It's not listed as being in Western Karana, but last night I killed A Rabid Grizzly near the Qeynos Hills zone, and it dropped the Putrid Bear Hide. I also had several more on track at various times. Rooted then pincusioned with arrows, to avoid disease. I'll post what xp or reward I get for turning it in.
I have been killing rabid grizzlies for a while now, and haven't seen a putrid bear hide drop in ages. I think they finally tied up some of the loose ends related to the plague that used to be on the Karanas. I haven't noticed if fleshy orbs still drop off the rabid wolves anymore, but I would think if they removed the rabid bear related quest that the rabid wolf one would be gone, too.
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If you were me and I were you, would we still be friends?
Actually they have both pelts and hides now . one can be turned in to princess caluria in the cleric building along with rabid wolf hides . Just sell the pelts since she wont take them , great noob exp from 5-12