Pharmacy Bond

The pharmacy bond is a type of surety bond required in 15 states as a licensing requirement for wholesale distributors of prescription and non-prescription drugs. In some states, it is required for medical equipment distributors. The bond may go by a different name in certain states, such as pharmacy wholesaler or wholesale drug distributor bonds. However, the purpose of the bond remains the same. It is to guarantee that bonded distributors will make any due payments of administrative penalties and fees to the state on time and carry out business according to state regulations. The bond is a way to protect the public and ensure that pharmaceutical distributors act ethically. The bond was put in place by many state governments due to the pharmacy industry’s importance to public well being. The bond amount required differs in each state, but it ranges between $25,000 to $100,000. For a $25,000 pharmacy bond, our prices start at $250.

Example Pharmacy Bond (CA)
Example Pharmacy Bond (CA)

How much does a pharmacy bond cost?

The cost of a pharmacy bond will be influenced by many factors, such as the required bond amount, your credit score, and the insurance company providing the bond. Each state has different requirements for the bond amount, but it usually ranges from $25,000 to $100,000.The cost for the bond will then be a percentage of the bond amount, which is determined by the insurance company providing the bond. The owner's credit score is the most significant factor when insurance companies rate a business. A higher credit score will lead to a lower bond cost, and a lower credit score will lead to a higher bond cost or a decline when applying for the bond. Our rates for pharmacy bonds start at 1%, so for a $25,000 bond, our prices start at $250.

One way to lower the annual cost of the pharmacy bond is by purchasing a multi-year bond. When we purchase a bond for longer than one year, we can offer a 15% annual discount. Our 10 insurance partners allow us to offer the most competitive rates on the market, but if you find a better quote, please let us know, and we’ll do our best to beat it.



Who needs a pharmacy bond?

Wholesale distributors of prescription and non-prescription drugs and ccasionallymedical equipment distributors may be required to purchase a pharmacy bond as part of the licensing process in their state. At this time, the following states require pharmacy businesses to purchase a bond: Arizona, California, Florida, Iowa, Indiana, Nebraska, Nevada, North Dakota, Oregon, Maryland, Mississippi, South Dakota, Texas, Wisconsin, and Wyoming. Proof of a pharmacy bond is necessary for wholesale pharmaceutical or medical equipment distributors to get licensed to operate legally in their state. 

Although the majority of pharmacy wholesalers need to be licensed and bonded to provide their services legally, there are a couple of exceptions for certain pharmacy wholesalers that do not need to be bonded:

  • Licensed manufacturers only dispensing drugs they manufacture might not need a bond as a part of the licensing process.
  • Pharmacy warehouses typically only need to be bonded if they are engaged in wholesale distribution.

To determine if you’ll need a pharmacy bond, we recommend contacting your state’s board of pharmacy to see if a pharmacy bond will be required for your license.

How does a Pharmacy Bond Work?

Each pharmacy wholesaler bond is a legal contract binding three parties together.

  • The principal is the pharmacy wholesaler.
  • The obligee is the government agency that requires the bond, usually the state's Board of Pharmacy
  • The surety is the insurance company that issues the bond.

If a pharmacy wholesaler conducts fraudulent activities (i.e., delivers fake drugs, fails to pay their suppliers, mishandles funds entrusted to him), a claim can be filed against the pharmacy wholesaler. If a claim is valid, the surety will pay up to the bond amount for the claim. Then, the surety will require reimbursement from the pharmacy wholesaler.

What happens if there’s a claim on a Pharmacy Bond?

If a claim is filed on a pharmacy bond due to fraudulent activity, the insurance company will investigate the claim's validity. During the investigation, the insurance company may request additional information or anything about the claim to conduct their investigation. The insurance company will pay the affected parties up to the bonded amount if the claim is valid.

Surety bond claims differ from insurance claims because a surety bond protects the third party, not the first party or the contractor, from any financial burdens. This is an important distinction because after a surety bond claim is paid out, the insurance company will require the principal, the pharmacy wholesaler, to repay the claim amount. If the claim is not paid back to the insurance company, the bond may be canceled, and the principal may have difficulty getting future bonds.

It’s best to avoid claims from happening on a bond by conducting your business according to the laws and regulations of your industry. If a claim does happen, remember to reimburse the insurance company for the claim so that you can continue to run your business legally.