Cost efficiency of pharmaceutical firms manufacturing drugs for specific diseases prevalent in India: A data envelopment analysis approach

Abstract

There exists a lot of diversity in Indian pharmaceutical environment in various aspects. The drugs manufactured by pharmaceutical companies including multinational corporations are costly drugs and these are ordinarily beyond reach of average Indian consumer. In 2010, the Planning Commission (a central government body) instituted a high level expert group to propose an overall framework for establishing universal health coverage in India. The universal health coverage will primarily grow generics market, with low prices moderating financial impact of increased volume, thereby eroding the margin for generic players of multinational corporations competing with low-cost locals. This will lead to a tough competitive market. Keeping larger public good in mind, it will be in the best interest of even these companies to tailor down their costs to meet needs of consumer, without any compromise on quality. Through this study, we get to understand clear picture of comparative assessment of the market place economics of drugs and of different firms at large to help consumers and also the Pharmaceutical companies including multinational corporations. Like with improved cost efficiency might lead to scope of reduction of price without reduction on margin. We have applied Delphi technique to arrive at specific prevalent diseases in India and identified 24 pharmaceutical firms making drugs for these diseases. We used data envelopment analysis approach to find out the cost efficiency of firms.