Domestic market competitiveness of Indian drug and pharmaceutical industry

This paper attempts to analyse the competitiveness of Indian drug and pharmaceutical industry in the domestic market where multinational pharma companies are entering and expanding in a big way, especially after enforcement of product patent regime in 2005. The study applied data envelopment analysis model to estimate relative efficiency and productivity changes in 141 Indian pharmaceutical firms during 2000-2001 to 2012-2013 which encompass pre- and post-product patent regimes. The present study found negative impact of Product Patent Act on the efficiency scores. The technological change factor is found to have played positive role in the growth of productivity, whereas technical efficiency change depicts the judicious utilization of input resources for improving performance. A sensitivity analysis with the inclusion of R&D expenditure in input variables, confirmed the validity of our selected variables. It found marginal bearing of new patent regime on the efficiency of R&D active firms, though it was found to have significantly impacted efficiency scores of large firms, R&D intensive firms, and group-owned firms. The study reported that large size, R&D intensive, private-foreign owned and those engaged in drug formulations exhibit better performance. Further, it is found that ownership, capital imports intensity and size have a positive and significant relationship with efficiency scores, whereas the age, time dummy and size square variables are inversely related. The results suggest that Indian firms need substantive improvements in efficiency by adopting best managerial practices, ensuring optimum utilization of resources, and investing significantly in the technology and products innovation.