The aim of this study was to measure the potential of production and the capacity used in the pharmaceutical industry. Capacity use is the actual production rate to the potential output, which reflects the gap between actual production and production capacity>.Through econometric methods, translog cost function in the short run along with functions of share cost of production factors is estimated through seemingly unrelated repeated regression (SURE) as a multivariate regression analysis provided by zeller.During the study the capacity used is decreasing. The capacity used, which calculated by weighted average, also decreased and the amount during the study period is much less than the simple average of the industry. Average capacity utilization in the industry over five years of study is equal to 57% while the average capacity used calculated by the weighted of industry average is 37%. To enhance the economic potential requires a proper use of resources, creation of favorable economic structure and productivity of the industry. Due to the large amount of unused capacity in the pharmaceutical industry there is no need to invest anymore unless in new grounds and it is obvious that more investment will change using capacity.
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