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Investing.com -- MiMedx Group (NASDAQ:MDXG) stock fell 19% and Organogenesis Holdings (NASDAQ:ORGO) shares plunged 36% after the Centers for Medicare & Medicaid Services (CMS) proposed a rule that would drastically cut Medicare spending on skin substitutes.
The proposal, part of the CY 2026 Medicare Physician Fee Schedule, aims to reclassify skin substitutes as "incident-to supplies" rather than biologicals for Medicare payment purposes. This change is expected to reduce spending on these products by nearly 90%, according to CMS.
Medicare spending on skin substitutes has skyrocketed from $256 million in 2019 to over $10 billion in 2024, which CMS attributes to "abusive pricing practices" and use of products with limited evidence of clinical value. Current payment rates for skin substitutes can reach as high as $2,000 per square inch.
The proposed rule would significantly impact companies like MiMedx and Organogenesis, which specialize in skin substitutes and wound care products. Both companies derive substantial revenue from Medicare reimbursements for these treatments.
CMS Administrator Dr. Mehmet Oz stated, "We are taking meaningful steps to modernize Medicare, cut waste, and improve patient care. We’re making it easier for seniors to access preventive services, incentivizing health care providers to deliver real results, and cracking down on abuse that drives up costs."
The proposal is part of a broader initiative to reduce unnecessary spending while improving care quality. Other elements include new quality measures focused on chronic disease prevention and a new payment model for specialty care targeting heart failure and low back pain.
The 60-day comment period for the proposed rule ends on September 12, 2025, with implementation planned for 2026 if finalized.