Medical equipment and pharmacy bonds are legally binding agreements between three parties: distributors of prescription and non-prescription drugs or medical equipment, the government agency responsible for regulating local pharmacies, and a surety company.
The government agency is the Obligee and establishes the obligations that the distributor (the Principal) must follow. The surety (also called bonding company) issues the bond guaranteeing the performance of the distributor.
Sometimes these medical equipment bonds are called DMEPOS bonds, short for Durable Medical Equipment, Prosthetics, Orthotics, and Supplies. Because these are often billed through Medicare, another name for these bonds is "Medicare Bonds". In the case of DMEPOS bonds, the Centers for Medicare and Medicaid Services (CMS) is the Obligee and establishes the obligations that the DMEPOS supplier (the Principal) must follow. The surety (also called bonding company) issues the bond guaranteeing the performance of the DMEPOS supplier.
Medical equipment and pharmacy bonds are required in some states for eligibility to obtain a license to distribute prescription and non-prescription drugs or medical equipment. For example, DMEPOS bonds are required before DMEPOS suppliers can receive accreditation to bill the Medicare Program for the goods they provide to customers. The bonding requirement was established in 2009 to help reduce Medicare billing fraud.
When the surety company issues the bond, they provide the government agency a guarantee that the customers of a licensed pharmaceutical wholesaler or distributor will receive payment for financial losses resulting from a violation of the statutes and regulations set forth by the distributor’s license.
If the distributor fails to meet the obligations set out by the government agency, the surety will pay out any damages up to the bond amount. The distributor is ultimately liable for the losses and is legally required to reimburse the surety company for any damages paid under the bond.
Medical equipment and pharmacy surety bond costs vary depending on the total bond amount and the premium rate. In the case of DMEPOS bonds, suppliers are required to post a surety bond with a minimum total amount of $50,000 for each National Provider Identifier (NPI) practice location. The surety company then determines your premium rate, which is the percentage of the total bond amount you pay as the premium.
Premium rates for medical equipment and pharmacy bonds typically cost between 1% and 5% of the total bond amount. During the application process, the surety company evaluates your credit score, financial strength, and industry experience. Applicants with good credit generally receive the lowest rates, however, bad credit will not prevent you from securing a pharmacy bond. EZ Surety still offers competitive rates to individuals with low credit scores or other financial issues.
Below are the lowest premiums EZ Surety has issued for DMEPOS surety bonds in popular states.