Cardinal Health (NYSE:CAH) is staring down its top two competitors for a U.S. Department of Veterans Affairs (VA) drug distribution contract that could be worth up to $32 billion.
In January, Dublin, Ohio-based Cardinal should know whether it or AmerisourceBergen (NYSE:ABC) or McKesson (NYSE:MCK) has won the giant VA contract, Bloomberg News reported.
Since 2004, McKesson has held a contract to supply pharmaceuticals to not only the VA’s hospitals, but also the department’s mail-order operations. Amerisource held the contract prior to that. It’s possible that the VA could split up the work.
Terms of the existing contract called for McKesson to give the VA a 5 percent discount on wholesale prices in the first year of the deal.
The VA is generally happy with McKesson’s performance, but the San Francisco company still could be vulnerable, Lisa Gill, an analyst with JP Morgan Securities, told Bloomberg.
“If someone bids substantially below them, they may lose the contract,” Gill said. “Price is by far the biggest determining factor.”
A Cardinal spokeswoman confirmed that the Ohio company is competing for the contract.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
The contract could boost its winner’s revenue by about $4 billion annually.
