OBJECTIVES: This prospective, observational, study evaluated the drug utilization patterns and cost of treatment of patients treated for rheumatoid arthritis at a government institution versus a private institution in Kerala, India. METHODS: Patients with a diagnosis of rheumatoid arthritis were enrolled into the study and were followed for a period of six months. Data regarding demographics, clinical outcome, laboratory results, drug utilizations, and cost was collected. The cost of drug therapy for each patient was calculated utilizing the Current Index of Medical Specialties 2004. Nominal data was analyzed using Chi square and Fisher's exact test and logistic regression univariate analysis was conducted to determine the association between disease improvement and treatment factors. RESULTS: One hundred thirty-one patients were enrolled in the study, 96 at the government institution and 35 at the private institution. The mean age was 42.61 and 80% of the patients were female. The most frequently utilized DMARD was methotrexate, 66% for the government institution and 80% for the private institution. The most common DMARD combination therapy was methotrexate plus hydroxycholoroquine (62.96%). Compliance was 68.75% in the government patients versus 94.28% in the private patients (P=0.003). Logistic regression results indicated that increased WBC (p=0.032), ESR (0.003), and COX-2 usage (p=0.039) was associated with poorer clinical outcome, while methotrexate use (p=0.029) and physiotherapy (p=0.041) was associated with improved outcome. The clinical outcome was not significantly associated with the site of care. The average cost of care was Rs. 420.13 per month at the government institution versus Rs.713.14 per month at the private institution, and 16.1% of the total noncompliance was due to financial constraints. CONCLUSION: The treatment of rheumatoid arthritis is best managed with a protocol that includes methotrexate. While financial constraints affect the compliance rate, the site of care did not have any impact on clinical outcome.