Skin Substitutes: Relief for COLOB.DC, Headiwnds for CTEC.LN & ORGO
Key Takeaways: The coordinated release of finalized skin substitute local coverage determinations (LCDs) from all seven Medicare Administrative Contractors (MACs) this morning is largely in keeping with our expectations, with Coloplast (COLOB.DC) seeing the greatest relief relative to the initial April 2024 proposal.
- Organogenesis (ORGO): The MACs’ finalized non-coverage for Puraply, Novachor, and Cygnus likely creates a 50%+ revenue headwind, which will only be partially offset by reversal from the initial draft on NuShield (2.3%) and ongoing coverage of Affinity (16%), Apligraf (3%), and Dermagraft (0.2%).
- Coloplast (COLOB.DC): The MACs reversed their draft decision to eliminate coverage of the company’s Kerecis line and will now cover these products that provide ~2% of company revenues through Medicare.
- ConvaTec (CTEC.LN): The company’s InnovaMatrix and Novafix lines remain non-covered, representing a ~2.5% headwind to company revenues going into 2025.
The chart below highlights our estimates of product-specific revenue implications, as well as the only changes we can identify between the draft and final versions.
While we have been asked of the likely implications for other manufacturers [MiMedx (MDXG), Smith & Nephew (SNN), Bioventus (BVS)], we view the revenue risk as largely immaterial, representing headwinds of just 0.1% to 0.3%.
Mitigation Potential
While CTEC.LN and ORGO have both indicated that they are currently conducting additional clinical studies that might better meet the evidentiary standards laid out in today’s final coverage policies, we are highly skeptical that even positive results will trigger a near-term reversal (e.g., CY25).
The MACs repeatedly cite the need for a full LCD reconsideration process in their responses to the myriad comments received throughout their review. This implies a formal request being submitted and granted, along with a draft proposal issued and a 45-day comment period being offered. It then typically takes 4-6 months for MACs to issue a finalized policy.
Considering the high volume of coverage requests each MAC receives across all topic areas, the fact that more than 200 products have now been deemed non-covered (and hence likely to prompt similar reconsideration requests), as well as the enormous literature review already conducted for the current analysis, we would be dubious of the MACs returning to this issue in just a few short months.
