Medical expenditure constitutes a significant component of out-of-pocket health spending in India. Recent research has shown that catastrophic household health expenditure has increased in India (Brinda et al. 2015; Pandey et al. 2018). Studies have found several policy interventions that are responsible for the increase in the cost of medical expenditure. These include structural adjustment policies and the resultant rapid privatisation of healthcare (Ghosh 2011), non-regulation of the private sector (Bonu et al. 2009; Bandameedi et al. 2016), irrational prescription practices of doctors (Bhaskarabhatla and Chatterjee 2017), poor health financial protection (Devadasan et al. 2007; Selvaraj and Karan 2012), market-based pricing policies of drugs (Narula 2015) and, above all, the higher cost of medicine. Development of new branded generics and biosimilars has contributed immensely to the treatment of several infectious and non-communicable diseases in India. However, with the adoption of a market-based pricing policy, it is not clear whether new drugs that are coming to the market are affordable to people. This chapter critically examines the question of affordability due to considerable variations in the prices of newly approved branded generics in the light of the market-based pricing policy of drugs in India. It also offers a discussion on various policy initiatives across the globe on pharmaceutical pricing and its relationship with affordability.

The chapter has used secondary data sources to examine the financial burden of medicines and prices of formulations of drugs. Data on prices of medicines for inpatient and outpatient treatment presented in the chapter are drawn from the nationally representative data of India – social consumption – health survey of the National Sample Survey Organisation (NSSO), Ministry of Statistics and Programme Implementation, Government of India, collected from January to June 2014. Medical expenditure is provided for a reference period of 365 days for inpatient care and 15 days of outpatient care for items including doctor's fee, diagnostic tests, bed charges, cost of medicine and other medical as well as non-medical expenditure. The data on the prices of formulation and brands of selected drugs discussed in the study are obtained from the web portal of Pharma Sahi Dam of the National Pharmaceutical Pricing Authority, Ministry of Chemicals and Fertilizers, Government of India.