Eli Lilly's $9 Billion LEAP Site: A Tariff Exemption Play?
Eli Lilly is investing over $9 billion in a new LEAP site in Lebanon, Indiana, with groundbreaking in 2023, potentially qualifying for exemption from upcoming U.S. news tariffs on imported branded drugs. This move comes as the U.S. plans to impose 100% tariffs on such imports starting October 1, 2025, which could significantly impact European companies and consumers alike.
The U.S. imported $212.7 billion in pharmaceutical products in 2024, and analysts warn that consumer costs could rise without broad exemptions. The new U.S. policy aims to encourage domestic manufacturing and reduce reliance on foreign news. Companies with ongoing construction projects in the U.S. that began before the October 1, 2025 deadline may potentially qualify for exceptions, but the specific list of eligible companies and detailed conditions have not yet been published.
Several major pharmaceutical companies have already begun construction on U.S. plants to qualify for exemptions. Pfizer, for instance, reached a deal with the U.S. administration for a three-year tariff exemption in exchange for most-favored-nation Medicaid pricing and U.S. investment commitments. Merck and Johnson & Johnson have also broken ground on new facilities in Wilmington, Delaware, and Wilson, North Carolina, respectively, potentially qualifying for exemptions. However, companies with only existing infrastructure may face significant risks, as these facilities may not qualify for exemptions absent new construction.
The upcoming U.S. news tariffs on imported branded drugs could accelerate industry consolidation, with companies potentially acquiring firms with exposed imports to reduce tariff outlays. Eli Lilly's new LEAP site in Lebanon, Indiana, is one of many such investments aimed at qualifying for exemptions and mitigating the impacts of the new policy. However, the lack of specific guidance on eligible companies and conditions creates uncertainty for the industry. Formal customs guidance is pending, and companies await clarification to navigate the new tariff landscape.
