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Cardinal Health Receives Contract from DoD

by: Matthew Potter
April 7, 2011

Category: Business Line, Companies, Contract Awards, Department of Defense, Events, Federal Budget Process, logistics, medicine, Services | RSS 2.0

The U.S. Department of Defense and its services and agencies buy many things from thousands of vendor. These range from advanced combat aircraft that cost over $100 million each such as the F-35 Lightning II to boots and IT support. Some of these contracts are huge but they happen and nobody really notices or remarks because they purchase mundane items. Such is the contract just announced with Cardinal Health (CAH).

The military runs several healthcare systems. They have clinics and hospitals at their bases to treat active duty members, their dependents and retirees. They have a complex system of field and evacuation hospitals to treat combat casualties and they have medics and corpsman in the field directly with Soldiers and Marines as well as on ships and submarines. Military medical personnel also treat refugees and people across the world as part of building goodwill. They employ thousands of medical personnel and use all sorts of supplies and equipment to carry out this part of their mission.

Cardinal Health is one of the major suppliers of pharmaceuticals and medical products in the United States. They sell not only basic medical supplies and drugs but also surgical equipment, apparel, as well as services to manage care and supply chain management.

They provide these products to companies like Walgreen Co. which they have a major distribution agreement with that was just renewed. Walgreen and CVS Caremark are two of the companies biggest customers.

Its subsidiary, Cardinal Health 200 Inc., won a two year contract worth over $1 billion to provide medical surgical supplies to the Defense Department. Even in a day and age of $700 billion annual defense budgets that is a contract not to overlook and demonstrates that the U.S. must invest in more then weapons.

The other thing that must be considered for companies like Cardinal is that once the fighting ends in Iraq and Afghanistan the demand for products like theirs should decline. Future defense budgets may see reductions and this is one area that may be cut. The company like many others must be prepared for the loss of this business and adjust.

Photo from exfordy’s flickr photostream.

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3 Comments

  1. Barry Graff on April 7th, 2011 4:52 pm

    I’m not sure where you’re getting your F-35 cost figures, but the Air Force CTOL version is $60 million RFC (Recurring Flyaway Cost). That’s complete – with everything to do it’s combat mission.

    Your $100 million may be a RFC plus cost (R&D, fuel, maintenance, or other costs, etc.) but remember, the government is paying for R&D because the aircraft is being built to its standards and specifications. And all planes, regardless of their generation, require fuel, maintenance, etc.

  2. Matthew Potter on April 7th, 2011 5:35 pm

    Hi, thank you for reading. I am not familiar with RFC but am with APUC and PAUC. The Congressional Research Service in their 23 Sep 10 report said that the USAF 31 Dec Selected Acquisition Report (SAR) submitted to Congress estimated PAUC at $133.6 million in CY10 dollars. APUC was $113 million. (http://www.fas.org/sgp/crs/weapons/RL30563.pdf)

    I think saying “over $100 million” was just to make a point.

    Any reduction in quantity for the F-35 will only increase PAUC as would any change in the international partners.

  3. Barry Graff on April 7th, 2011 6:09 pm

    APUC includes non-recurring and ancillary equipment, tech data, publications, contract services, training equipment, factory training, and initial spares – the same things every new and existing combat aircraft must have.

    PAUC adds RDT&E and Milcon costs. Again, a cost common to all aircraft speced by DoD.

    I understand the desire to make a point, but it had no context.

    As for your final point, I agree – the $60 mil is based on full production of the agreed upon numbers.

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