Lilly's CEO Building On The Trump Agenda

By Louis Garguilo, Chief Editor, Outsourced Pharma

“We hadn’t built a new site in the U.S. in more than 40 years until the first set of Trump tax cuts, so we need to see those either extended or improved to support this,” Eli Lilly CEO David Ricks said at a recent press conference in Washington, DC.

“This” is Lilly’s plans to invest $27 billion to build four new manufacturing plants in the United States. Three of the planned facilities will be dedicated to producing API; the fourth will focus on sterile injectables, including Mounjaro.

The investment is expected to create 3,000 positions (and approximately10,000 construction jobs.)

Count this as another anti-doom-and-gloom editorial on the Trump administration vis-a-vis the biopharma (and healthcare) industry (also see: What If The Trump Tariff Strategy Works?).

Here we talk about aspirations for increased drug manufacturing in the U.S. and deeper domestic-based supply chains.

This includes U.S.-based CDMOs competing in a (still) very global outsourcing world, as well as Pharma building facilities here. We'll talk more about the CDMOs subsequently.

Ricks held his event with Trump administration officials present to announce Lilly's investment plans.

Unusual, he said, for Lilly to do so.

Ricks openly expressed support, and further requirements, to help realize objectives for revitalization of American drug development and manufacturing.

Afterwards, Ricks gave an attention-grabbing interview on CNBC. He spoke directly as to how we can as an industry build prosperous facilities in the U.S.

Starting On The Same Page

The CNBC interviewer started by pointing out the Lilly event was in D.C.

“How much of this is about getting a message to President Trump?” was the question.

Ricks replied, “Lilly wants everyone to know that we're doing this,” different than in the past when “we would quietly look for a site and then announce it when we did a groundbreaking.”

He added Lilly was “expressing our intention” for two reasons. 

“One is we do want to influence the policy environment. Of course, President Trump … can have an influence on that, which is about U.S. tax competitiveness, because none of this would happen if we go back to the days of U.S. having double the tax rate of every other country.”

‘We need that corporate tax rate to stay low, and then of course other policies that support domestic manufacturing. We want to build things here. We want to make our medicines here.

‘We need an environment that remains competitive to do that, including an environment that supports innovation.

“The other part of this is being open to new things. Lilly’s been a Midwestern company most of our time, our almost 150 year history. But we're open to locating in other places [in the U.S.]”

The next question was about what Ricks had heard from President Trump a week earlier when business leaders met with him at the White House.

“He'd like to see more manufacturing jobs and capital expenditures,” Ricks replied.

And with Lilly, he said, “We already have a heavy dose of that in the U.S., with five or six plants either built or under construction. Now we're adding four more.”

“We are, though, a global business,” he clarified.

“We will also spend our resources to expand capacity in places where that makes sense.”

“All companies need to consider the disruption we saw in supply chains, whether due to the COVID-19 virus and the lessons of that, other geopolitical tensions, or other things.

“I think you’ll see more redundancy being put in around the world. Europe's a big market for us, so is Asia. Mostly today it is about the U.S. situation.

"We'll be a net exporter out of the U.S. when all this is said and done. I think that's great for our country.”

He added, “It's good for Lilly to have those supply chains closer to us. We have a lot of confidence in our ability to train workers and make safe and effective medicines here in the U.S.”

“Of course, we don't have a tariff policy affecting pharmaceuticals as of yet, but you can bet we're speaking to the administration about what the contours of that should be.”

In my book, Ricks represents a refreshing attitude we could use more of around the industry. Let's at least give this a try.

The conversation on CNBC then moved to the fact it typically takes four or five years (and can be longer) to build a site a large manufacturing site here.

“It takes too long for environmental and local permitting,” he said directly. “It takes too long for the FDA to review and approve these sites. In total, that's almost half the time.”

“We could work together with government and speed up these sites coming online, jobs being filled, and exports happening. But we have to work together.”

“And it makes no sense to punish companies pursuing this agenda with the administration and on behalf of the American people. So we'll make that point as well.”

Lilly Not Alone

Lilly is our example here. But Lilly is not alone – in investment nor attitude.

One example from April: Novartis announced it would spend $23 billion on U.S. manufacturing and R&D sites, including seven new facilities.

Novartis CEO Vas Narasimhan noted America’s “pro-innovation policy and regulatory environment.”

So while tariffs are on most everyone’s mind, the building of manufacturing supply chains in the U.S. has been in the works with these executives.

Leaving tariffs for the moment and back to taxes and Lilly, Ricks said he is all for renewing the 2017 (Trump) tax cuts, but for doing much more.  

“Over 40 years, most all new sites went to low tax jurisdictions, like Ireland and Singapore. [Although] it's not as low as those countries … it became much less of a factor [in the U.S.] when considering facility locations.

Another potential facility-building wet blanket was the sunsetting of Trump’s first-term capital expensing policy.

“It seems to me,” comments Ricks, “almost every economic analysis I've seen says that is the lifeblood [of hard-asset investments].”

“Not only do we want to make products in America, we want to invent them in America. So stop punishing R&D. That needs to change in new legislation, he says. “We should make R&D expensing permanent.”

For now, then, let’s end with this: Yes, the tariff tantrum kind of, well, sucks. It’ll have to play out.

But it appears it is time to build more in the U.S. Lilly and others are doing just that.