Healthcare player Polynovo (ASX:PNV) has offered relief to long-term shareholders who may have been bemoaning 1Y returns down -30%.
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Thanks to changes in the U.S. medicare system around how skin healing products are reimbursed, ultimately offering the potential for higher penetration of the company’s NovoSorb product into the U.S. market.
NovoSorb, which is ultimately a dermal product for promoting wound healing, stands to make the company more revenue after the Trump administration has proposed a change to reimbursements for outpatient skin substitutes to USD$806 per square inch, which ultimately means physicians in the U.S. will now be less likely to opt for more expensive products.
Previously, that had been the case as operators sought to make more money back from medicare reimbursements by targeting products more expensive than NovoSorb.
“Under the existing reimbursement model, physicians are paid a percentage of the price for each skin substitute used in outpatient wound care,” PolyNovo elaborated on Tuesday.
“This has disincentivised the selection of lower-priced products as it reduces the physician/surgeon payment with a decrease in product cost.”
While the changes are proposed and based on media reports in the New York Times and The Australian – which is probably as clear as things can be right now under the U.S. healthcare system, considering who’s in charge – the market responded favourably to the update on Tuesday.
While the NovoSorb product is predicted to be a profitable asset under the proposed changes, management also highlighted that changes to the inpatient and outpatient nature of patient care also offer potential benefits.
“The majority of PolyNovo’s current business has to date been inpatient product application. Outpatient product application, the focus of the CMS proposed changes, is a significant potential growth area for PolyNovo’s products. We are currently assessing the optimal commercial model for accessing this market,” PolyNovo Acting CEO Dr. Robyn Elliott.
PNV last traded at $1.42/sh.
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