National Health Accounts data of 2001-02 indicate that out of pocket health expenditure contributes a significant 72% of the total health expenditure in India (GOI, 2006). Out of pocket expenditure refers to direct and indirect costs incurred by the individual and /or household in securing or maintaining their health and includes health service user fees, contribution to health insurance, costs on drugs, medicines and diagnostics and additional cost incurred for securing and maintaining health, such as that on nutritional supplements and transport costs. Currently the primary source of such data comes from household surveys conducted by the NSSO. While such data is useful in understanding trends and making overall estimates of out of pocket expenditure, the format in which data is collected is not amenable for a more in depth analysis of out of pocket expenditure on specific items such as that on drugs and consumables at specific levels of care. Given the 1 year recall period for expenditure on hospitalization, data is subject to recall bias and misclassification. Further such surveys do not provide much information on the volume of drugs and investigations purchased privately by patients seeking care at public hospitals. Given that cost of the same drug can vary significantly from manufacturer to manufacturer and the often unethical marketing and prescription practices, it is highly likely that patients may be actually spending more than what is required. Data for such expenditure is also not available. Such estimates will help generate evidence for appropriate allocation of resources for provision of drugs and investigations in public hospitals and framing of policies regarding prescription of drugs. This study has been commissioned the MoHFW to address some of these issues. The study is sponsored by the World Health Organization and is expected to be completed by September 2008.^[1]