Lilly Invests $850 Million in US Manufacturing Operations

In an announcement on March 24, 2017 Eli Lilly said it will be investing $850 million in capital projects in the United States throughout 2017. Much of the company’s investments will be in Indianapolis, Indiana, where Lilly manufacturers its diabetes treatments.

Lilly revealed it would be investing $85 million in an expansion of its Trulicity (dulaglutide) device assembly operations in Indianapolis and $140 million in an insulin cartridge production facility. The subsequent investments are part of a five-year plan by Lilly to expand diabetes manufacture in the US. In the past five years, the company has invested $1.1 billion in expanding US diabetes operations. Lilly also mentioned that it has made a $70-million capital commitment in a small-molecule laboratory on its Indianapolis campus.

In 2016 Lilly struck a pay-for-performance deal with Harvard Pilgrim, giving Trulicity preferred status on the company’s formulary. According to the terms of the deal, if patients achieve a less than 8% HbA1c while taking Trulicity compared to other GLP-1 receptor drugs, Harvard Pilgrim will pay a lower net cost to Lilly for the drug. This new investment in Trulicity manufacture may mean that the company is confident in the success of its diabetes treatment, which outperformed similar drugs in clinical trials.

A message to the President

Lilly’s investment announcements came with a direct message for the new Presidential administration. The company said in a statement that “more investments can be expected, particularly if the US adopts a more favorable tax environment.” During a press conference on March 24, 2017, Lilly CEO David A. Ricks said that the company supports lowering the federal corporate tax rate to 20%.

Ricks called the US federal tax system “outdated” and said that it is forcing biopharma manufacturers to expand overseas, in countries including Ireland, Switzerland, and France. Ricks said lowering the tax rate would make it possible for more companies to remain in the US and that hiring US workers “makes good business sense.” Ricks specifically mentioned the Swiss company Novartis, a Lilly competitor, which likely pays a national corporate tax rate in Switzerland of 8.5% compared with the 35% companies pay in the United States. Ricks said he supports lowering the tax rate and said, “we need to stop taxing US companies for simply being American.”

Source: Eli Lilly