Medicare has spent billions on expensive “skin substitutes” made from dried placenta, a category that surged in the past two years. The products—marketed as advanced wound‑care bandages—are reimbursed at high rates, prompting insurers to shoulder costs that far outpace their clinical benefits. Congressional oversight committees have begun reviewing the expense, fearing wasteful allocations.

The surge ties to a narrow supplier network, chiefly Legacy, which offers two similarly described products and negotiates steep discounts with physicians. Doctors receive a share of the discount, earning a rebate on every claim. The discounts can exceed 30 percent, translating into sizable kickbacks per procedure, inflating utilization as clinicians favor the high‑priced bandages over cheaper, proven alternatives.

For policymakers, the pattern signals a need to tighten Medicare coverage rules for biologic dressings and to scrutinize physician‑supplier contracts. Reducing the rebate incentive could curb unnecessary spending and restore competitive pricing. Tightening oversight may protect the budget while preserving access to legitimate wound‑care innovations.