Shares of medical device makers Dexcom, Tandem Diabetes and Insulet skidded Tuesday on a proposal that would cut Medicare reimbursements for wearable diabetes tech.
Late Monday, the Centers for Medicare and Medicaid Services outlined a proposed competitive bidding process for some medical equipment, including continuous glucose monitors and insulin pumps. CGMs are wearable devices that help keep tabs on blood sugar in real time.
Dexcom stock dropped 4.3% to 83.58, while Tandem Diabetes shares shed 7.5%, closing at 17.24. Insulet stock also toppled 4.5% to 299.99. Dexcom makes CGMs, while Tandem and Insulet are insulin pump makers.
Abbott Laboratories, which makes CGMs in addition to a number of other health care products, saw shares rise a fraction to 136.25. Medtronic also makes insulin pumps and CGMs, among other products. But shares rose 1.8%, closing at 88.75.
Pricing Pressure On Dexcom, Abbott?
William Blair analyst Brandon Vazquez isn't overly worried about the future of medical device makers.
"The overall takeaway is that there likely will be pricing pressure that comes from competitive bidding, but this does not have to fundamentally change the long-term diabetes growth stories, even if it creates some pockets of headwinds," he said in a report.
After a 60-day comment period, Vazquez expects CMS to make a decision in late 2025 or early 2026. If finalized, the competitive bidding process would start in late 2026 or early 2027.
Vazquez estimates 10% to 20% of the U.S. CGM market could be exposed to pricing cuts with the new competitive bidding process. For Dexcom, this means something around the mid-teens of its global installed base is exposed.
"The severity of pricing cuts will not be known until we get more info on bids, but we suspect pricing cuts should be manageable to the CGM manufacturers since there are only two real stand-alone CGM players that can service the market — Dexcom and Abbott," he said.
Follow Allison Gatlin on X/Twitter at @AGatlin_IBD.
