Dexcom stock popped Thursday after the Centers for Medicare and Medicaid Services said it would cover continuous glucose monitors for a broader group of type 2 diabetics.
The decision goes into effect in April, earlier than companies predicted. Under the new rule, CMS will reimburse the cost of continuous glucose monitors for patients whose diabetes doesn't require insulin treatment. The agency also will cover CGMs for patients with low blood sugar.
In response, Dexcom stock surged 9.5% and closed at 121.24 on the stock market today. Shares of Abbott Laboratories, which makes a body-worn glucose monitor called Freestyle Libre, advanced 1.8%, ending the regular session at 102.63.
Dexcom Stock: Expanding CGM Market
Previously, only diabetes patients who needed insulin treatment qualified for reimbursement of their CGMs. That limited the market for Dexcom and Abbott to people with type 1 diabetes — a genetic condition — and people with severe type 2 diabetes.
The policy change opens up a broader market of diabetes patients for Dexcom and Abbott. More than 37 million people in the U.S. have diabetes and about 90%-95% of them have the type 2 form, according to the Centers for Disease Control and Prevention.
Often, commercial insurers will also follow Medicare's suit. Such a move would further boost the market.
Dexcom stock is closing in on a buy point at 125.65 out of a consolidation, MarketSmith.com shows. Shares have a strong Relative Strength Rating of 89, according to IBD Digital. This puts shares in the top 11% of all stocks when it comes to 12-month performance.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
