Study: Lilly drives 3.3 % of Indiana economy-WEB ONLY

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The past decade has often been rough for Eli Lilly and Co., but a new economic impact study commissioned by the company suggests the drugmaker’s contribution to the state’s economy actually has increased over that time.

The study by Indiana University professor Bruce Jaffee calculates that Lilly accounts for $8 billion, or 3.3 percent, of Indiana’s annual gross state product – the total value of all goods and services produced in the state.

In 1999, using a different method, Jaffee calculated that losing Lilly would cost the state 3 percent of its gross state product. The earlier study used 1998 data provided by Lilly while the latest study used 2007 numbers.

“Lilly has changed and grown and become modestly more dominant in 2007 than it was 10 years before,” Jaffee said. Since his earlier study, Lilly suffered an early loss of its patent on its bestselling antidepressant Prozac and has watched its stock lose 50 percent of its value. It’s also expected to face a revenue shortfall when its patent on its bestselling drug Zyprexa expires in 2011.

Yet Lilly also launched a raft of new drugs in the past decade and more than doubled its total revenue to more than $20 billion.

“It’s really been especially important as other companies have gotten smaller,” Jaffee added, singling out the shrinking of the domestic automakers in Indiana.

Jaffee’s observations echoed a recent study of Indiana’s economy, which noted the growth of the life sciences industry as more traditional manufacturing companies shrank.

Lilly is the sixth-largest employer in Indiana, behind federal and state government, Indiana University, Wal-Mart Stores Inc. and the Clarian Health hospital system.

At the end of 2007, Lilly directly employed 15,500 people in Indiana and had a payroll of about $1.5 billion.

Jaffee figured that Lilly could take credit for another 16,700 jobs created at other Indiana companies, from which Lilly bought supplies and services or where its employees spent their paychecks.

Lastly, because those businesses and their workers also spend money in Indiana, another 11,000 jobs get created.

All told, Lilly accounted for 43,500 jobs in Indiana. Nearly three-quarters of them are in the Indianapolis metro area.

Lilly CEO John Lechleiter intends to use the jobs and other economic impact data from Jaffee’s study to lobby Congress that the pharmaceutical industry needs to be protected in health care reform legislation.

“As we have discussions with Congress and opinion leaders about health care reform, these results solidly back our position,” Lechleiter said in a statement. “The thousands of jobs identified in Professor Jaffee’s study, in many cases, are held by people who are directly or indirectly working to find better treatments and cures to some of our most devastating illnesses.”

Jaffee also credited Lilly for generating $215 million annually in state and local tax revenue from its spending and payroll, as well as spending by its employees and the employees of its suppliers.

Jaffee’s numbers do not account for the many staff reductions Lilly made in 2008. For example, it cut 335 people out of its Indianapolis manufacturing operations through a voluntary buyout program.

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