Lilly: Tax reforms would release $150m to further support US manufacturing

By Dan Stanton contact

- Last updated on GMT

Image: iStock/alfexe
Image: iStock/alfexe
Eli Lilly will invest $850m in its US operations this year but warns the country’s antiquated tax system leaves the firm at a competitive disadvantage.

Last week, the multinational pharma firm dedicated a $140m (€129m) insulin cartridge production facility at its site in Indianapolis, Indiana and announced it will be spending a further $710m in 2017 across its US network.

Among the other expansions, CEO Dave Ricks said the firm would build an $85m device assembly plant to support its diabetes drug Trulicity (dulaglutide), while also expanding its small molecule R&D laboratories, also located on the Indianapolis campus.

But as well as pledging investments, Ricks also pledged his support for the House Republican blueprint on tax reform​, saying a proposed reduction of corporate tax rates and the scrapping of tax paid by American companies on overseas income will be essential in encouraging US manufacturing and remaining competitive.

“For more than 140 years [Eli Lilly] has believed investing in US workforce makes good business sense and it’s no different today. What we would really love is to do a little more, and with a little help from congress I know we can,”​ he said during the facility dedication Friday.

“The truth is the US is trying to drive a modern economy on an antiquated tax system that’s given our country slow growth, stagnant middle-class income and massive trade deficits. House leaders want to cut corporate tax rates from 35 to 20 percent and stop taxing the income US companies make in foreign countries – I think those changes are desperately needed.”

Under the current system, companies have been expanding their operations overseas to the detriment of the US, he continued.

“These advanced manufacturing jobs are exactly the types of high skilled high waged work we want to keep in the US but we are losing them to countries like France, Ireland and Switzerland.”

Swiss watchfulness

He also compared Lilly’s position with Big Pharma rival Novartis, headquartered in Basel, Switzerland.

“Novartis pays a much smaller chunk of its profits in corporate tax. We’re happy to pay taxes on our US earnings, but we need to stop taxing US companies for simply being American,”​ he said.

“If Lilly enjoyed Novartis’ tax rate and the territorial tax system that’s being proposed in the house, we’d have 150 million more dollars to spend and invest every year – that could employ up to 1000 manufacturing workers, it could support the launch of a new Phase III programme for a medicine for patients, or over two years it could pay for a new factory.”

Irish freeze

Lilly’s $850m announcement comes six weeks after Irish newspapers suggested​ the construction of a three-story facility housing an additional production line Lilly’s biomanufacturing site in Kinsale, Ireland had been put on hold due to President Trump’s plans for US tax reforms.

At the time, spokeswoman Louisa Stevenson told our sister publication Biopharma-Reporter​ the allegations were examples of the media “getting the wrong end of the stick,"​ and reports Lilly had U-turned on a project due to potential tax reforms were the result of “people writing what they want to write.”

“We have not made a final decision to proceed at this time [on a Kinsale expansion] and this decision will be made by Lilly’s global Board at the appropriate stage of the process."

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