Technical efficiency of Ukrainian pharmaceutical firms: Evidence from the COVID-19 pandemic and Russia-Ukraine war

This paper examines the influence of marketing expenses and total assets on the technical efficiency of big Ukrainian pharmaceutical producers during the COVID-19 pandemic and the war in Ukraine. The data were collected from the nine leading pharmaceutical firms for six years, covering 2018–2023. Input-oriented data envelopment analysis was used, with revenue serving as the output and raw materials, sales, and general and administrative expenses as the inputs. The study found that the COVID-19 pandemic and the onset of the full-scale invasion of Russia in Ukraine caused a decline in efficiency, although not statistically significant. The analysis showed that around 70% of pharmaceutical firms need to increase the scale of operations to achieve efficiency. Additionally, smaller and older firms were found to have better efficiency. The research findings show that marketing productivity is positively associated with pure efficiency, while marketing expenses have the opposite impact with coefficients 0.064 and –0.05, respectively. Finally, a substantial increase in slacks during the COVID-19 pandemic propelled managers to find ways to cut sales and general and administrative costs. The results underscore the importance of cost optimization policies, along with asset and business-scale management in maintaining the efficiency of Ukrainian pharmaceutical firms.