The pharmaceutical industry of Puerto Rico: Ramifications of global competition

This paper utilizes a non-homogeneous production function to estimate the efficiency of the pharmaceutical industry of Puerto Rico using data from 1980 to 2008. Global competition in recent years has resulted in job loss and plant closures requiring strategies to profitably use the industry's excess capacity. The estimated results indicate operation at decreasing returns to scale mainly due to the decreasing output elasticity of the number of plants; labor productivity, however, is positive and increasing. Shifting production to generic drugs as a challenge to foreign competition is a top policy consideration.