As one of the biggest medicines market in the South East Asia, the pharmaceutical industry in
Indonesia has a huge potential market. However, the majority supply of raw materials has been imported.
Besides, regulations of the Health Ministry and the Trade Ministry have still hampered most
players in Indonesia pharmaceutical industry. Therefore, this study used Data Envelopment Analysis
(DEA) models to analyze efficiency and productivity change in the Indonesian pharmaceutical industry
between 2006 and 2011, listed in the Indonesia Stock Exchange and also supported by applying
efficiency financial ratio. This study finds that the decision for the most relatively efficient company
is different using DEA compared to efficiency financial ratios, yet DEA has better measurement of
efficiency. It is proven by one of State-owned Enterprises has been evaluated underperformed by the
financial ratio analysis, unexpectedly is efficient using the DEA approach. This study has also proposed
and tested a hypothesis on the average efficiency to check if the domestic and foreign pharmaceutical
companies differ in their efficiency but the result implies that there is no significant statistical
difference among them. This study indicates that firms having dominant contribution in selling overthe-
counter medicines are more efficient than selling ethical medicines. Lastly, technological change
contribution has more influence to productivity change instead of pure technical efficiency change in
Indonesia pharmaceutical companies.
