Industry experts say companies can set such high prices because of the quirks of Medicare pricing rules. For the first six months of the lifespan of a new bandage product, Medicare sets a refund rate at the price chosen by the company. The agent will then adjust the refund to reflect the actual price your doctor will pay after the discount.
To avoid refund drops, some companies simply roll out new products.
In April 2023, Medicare began reimbursing $6,497 for every square inch of bandages called Zenith sold by Legacy Medical Consultants, a Fort Worth, Texas company. Six months later, Zenith's refunds fell to $2,746.
That month, in October 2023, Medicare began reimbursing $6,490 for a new legacy product called Impax.
The marketing materials for the two products use the same photographs and language, except for the brand name. The company describes both products as “providing optimal wounds and protection during wound treatment.”
Since 2022, the spending on Zenith and Impax has exceeded $2.6 billion, according to an analysis by Earty Read.
Legacy Medical Consultants did not answer questions about marketing and pricing for these products. “Legacy follows laws that do not use the system,” company spokesman Dan Childs said in a statement.
Doctor discounts
The doctor and nurse cottage industry calls homes to treat wounds. Some skin alternative companies pitch themselves to hurt doctors by reducing the rise in bandage prices.
Texas wound care physician Dr. Caroline Fife often writes about the industry's overload, but last year she shared an email she received from a private skin replacement company. The company boasts that other doctors have developed a “sound revenue stream” from its bandages, with patches smaller than credit cards “generate just $20,000 for your practice.”
Some companies offer doctors a “bulk discount” of up to 45%, according to doctor interviews and contracts reviewed by The Times. However, doctors will then collect Medicare rebates for the entire price of the product.
The anti-kickback law prohibits physicians from receiving financial compensation from pharmaceutical companies or medical suppliers. Medicare also allows for large discounts, but experts said rebates on bandages could have violated federal law because they didn't actually require bulk purchases. In some legacy agreements reviewed by The Times, doctors had to buy only three products to qualify for a 40 or 45% discount.
“That's not a discount on volume,” said Reuben Guttman, a Washington, D.C. lawyer who represents many Medicare whistleblowers. Guttman said that such labeling could be used to hide kickbacks.
In 2024, at least nine health practices claimed more than $50 million in Medicare for skin replacements, according to an analysis conducted by the Times, conducted by the National Association of Associations, which represent incentived health groups that curb Medicare spending.
