Abstract

The current study examines the efficiency changes of Nifty Pharma firms before and during the Covid-19 pandemic. The sample has 17 selected pharmaceutical firms that represent a large fraction of pharmaceutical sector in India. Using Data Envelopment Analysis (DEA) the study reports an increase in overall efficiency in the years 2020 and 2021. Further, the improvement in scale of operations was reported among the sample of firms. Pre-pandemic surge in the number of production (pure) efficient firms subsided by the end of 2021, marking negative impact of Covid-19 on the allocation of inputs by pharmaceutical firms. It was found that production efficiency positively correlates with firm size and negatively with age. We recommend that inefficient companies optimize their scale efficiency through mergers and acquisitions, organic growth, restructuring, or outsourcing. Production efficiency can be achieved by minimizing salaries, wages, and bonuses, which presents a sensitive issue for managers to devise salary-cutting policies. Lastly, the study reports changing nature of reference companies, thus highlighting the importance of regular efficiency benchmarking.