Shares of Fresenius Medical Care (ETR:FMEG) dropped by about 5% on Thursday after the U.S. Centers for Medicare & Medicaid Services released a draft payment rule that fell short of investor expectations.
CMS proposed raising the base rate for its end-stage renal disease (ESRD) bundle payment by 1.1%, a change that UBS analysts characterized as "worse than usual" and roughly half of what many investors had anticipated. The proposed increase is also smaller than recent year-on-year adjustments.
In a separate but related change, CMS said it would include phosphate binders in the ESRD bundle beginning in 2027. That policy change would eliminate a separate payment mechanism that has supported uptake of Fresenius’s Velphoro product.
UBS warned that moving phosphate binders into the bundle would likely result in lower utilization of Velphoro, drawing a parallel to the decline in use that followed the prior inclusion of calcimimetics in the bundle when they were removed from transitional add-on payments. The bank's analysts said they would expect the profit pool tied to Velphoro to fall significantly for Fresenius Medical Care in 2027 if the proposal becomes final.
Analysts had hoped the transition of phosphate binders into the bundled payment might be delayed by another year, which UBS said made the draft proposal likely to disappoint investors. While CMS could still revise the final ESRD rate, the note pointed to last year’s precedent in which the final rate ended up 30 basis points above the draft. Even with that type of upward adjustment, UBS suggested the ultimate result would likely translate into some margin pressure for Medicare patients.
Key market participants reacted quickly to the draft proposal. The combination of a smaller-than-expected base rate increase and the proposed elimination of a separate reimbursement pathway for phosphate binders created an earnings and utilization risk scenario for products linked to dialysis care.
At this stage the CMS proposal remains a draft and could be revised before finalization. For Fresenius Medical Care, the draft paints a potentially more constrained reimbursement backdrop for 2027 and highlights the sensitivity of dialysis-oriented drug demand to payment-policy shifts.