Organogenesis slashes its R&D staff as Medicare preps a big price cut

The regenerative medicine company Organogenesis is slashing jobs as part of its company-wide reorganization in the face of Medicare's decision to cut what it's paying for its wound-healing medicine Apligraf. A spokesperson for the company confirmed to FierceBiotech today that Organogenesis is primarily hacking back on its research costs, with an unspecified number of layoffs being made across all departments outside of manufacturing and marketing.

According to a source close to the operations, Canton, MA-based Organogensis started handing out 60-day severance pay last week to everyone but the director and two managers in R&D and all but four positions in medical and clinical. Company executives discussed cutting up to 200 positions in the reorganization, according to the source, though final numbers are still hard to come by.

The axe fell primarily on staffers working on "innovation and new products," says the spokesperson, adding that all the layoff notices that were planned have been made. "We're not going to release the numbers of the employment cutbacks," she added. "We're a private company and we're not releasing the numbers to anyone."

The cutbacks were forced by Medicare's decision to issue final rules that will "bundle" the company's wound-healing regenerative medicine Apligraf at a reduced price of $1,371. Bundling is a process in which Medicare comes up with a price for a single episode of care, capping its exposure. But the reduced reimbursement for Organogenesis, says the source,  forced cuts across most company units.

FierceBiotech was the first to report the looming cuts as the company chief warned staffers of the restructuring just ahead of Christmas.

"There is a solution for Apligraf," CEO Geoff MacKay told workers in a memo sent in early December, "which we have been working on through the weekend, which includes more competitive pricing of Apligraf in the wound care market. However, the downside to this is a one-time adjustment to significantly lower revenues due to a lowering (of) the product price. In the coming days, weeks and months, we will need to adjust the cost structure of the company to reflect this new reimbursement reality. This will be very difficult to accomplish and will result in heart breaking cuts."