the win to the wholesaler's automated ordering technology (¹ Also see "McKesson Takes VA Contract From Amerisource, Cites Technology As Reason" - Pink Sheet, 5 January, 2004., p. 14). ABC said McKesson's "irresponsible" price of distribution minus 5% was the impetus for VA's decision (² Also see "McKesson/VA Contract Is Cost-5%; “Irresponsible,” Amerisource Says" - Pink Sheet, 12 January, 2004., p. 31).

VA's brief appears to support the notion that price was the differentiating factor between the two wholesalers.

"There are no major strengths offered by either that vastly exceed the other," VA's contracting officer for the solicitation said.

"Both McKesson and AmerisourceBergen have the technical capability to function as a prime vendor."

ABC is arguing that VA improperly ignored a significant portion of its written technical proposal.

VA refuted the claim, citing the department's request only for oral, not written, presentations of technical proposals.

Both McKesson and ABC submitted additional written material. After VA notified the wholesalers that it would not consider the material, ABC "elected to not raise this concern until after award, thereby failing to allow VA to consider any change," VA stated.

ABC filed its complaint Jan. 21 in the U.S. Court of Federal Claims. On Feb. 11, it obtained a consent order extending its service of the VA contract until 45 days beyond the court's decision. The order also said that the court would hand down an opinion on an injunction by March 25 (³ 'The Pink Sheet' Feb. 16, 2004, In Brief).

ABC argued that an injunction is necessary to avoid shortages if both wholesalers order product in anticipation of handling the VA account April 1.

McKesson President of Customer Operations Patrick Blake replied in the company's brief that "in the unlikely event of a shortage, McKesson would be willing to sell to ABC inventory obtained in contemplation of the [pharmaceutical prime vendor] contract to alleviate such shortage."

"Of course, to the extent there is any shortage to users other than the VA caused by this situation, one of the competitors will not be performing the PPV contract, so any excess inventory would be available to the market."

VA Wholesaler Dispute: McKesson And ABC Head To Court In March

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