Practical Measurement of Affordability: An Application to Medicines/ Mesure Pratique De L'abordabilite: Une Application Aux Medicaments/ Medicon Practica De la Asequibilidad: Aplicacion a Los Medicamentos

Introduction Affordability is not an unequivocal concept; Bradley (1) calls it vague, and Whitehead,2 Milne3 and Komives et al. (4) deny that it has a clear basis in economic theory. The theory assumes that a household chooses the bundle of goods and services that maximizes utility--i.e. the benefit derived per money spent--subject to its preferences and budget. Clearly, different preferences lead to different choices on how much to spend on a particular commodity. The definition of what constitutes an "affordable" price is thus a normative one that, according to some, lacks an economic foundation. (5) A commodity is obviously unaffordable if it costs more than what is in the full (potential) budget, but such a definition is overly restrictive. According to Maclennan & Williams, affordability has to do with securing a standard of living (e.g. housing, education or transport) at a price that "does not impose, in the eyes of a third party (usually government), an unreasonable burden on household incomes". (6) To operationalize the concept of affordability, one therefore needs: (i) information on household incomes; (ii) knowledge of the price of the commodity in question, and (iii) a definition of "unreasonable burden". This highlights two problems related to measuring unaffordability. First, there is arbitrariness in defining "an unreasonable burden" Previous work has identified two ways to define this unreasonable burden: (i) the so-called catastrophic payment method, which is based upon the ratio of the payment for a particular commodity to a household's total resources, and (ii) the impoverishment method, which looks at a household's residual income after paying for a good. (2,5-8) The second problem is that to measure affordability in practice requires a large amount of household level data that is often difficult to access, only available for certain years, not comparable across different time periods or countries, or simply lacking. To address the second problem while simultaneously acknowledging the first, in this paper we apply the impoverishment and catastrophic payment methods in a manner that can be applied to a broad range of commodities when micro data are scarce. We do this by applying these methods using widely available aggregate data, which makes for easy implementation and comparison across countries. We explore their use in elucidating the affordability of medicines, a commodity critically related to affordability. Indeed, in the developing world, medicines account for a substantial part of health-care costs. (9-12) Since most of the population in many low-income countries lacks health insurance, (13) medicines have to be paid for out-of-pocket when people fall ill. If their prices are too high, people are unable to procure them and often forego treatment altogether or get into debt. (14) It is therefore important to examine and compare the affordability of medicines across countries in the developing world and to monitor the impact of interventions seeking to improve it. Measuring affordability As explained before, two approaches are generally used to estimate affordability. One relies on the ratio of expenditures to total household resources, whereas the second focuses on the residual income after an expenditure. Under the first approach, the payment for a commodity is deemed "catastrophic" (unaffordable) when it exceeds a certain proportion of a household's resources. The idea is that if a household spends a large fraction of its available budget on a specific item, it will have to reduce its consumption of other goods and services. The affordability threshold is subjective. (4,5,15) Studies of this approach, which have focused primarily on the affordability of transportation, (8) education, (16) health care (15,17) and utilities such as energy and water, (18,19) define the affordability of a commodity in terms of the share of available resources that it consumes. …