Trend analysis of cost efficiency for the pharmaceutical industry: A dea approach

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.