An inquiry into the productivity of the Indian pharmaceutical industry: application of data envelopment analysis

Abstract

Pharmaceutical industry is an important and significant industry in India. The common practice by experts, would-be investors and stakeholders of a pharmaceutical firm is to observe the year-end or quarterly financial figures of a firm and then use them to assess the firm’s future growth and competitive standing against rivals. However, over the past few years, there is a strange environment in which paid consultants and scamsters are making false and conflicting claims in terms of the performance and future growth of the companies. The researchers, however, have attempted, by means of Data Envelopment Analysis (DEA), to get past all this by benchmarking the companies based on the conversion from input to outputs. The advantage of using DEA is that, by simply using the figures from the financial reports, it brings a more rigorous quantitative analysis to make a comparison of the peers with the best virtual firm in their neighborhood. The technique itself may suggest measures for improvement. It is illustrated in the analysis by observing the slacks and targets about various companies of the pharmaceutical sector, i.e., decision making units (DMU).