Abstract
This paper evaluates the efficiency of five Indian pharmaceutical Industries using Data Envelopment Analysis (DEA) approach. The paper uses Net Block, Cash and Bank Balance, Share Capital, Reserve and Surplus, Secure Loan and Unsecured Loan as input variables and Investments and ‘Loans and Advances’ as output variables. In this study, the Basic Radial Models input oriented with Constant Returns to scale (CRS) are used to estimate the efficiency of pharmaceutical Industries. The DEA tool assists the administrators to identify the inefficient measures and take necessary actions for improvement. The results are indicative of the scenario that changed patent laws in India are not detrimental to the financial and overall health of Indian pharmaceutical companies in general. The Indian pharmaceutical companies have suitably modified their business model to cope up with the changed legal environment. It is a positive sign for all Indian pharmaceutical companies that they are dynamic in management and operational policies to face any new situation and shall flourish more in the coming days.
Highlights
The Pharmaceutical industry plays an important role for the development of the economy in developing countries and it is the biggest producer and exporter of the generic drugs across the world
The Basic Radial Models input oriented with Constant Returns to scale (CRS) are used to estimate the efficiency of pharmaceutical Industries
This study uses Data Envelopment Analysis (DEA) Software (DEAOS) to calculate the efficiency scores of hospitals by ‘Basic Radial Models input oriented with Constant Returns to scale (CRS)
Summary
The Pharmaceutical industry plays an important role for the development of the economy in developing countries and it is the biggest producer and exporter of the generic drugs across the world. Indian pharmaceutical industry fulfills 70 per cent of India’s demand of drug usages and has exported drugs to the rest of the world. As per global standards the production cost of Indian pharmaceutical industry is very low and it is approximately 70 percent less than US and Europe. In 2013 the value of Indian pharmaceutical industry was US$22 billion and presently it is growing at the rate of 8-9 per cent annum. At the time of Indian independence, the Indian pharmaceutical market was dominated by the large multinational companies which were in command of about 70 percent of the Indian market.
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