Efficiency trends in the Indian pharmaceutical industry in the new patent regime

This paper applies data envelopment analysis (DEA) to measure the efficiency of Indian pharmaceutical firms over the period of 2000-01 to 2010-11. The findings reveal that there has been less variation in the mean OTE and PTE scores across years. Further, overall inefficiency in the industry is found to be driven more by managerial inefficiency than the scale inefficiency. The paper identifies efficiency leaders and laggards by applying BCC model. The comparative analysis of efficiency results show that the efficiency scores varied across size, ownership and product-group. On an average, firms in large size, private foreign owned, and engaged in drug formulations have relatively performed better than their counterparts. The paper suggests that in the new patent regime, the possible strategy for the small firms may be to expand their plant size or to merge with large firms in order to improve their performance.