Pharmacy Bonds

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Continue below to learn more about pharmacy bonds. If you have any questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond experts today!

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FREE PHARMACY BOND QUOTE

What Are Pharmacy Bonds?

Pharmacy bonds are a type of license and permit surety bond, allowing you to get a license to operate as a distributor serving retail pharmacies.

A pharmacy bond brings three parties together in a legally binding contract: the State Board of Pharmacy (the “obligee” requiring the bond), the pharmaceutical distributor (the “principal” required to purchase the bond), and the company authorizing and guaranteeing the bond (known as the bond’s “surety”).

A pharmacy bond serves multiple purposes:

  • It is the principal’s guarantee to do business in compliance with all applicable state laws and regulations as identified in the terms of the surety bond agreement.
  • It indemnifies the state against liability for damages resulting from the principal’s violation of the surety bond agreement.
  • It establishes accountability and acts as a deterrent to unlawful or unethical business conduct by the principal.
  • It provides a measure of financial protection for the pharmacies that do business with the bonded distributor.
  • It provides a source of funds for compensating parties incurring a financial loss as a result of the principal’s unlawful or unethical actions.

Who Needs Them?

Currently, 15 states require wholesale distributors that supply prescription medications and medical equipment to retail pharmacies to purchase a pharmacy bond as a prerequisite for obtaining a license to operate within the state. The bond must be continuous, meaning that there must always be an active bond in force to prevent suspension or revocation of the wholesaler’s license.

The state, as the bond’s obligee, establishes the required bond amount. This amount is also known as the bond’s “penal sum,” because it is the maximum amount that will be paid out on a single claim against the bond.

How Do They Work?

The terms of surety bond agreement make the principal wholly responsible for paying valid claims against a pharmacy bond. The surety guarantees payment of claims and typically pays claims initially, to ensure prompt resolution of the matter.

But the legal obligation to pay legitimate claims remains the principal’s. Consequently, the principal must repay the surety in full. Failure to do so can result in the surety taking legal action against the principal.

What Do They Cost?

The surety establishes the premium rate for each bond applicant based largely on the underwriters’ assessment of the risk inherent in paying claims on behalf of the principal.

The principal’s personal credit score is a good predictor of the relative ease or difficulty of collecting reimbursement for claims paid on the principal’s behalf. A high credit score suggests a relatively low risk of not being repaid and is rewarded with a low premium rate. A lesser credit score is an indicator of a greater credit risk and results in a higher premium rate. With excellent credit, the premium rate for a pharmacy bond can be as low as 0.75%.

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Continue below to learn more about pharmacy bonds. If you have any questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond experts today!

CONTACT US FOR A

FREE PHARMACY BOND QUOTE

What Are Pharmacy Bonds?

Pharmacy bonds are a type of license and permit surety bond, allowing you to get a license to operate as a distributor serving retail pharmacies.

A pharmacy bond brings three parties together in a legally binding contract: the State Board of Pharmacy (the “obligee” requiring the bond), the pharmaceutical distributor (the “principal” required to purchase the bond), and the company authorizing and guaranteeing the bond (known as the bond’s “surety”).

A pharmacy bond serves multiple purposes:

  • It is the principal’s guarantee to do business in compliance with all applicable state laws and regulations as identified in the terms of the surety bond agreement.
  • It indemnifies the state against liability for damages resulting from the principal’s violation of the surety bond agreement.
  • It establishes accountability and acts as a deterrent to unlawful or unethical business conduct by the principal.
  • It provides a measure of financial protection for the pharmacies that do business with the bonded distributor.
  • It provides a source of funds for compensating parties incurring a financial loss as a result of the principal’s unlawful or unethical actions.

Currently, 15 states require wholesale distributors that supply prescription medications and medical equipment to retail pharmacies to purchase a pharmacy bond as a prerequisite for obtaining a license to operate within the state. The bond must be continuous, meaning that there must always be an active bond in force to prevent suspension or revocation of the wholesaler’s license.

The state, as the bond’s obligee, establishes the required bond amount. This amount is also known as the bond’s “penal sum,” because it is the maximum amount that will be paid out on a single claim against the bond.

The terms of surety bond agreement make the principal wholly responsible for paying valid claims against a pharmacy bond. The surety guarantees payment of claims and typically pays claims initially, to ensure prompt resolution of the matter.

But the legal obligation to pay legitimate claims remains the principal’s. Consequently, the principal must repay the surety in full. Failure to do so can result in the surety taking legal action against the principal.

The surety establishes the premium rate for each bond applicant based largely on the underwriters’ assessment of the risk inherent in paying claims on behalf of the principal.

The principal’s personal credit score is a good predictor of the relative ease or difficulty of collecting reimbursement for claims paid on the principal’s behalf. A high credit score suggests a relatively low risk of not being repaid and is rewarded with a low premium rate. A lesser credit score is an indicator of a greater credit risk and results in a higher premium rate. With excellent credit, the premium rate for a pharmacy bond can be as low as 0.75%.

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Request a quote online or call today to speak with one of our surety bond experts about obtaining a pharmacy bond.