Tonix Pharmaceuticals stock halted ahead of FDA approval news
Investing.com -- Shares of wound-care product manufacturers dropped sharply in premarket trading Tuesday after the U.S. government proposed significant changes to how skin substitutes are reimbursed.
MiMedx (NASDAQ:MDXG) fell 21% while Organogenesis (NASDAQ:ORGO) declined 25% following the announcement. Investors should also monitor Integra Lifesciences (NASDAQ:IART) shares for potential impact.
The Centers for Medicare & Medicaid Services (CMS) has proposed eliminating product-specific reimbursement for skin substitutes. Instead, these products would be treated as "incident-to supplies," a change expected to reduce spending on these products by nearly 90%.
CMS also plans to group skin substitutes according to their FDA regulatory status and eventually establish differentiated payment rates based on these classifications.
According to BTIG analyst Ryan Zimmerman, "Incident-to services and supplies are those provided as an integral, although incidental, part of the physician’s or nonphysician practitioner’s personal professional services during diagnosis and treatment."
Zimmerman views the proposal as consistent with CMS’s recent efforts to reduce spending and combat fraud within the healthcare system.
While he acknowledged the stock reaction "was immediately harsh given that proposal, on the surface it appears draconian," he believes it "may actually result in consolidation and a clean-up of the market."
Despite the negative market reaction, Zimmerman maintains a buy rating on Organogenesis.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.