Question normal

In trying to get to the root of drug pricing and reimbursement, I have started to realize just how complex this is. There are many different ways to look at price- the average wholesale price (AWP), the average manufacturer’s price (AMP), the Actual Acquisition Cost (AAC), the Wholesale Acquisition Price (WAC), the list goes on… To make matters worse, not only do these different prices refer to the price or cost of a drug as paid or received by different players in the supply chain, but different costs are used to determine different payments from Medicare, Medicaid, and others! This is enough to make anyone’s head spin; (so,we hire private contractors and third party intermediaries to help navigate this, introducing more cost into the system). I am wondering- what is the history behind this extremely complex pricing system? Why do different payers use different estimations of cost? Are there any specific policy recommendations you have to simplify this pricing system, with the understanding that new policies are path dependent?