In a sharp turnaround, the Trump administration proposed new regulations recently to limit skyrocketing spending on skin substitutes, used to treat wounds that won’t heal.
After twice delaying proposed Biden-era regulations to sharply limit spending on skin substitutes earlier this year, many industry observers thought that the administration had chosen not to impose limits on skin substitute use and spending. But the new proposed rule — released without fanfare as part of a set of proposed healthcare changes — seems to indicate that a crackdown is coming.
Essentially the rule from the Centers for Medicare and Medicaid Services proposes that skin substitutes that have a Biologic License Agreement — approval from the government that the product is safe and approved — will be paid out at 6 percent of the Average Sales Price.
If a product does not have an agreement, it will be paid at a basic rate of $125.38 a square centimeter — with geographic adjustments added later. Products without an agreement include “me-too” products that have flooded the market at rates of $2,500, $3,000 and up. Products that apply for and receive an agreement would presumably be able to get that A.S.P. plus 6 percent.
Currently, skin substitutes are paid as “biologicals” under the Average Sales Price methodology, allowing manufacturers to set their own prices and wait for the market to adjust — which has led to the sharp increase in spending over the entire industry. But in the new proposal, for payment purposes, the skin substitutes will be classified as “incident to” the office visit, instead of being classified as separately paid and priced biologicals, and therefore will bring lower reimbursements. Providers using high-cost products will see lower payments.
Medicare’s skin substitute spending annually could be cut by as much as 90 percent under the new rules, analysts said.
40-fold increase
Medicare Part B spending for skin substitutes rose from $252 million in 2019 to over $10 billion in 2024, a nearly 40-fold increase, C.M.S. reported.
This new proposal achieves some of what was tried in a previous set of regulations, which would have approved only a small handful of the products on the market — about 15, those being the ones that had clinical studies behind them to prove efficacy — while placing sharper limits on the newer “me-too” products that lacked such studies and approvals. (For our first story about this, see here. For our second installment, see here. For our third installment, see here.)
Wounds that don’t heal by themselves may need special treatment, sometimes by the application of products commonly known as skin substitutes that can be biologic or synthetic — derived from placentas, infant foreskins, or cadaver skin, as well as fish skin and some other sources. Treatment of these non-healing wounds, including diabetic foot ulcers and venous leg ulcers, as well as other wounds like pressure injuries (such as bedsores), and some surgical incisions like that for Mohs skin cancer surgery, can avert pain and other complications, including amputations.
But the system has generated a fierce competition for creating products that some say are wildly overpriced, and a series of practices for pricing and application of the products that are less than pristine — it’s a market described by some sources as “the wild, wild West.”
Spending has skyrocketed, with much of that spending coming from Medicare — about 16% of Medicare beneficiaries have a chronic non-healing wound.
As a result of concern over high prices and improper usage, new regulations were proposed by the nation’s seven Medicare Administrative Contractors to limit the number of products that are covered by Medicare, and also to impose some other restrictions, including a condition that the products should have good research behind them supporting their efficacy, and that the people applying these products should be certain that patients are assessed for underlying reasons that might delay wound healing, like poor circulation, poor nutrition and other causes. The earlier set of new regulations, proposed in identical Local Coverage Determinations (L.C.D.’s) by the administrative contractors, were were due to come into effect Feb. 12 but were postponed on Jan. 24 until April 13 — and then postponed again until an effective date in September, leading to speculation that the Trump administration had no plans to rein in the excesses.
Short list
The new regulations appear to limit the products covered at the 6 % rate to the short list of products that were approved in the L.C.D. But it would seem that others — ones that do not have a B.L.A. and may be in the group of “me-too” products that are fetching the ever-increasing prices — will be paid at the $125.38 rate.
One problem is the “Average Sales Price” pricing system used by Medicare, which allows manufacturers or distributors to set their own prices, which the market is supposed to adjust — a practice that seems to encourage some manufacturers to charge high prices and some wound care specialists to use the most expensive product, regardless of research on efficacy. (See one of our previous stories here.)
“Currently, most skin substitutes are paid as if they are biologicals under the average sales price (ASP)-based payment methodology described in section 1847A of the Social Security Act,” the Centers for Medicare and Medicaid Services wrote announcing the change. “Using this methodology, each skin substitute product receives a unique billing code and payment limit. This has led to significant growth in spending under Medicare Part B for skin substitutes in the non-facility setting.
“According to Medicare claims data, Part B spending for these products rose from $252 million in 2019 to over $10 billion in 2024, a nearly 40-fold increase. Most of that increase is directly attributable to increases in stated prices for specific products.”
One analyst wrote: “The proposed transformation of skin substitute payments from biologicals to incident-to supplies represents one of the most dramatic market corrections in recent Medicare history.”
The implications? “Established skin substitute manufacturers face an existential challenge. Companies like Organogenesis, MiMedx, and Integra LifeSciences, which have built business models around premium pricing for biological products, must rapidly pivot to volume-based strategies or risk market exit. The 90% payment reduction makes current cost structures unsustainable for many products. …
“Actuarial modeling suggests that while overall spending decreases, the cost-per-successful-healing outcome may remain stable or even improve as the market eliminates low-efficacy, high-cost products.”
Significant savings
C.M.S. wrote: “C.M.S. believes grouping and paying for skin substitute products based on relevant product characteristics, consistent with their F.D.A. regulatory status, recognizes the clinical and resource differences in product types and would incentivize competition to create more innovative products, while also resulting in significant savings to the Medicare Trust Fund. We note that for CY 2026, C.M.S. is proposing to use a single payment rate reflecting the highest average for these three categories of skin substitute products to ensure we are not underestimating the resources involved with furnishing these services.”
One other problem that the new proposal aims to address is that of independent or small-practice wound care providers inserting themselves into treatment in congregate care or home settings, without assessing the whole patient for other associated problems, and without coordinating with primary care providers. This largely unregulated sector of the industry has seen massive growth.
These providers often use the more expensive products, which brings higher reimbursements. Also manufacturers and distributors can benefit from this stream of business, which is less regulated than a doctor’s office or hospital.
Without such restrictions, industry sources predict that Medicare will continue to spend billions on treatments that may not have clinical documentation of results. (Here is our first post about this topic.) Also, some patients are being harmed by practitioners who apply these products inappropriately, as a Colorado doctor explained.
The skin substitute proposal was one passage in a 1,803-page proposed rule on Physician Fee Schedule changes for 2026 that encompassed many other topics as well — telehealth, care for the chronically ill, mental health care and a number of other things. With publication in the Federal Register, a 60-day comment period starts, after which a decision will be made on skin substitute pricing and other topics in the proposed rule. An overview of the entire proposed rule may be found here.
Praise and criticism
Reaction was swift. Several of the originally approved 15 companies applauded the proposal, which would more or less preserve their business. But a trade group representing the newer companies objected.
One company, Organogenesis, praised the proposed rules. “We are pleased C.M.S. is proposing a per centimeter square payment methodology based on F.D.A. classification for skin substitutes in both the physician office and hospital outpatient department settings,” said Gary Gillheeney, C.E.O. of Organogenesis, according to a TipRanks report. “We believe this new payment structure will curb abuse under the current system, and the resulting rapid escalation in Medicare spending, while ensuring a much-needed consistent payment approach across sites of care.”
Another company, MiMedx, also praised the move. “We welcome and support improvements to Medicare’s reimbursement of skin substitutes across all care settings. The proposed rule … calls for a move away from the ASP methodology in favor of a fixed price per square centimeter of $125.38 for all skin substitutes. While many may take issue with the proposed price, reform in this category is long overdue,” saidJoseph H. Capper, MiMedx C.E.O., in the Sante Log.
Not surprisingly, an industry group that opposed the original regulations also objected to the new proposal.
“While the MASS Coalition is fully supportive of changes to the payment system and will continue to work with C.M.S. on finding a reimbursement methodology that ensures patients with chronic wounds can access skin substitute treatments, we do not support CMS’s proposal to lower the payment rate so drastically that it will harm or even eliminate necessary patient care,” wrote Preeya Pinto, a partner at the D.L.A. Piper law firm, who leads the MASS Coalition, a group of industry figures generally opposing regulation, in an email.
The MASS Coalition also sent out a press release disparaging the limits on access it said would result from the proposal, saying: “This change will have devastating consequences for patients suffering from chronic wounds who rely on life-saving skin substitute treatments. Without access to this crucial care, these patients will be much more likely to experience chronic pain, amputations, and premature deaths.”
The MASS Coalition does not publicize its membership, but says it is a group of “manufacturers, processors and distributors — that are committed to ensuring access to critical wound care products for Medicare beneficiaries and other patients.” Some of those “me-too” companies are presumably MASS members, opposing limits on their ability to not only sell products for prices they name but also requiring them to have scientific evidence backing up those higher prices.
Sharp rise
The new regulations came as a new policy brief by a research organization detailed the sharp rise in the use of skin substitutes from 2019 to 2024, based on an analysis of 100% of Medicare fee-for-service data from the Chronic Condition Warehouse Virtual Research Center. The brief, by L&M Policy Research, found these facts:
” Spending increased 50-fold over this period, from $200M to $10B.
“· Average spending per patient grew 15 times, from $10K to $150K, with the most explosive growth occurring in the past three years …
“· Price per claim surged from $2K in 2019 to $25K in 2024, driven by the introduction of higher-priced products and an increase in claims per patient.
“· The number of patients more than tripled, with the most significant growth in treatment settings shifting from in office settings to the home and nursing homes.”
Misha Segal, a senior researcher at L&M, said in a Zoom interview that the researchers were struck by how much wound care was suddenly being provided outside of office settings and instead in homes and congregate care facilities. He also said “the average price per claims increased significantly per beneficiary” during the period studied, and the number of treatments per beneficiary also significantly increased.
The researchers also noted that use of skin substitutes was much higher in traditional Medicare than in Medicare Advantage. While they did not examine the reasons, people in the industry are very clear that Medicare Advantage insurers may require prior authorization for such spending, or deny claims after the fact, so traditional Medicare enrollees receive more of such treatments.
