Prescription Drug Wholesaler or Nonresident Wholesaler ($100,000) Bond - Statewide in California
Table of Contents
Brief Summary
Every California wholesaler and nonresident wholesaler that is not government run has to keep security on file with the Board of Pharmacy, and $100,000 is the default amount. A surety bond lets you meet it for an annual premium instead of tying up $100,000 in a letter of credit or cash deposit, and one bond can cover every licensed site you own.
California Business and Professions Code sections 4162 and 4162.5 require a $100,000 surety bond, payable to the Pharmacy Board Contingent Fund, from every applicant for a new or renewed wholesaler or nonresident wholesaler license that is not government owned and operated. The bond secures payment of administrative fines and cost recovery ordered by the California State Board of Pharmacy. New businesses must post the full $100,000.
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How to Apply for a Prescription Drug Wholesaler or Nonresident Wholesaler ($100,000) Bond:
- Use the board's Wholesaler or Nonresident Wholesaler Surety Bond form for $100,000 under sections 4162 and 4162.5.
- Name the Pharmacy Board Contingent Fund as the payee and match the applicant name to the license application.
- Check the box on the form for a California prescription drug wholesaler or an out of state prescription drug wholesaler.
- Include a letter from the surety showing the bond renewal date.
- Submit the bond with the wholesaler application (17A-68) or the nonresident wholesaler application and the $1,000 application fee.
- Keep the bond in force at every annual license renewal.
Detailed Information About the California Prescription Drug Wholesaler or Nonresident Wholesaler ($100,000) Bond:
Who needs the $100,000 bond
The California State Board of Pharmacy licenses firms that distribute, broker or sell prescription drugs and devices into or within California. Section 4162 covers in state wholesalers and section 4162.5 covers nonresident wholesalers shipping into the state. Both set the bond at $100,000 unless the firm qualifies for the reduced amount.
A brand new company has to post $100,000. The board says plainly that a new business has no proof of annual gross receipts, so it cannot use the $25,000 option at first. Once the company can show gross receipts of $10 million or less for the previous tax year, it may replace the bond with a $25,000 one.
Who does not post it
California government owned and operated wholesalers are exempt. So is a company holding an FDA approved new drug application that distributes only the drug named in that application. For nonresident wholesalers the exemption also covers a biologics license application. Exempt firms send the board a signed exemption letter with the NDA number instead of a bond.
A bond on file with another state does not count. The board's Q&A states that a Florida bond, for example, will not satisfy the California requirement.
What the bond pays
The board can claim against the bond if the licensee fails to pay an administrative fine within 30 days of the order or fails to pay cost recovery once it is final. The bond is continuous and runs with each license period.
One bond for several sites
A single $100,000 bond covers all licensed sites under common control. If you add a location later, send the board a copy of the original bond and a rider listing the new address.
Eligibility and Requirements for a California Prescription Drug Wholesaler or Nonresident Wholesaler ($100,000) Bond:
- A surety authorized to transact surety business in California.
- Bond amount of $100,000 unless the board accepts the reduced $25,000 amount.
- Countersignature by a California resident agent where the form calls for it.
- Principal signature by an authorized representative, with witnesses as shown on the form.
- A standby letter of credit or cash deposit is accepted in place of a bond if it is payable to the Pharmacy Board Contingent Fund.
California Prescription Drug Wholesaler or Nonresident Wholesaler ($100,000) Bond FAQs:
No. The board requires a new business to post $100,000 because it has no prior year gross receipts to show. Once it can document receipts of $10 million or less for the previous tax year, it may switch to a $25,000 bond.
No. One $100,000 bond or other approved security covers all licensed sites under common control. Subsidiaries owned by the same parent can share one bond if you send an organization chart showing the common ownership.
If you distribute only the drug covered by your FDA approved new drug application, you do not post the bond. Send the board an exemption letter signed by an officer that lists the NDA number.
The board can claim directly against the surety when a fine goes unpaid for 30 days or cost recovery becomes final and unpaid. The surety then looks to you for repayment.
The surety prices the bond from an underwriting review of the business and its owners, usually starting with credit. You pay that premium each year the bond stays in force.
