Key Takeaways
- Eli Lilly announced a new $27bn commitment to US manufacturing on 26 February, which is part of a broader industry effort to avoid tariffs and demonstrate to President Trump that it is a partner that can help enact his agenda.
- Top Trump officials joined Lilly for the announcement and lavished high praise on the company.
- Lilly also stressed that tax reform is needed to make the investments in new American facilities possible.
Eli Lilly and Company announced a new $27bn commitment to US-based pharmaceutical manufacturing, an effort sources say is part of a broader industry effort to help make pharmaceuticals exempt from President Trump’s plan to increase tariffs on many goods imported into the US.
US manufacturing announcements from other companies are expected in the next few weeks and remarks from key Trump officials at the Lilly event indicated the administration already is quite pleased.
Lilly CEO David Ricks made the manufacturing announcement on 26 February in Washington, DC alongside Commerce Secretary Howard Lutnick and White House National Economic Council Director Kevin Hassett. Republican Sen. Todd Young of Indiana, where Lilly is based, also spoke.
Lilly tied its four new planned facilities, three that will produce active pharmaceutical ingredients (API) for small molecule drugs and another focusing on global parenteral manufacturing for injectable therapies, to the expected renewal of tax cuts made during Trump’s first term.
The event seemed to build on the drug industry’s efforts to show it is aligning with the Trump agenda.
Tariffs Are Stick, Tax Reform Is Carrots
Ricks declined to answer a Pink Sheet question on whether he expects the pharmaceutical industry will be excluded from Trump’s planned tariffs.
But Ricks suggested that Trump is floating the prospect of tariffs in part to solicit domestic manufacturing commitments from companies. Trump recently said he planned tariffs as high as 25% on pharmaceuticals.
“It [is] clear … that the administration tends to use tariffs as a tool to drive the outcomes they are looking for,” which includes brining manufacturing capacity back to the US, Ricks said. “In that sense it’s a stick or it’s a punishment.”
But an expected extension of the tax cuts made in the 2017 Tax Cuts and Job Act during Trump’s first term are the carrot, Ricks added.
“When that’s not in balance, I don’t think they’ll get the outcome they want,” he said regarding the need for tax reform to make the manufacturing commitments possible.
“We’re counting on tax reform being perpetuated and we certainly hope that medical supplies are exempt from tariffs, because it adds cost in the near term,” Ricks added. “But if they aren’t Lilly’s well positioned because we already have a pretty large industrial base in the US that we’re standing on today.”
Ricks also highlighted $23bn in commitments to US manufacturing Lilly made from 2020 to 2024, which he said were only made possible by the 2017 tax cuts. The $50bn in total capital expenses represents the largest pharmaceutical expansion investment in US history, he said.
“It’s important to note that the Tax Cut and Jobs Act legislation passed in 2017 during President Trump’s first term in office is fundamental to Lilly’s domestic manufacturing investments, and it’s essential these policies are extended permanently this year,” Ricks said.
House and Senate Republicans are just beginning work on tax legislation. The plan includes extending, if not making the cuts, including lowering the maximum corporate tax rate, permanent.
Republicans must offset the tax cuts with large reductions in other US spending, which could mean fewer Americans have the health insurance needed to buy medicines. Finding necessary savings without harming popular programs like Medicaid and the Affordable Care Act may make passage difficult.
In addition to tax reform, the drug industry also needs regulatory certainty, a growing US talent pool available for manufacturing jobs, open global markets and pharmacy benefit management reform to continue investing in US factories, Jay Timmons, CEO of the National Association of Manufacturers, added later in the event.
Administration Praises Lilly
Lutnick’s remarks at the event indicated the administration is pleased with Lilly’s actions.
“If you want to understand tariff policy of the United States of America I just articulated it,” Lutnick said. “It is a drive to bring back manufacturing to protect our great jobs here and to bring our great jobs here.”
“I’m honored to be here today because Eli Lilly is doing exactly what the president was hoping would happen, which is having tens of billions of dollars of investment in America,” Lutnick added. “It’s going to produce more than 10,000 jobs in America … I’m delighted to honor Eli Lilly because they are honoring America by investing in America, by building in America.”
The new Lilly facilities are expected to employ more than 3,000 highly-skilled workers and create about 10,000 construction jobs during their development, the company said.
The facility sites have not been selected. A Lilly spokesperson said facility construction and production preparation could take as long as five years.
Lilly currently is negotiating with several states, but will welcome additional interest until 12 March. The company plans to announce the locations later this year.
Lilly said that so far it has not seen much impact from the recent US Food and Drug Administration layoffs, but will be watching for changes with the review and approval of new productions sites.
“We certainly will not want that to slow down, because that’s what enables that announcement that we have today,” Ricks said, adding that the company has discussed the issue with the Trump Administration.
Lilly The Latest Of Several US Manufacturing Projects
Other companies have recently indicated that they believe US manufacturing investments will help protect them from tariffs.
Amgen Inc. touted a new US site in Ohio and planned sites in North Carolina during its fourth quarter earnings call earlier in February.
Novo Nordisk also announced a $4.1bn investment in North Carolina in 2024.
The drug industry also has been shifting supply chains due to growing US political pressure to reduce its dependence on China.
