Scientific Indiana: Eli Lilly

When I submitted my book Scientific Indiana to The History Press, I had to cut a few chapters. The following blog entry is a chapter is on the history of the Eli Lilly company, one of Indiana’s largest employers and a leader in applied scientific research.

Eli Lilly and Company is one of the world’s largest pharmaceutical companies with offices in eighteen countries employing nearly 34,000 people. In 2019, the company ranked 123rd on the Fortune 500 list. Headquartered in Indianapolis, it is one of the largest corporations headquartered in Indiana and one of the state’s largest employers. In 2020, it was rated as one of the world’s most ethical companies by the Ethisphere Institute. Eli Lilly has a rich tradition of scientific research and has been closely associated with two Nobel Prizes. 

The story of Eli Lilly and Company begins with its namesake, Eli Lilly, who was born in Baltimore, Maryland on July 8, 1838. He was the son of Gustavus and Esther Lilly and was the first of their eleven children. While Eli was an infant, the family moved to a farm near Warsaw, Kentucky on the Ohio River between Cincinnati and Louisville. In 1852, the family moved again to Greencastle, Indiana where Lilly enrolled at Indiana Asbury University (now DePauw University) and attended classes from 1852 to 1854. 

Lilly became curious about chemicals when, during a trip to visit relatives at age sixteen, he found himself in Henry Lawrence’s Good Samaritan Drug Store in Lafayette. He was fascinated as he watched Lawrence mix the chemicals and prepare the drugs. Lilly decided on a career as a pharmacist and worked as an apprentice to Lawrence for the next four years. After earning his certificate of proficiency in 1858, he worked at several drug stores before returning to Greencastle where he married Emily Lemon in January 1861, on the eve of the Civil War. 

Shortly after the war began, Lilly enlisted in the Union Army. While Lilly was away, Emily gave birth to a baby boy named Josiah Kirby, later known as “J. K.” In September of 1864, at the Battle of Sulphur Creek Trestle in Alabama, Lilly was captured by Confederate troops and held in a prisoner-of-war camp in Mississippi. He was released in a prisoner exchange in January 1865 and was promoted to the rank of colonel in recognition of his service, a title that he would use for the rest of his life. In 1893, Lilly served as chairman of the Grand Army of the Republic, a fraternity of Union Civil War veterans. During his term, he organized an encampment that brought thousands of veterans to Indianapolis for a reunion and parade.

After the war, Lilly and a business partner leased a cotton plantation in Mississippi where he was joined by his wife, sister, and son Josiah. Shortly after arriving, the entire family got sick with a disease, probably malaria, carried by mosquitos. Everyone recovered except for Lilly’s wife Emily, who was eight months pregnant. Emily and the unborn child died on August 20, 1866. Devastated, Lilly returned to Indiana leaving the plantation in the hands of his business partner. The next year, a drought hit the south and the cotton crop failed. Lilly’s business partner absconded with what little money remained forcing Lilly to file for bankruptcy.

Lilly left his young son with his parents in Greencastle while he found employment at various drug firms. In 1869, he moved to Illinois to open a drugstore with business partner James W. Binford. In August of that year, Binford and Lilly opened the Red Front Drugstore in Paris, Illinois and in November, Lilly married Maria Cynthia Sloan. The couple had one child together, a daughter named Eleanor, but she died of diphtheria at age thirteen. The Illinois drug store was profitable, but Lilly discovered he was more interested in manufacturing medicine and began hatching a plan to start his own company. On New Year’s Day 1874, in Indianapolis, Lilly and John F. Johnston opened a drug manufacturing company. In March 1876, Lilly left the partnership with $1,000 in cash and $400 in merchandise. When Lilly asked his friend and pharmacist Augustus Keifer for a job, Keifer suggested that Lilly start his own drug manufacturing firm. Keifer and two other drugstores agreed to buy their medicine from Lilly as long as it was at a lower price.

On May 10, 1876, Eli Lilly opened his own pharmaceutical manufacturing company in a rented two-story building at 15 West Pearl Street in Indianapolis. On the front of the building, the sign read: “Eli Lilly, Chemist.” Lilly started with three employees including his fourteen-year-old son Josiah (J. K.), who had quit school to work as an apprentice. One of Lilly’s first innovations was gelatin-coated pills which, because of the smooth texture, made them easier to swallow. Another early innovation was fruit-flavored and sugar-coated pills which disguised the unpleasant taste of some medicines. Remembering the poor quality medicines used during the Civil War, Lilly committed the company to producing high quality products. As a result, the company gained a reputation for excellence and became a popular drug supplier in Indianapolis.

One of the first medicines Lilly produced was quinine, a drug used to treat malaria, which quickly increased sales by a factor of ten. By the end of 1876, sales reached $4,470, and by the end of 1879, sales had increased to $48,000. As sales grew, the company began to attract customers from outside the state. In 1878, Lilly hired his brother James as his first full-time salesman. James and the sales team he put together began marketing the company’s products across the country. The company soon outgrew the small building it occupied, so in 1881, Lilly bought a group of buildings south of downtown Indianapolis to house his pill-making operation. That same year, the business was formally incorporated as Eli Lilly and Company. A board of directors was elected and stock was issued to family and friends. By the late 1880s, the company had over a hundred employees and $200,000 in annual sales. 

Lilly recognized the importance of scientific research to the success of his company. Eli Lilly and Company became one of the first pharmaceutical firms to have a department dedicated to research. At first, Eli Lilly himself was the only researcher. Then J. K. attended the Philadelphia College of Pharmacy in 1880 and, upon his return in 1882, became director of the lab. In 1886, Lilly hired its first full-time research chemist and botanist. Lilly insisted on quality assurance and insisted that every pill he produced had the right ingredients in the correct dosage and would be effective in fighting the ailment it was intended to treat.

Eli Lilly retired around 1890, leaving the business in the hands of J. K., who ran things for the next thirty-four years. By then, Lilly was a millionaire and was heavily involved in civic affairs and philanthropic efforts. Lilly contracted cancer in 1897 and died at home on June 6, 1898. He is buried in Crown Hill Cemetery in Indianapolis. At the time of Lilly’s death, the company had over 2,000 products and over $300,000 in annual sales. 

Eli Lilly was a progressive pioneer in the pharmaceutical industry. At a time when the country was rife with quack medicine and miracle cures, he was an advocate of honesty and ethical conduct. Lilly was also aware that some drugs could be dangerous or addictive and supported the concept of a prescription requiring that the patient see a doctor before obtaining the medicine. Finally, he pushed for federal oversight and regulation concerning drugs. A few years after his death, the U. S. Congress adopted federal laws governing pharmaceuticals. The government oversight mechanism eventually evolved into the Food and Drug Administration (FDA). 

In 1919, J. K. hired biochemist George Henry Alexander Clowes and put him in charge of research. (Clowes Hall on the campus of Butler University is named in his honor.) Two years later, Clowes learned about three scientists at the University of Toronto, J. J. R. Macleod, Frederick G. Banting, and Charles H. Best, who were working on a treatment for diabetes. The drug was called insulin. Clowes proposed a collaboration between the scientists and Eli Lilly and Company. The scientists were reluctant to partner with a commercial company, but decided to go ahead because Lilly could produce the medicine on a massive scale. In 1923, Lilly began selling insulin under the trademark name Iletin and enjoyed a monopoly on its sale for two years. Also in 1923, Banting and Macleod won the Nobel Prize in Medicine or Physiology for their discovery of a treatment for diabetes. Insulin was the single most important drug Eli Lilly ever produced and transformed the firm into one of the leading pharmaceutical companies in the world. 

Lilly’s success with insulin gave them the prestige they needed to attract other top scientists into a working collaboration. Soon, Lilly joined with Harvard scientists George R. Minot and William P. Murphy along with George Whipple from the University of Rochester, who were working on a treatment for a life-threatening blood disorder called pernicious anemia. In 1928, Lilly introduced a liver-extract product to treat the disease. In 1934, Minot, Murphy, and Whipple were awarded the Nobel Prize in Medicine or Physiology for their discoveries about liver therapy in anemia cases.  

In the 1950s, Lilly was one of five companies selected by the National Foundation for Infantile Paralysis to produce Jonas Salk’s polio vaccine for clinical trials. Lilly was the first company to manufacture and distribute the vaccine globally. By 1955, Lilly was producing about 60% of the vaccine available. Also during the ‘50s, Lilly sold its first public shares of stock and was, for the first time, managed by people from outside the Lilly family.

The 1970s and 1980s saw Lilly introduce a flurry of new drugs into the market including the antibiotic Keflex, an antiarthritic called Oraflex, and a top-selling antibiotic called Ceclor. In 1982, Lilly introduced Humulin, insulin identical to that produced by the human body and the world’s first human drug made by using recombinant DNA technology. In 2003, Lilly introduced one of its best known and popular drugs (at least with half the population), Cialis, for erectile dysfunction. It competed with Pfizer’s Viagra but had the advantage of an effective period of thirty-six hours, a much longer time than Viagra, and as a result, became known as the “weekend pill.” Currently, Lilly is the world’s largest producer of drugs aimed at psychiatric and mental-health conditions. These include Prozac and Cymbalta for depression and anxiety, Zyprexa for schizophrenia and bipolar disorder, and Methadone for narcotic addiction.

When a new drug is introduced, the pharmaceutical company applies for a patent which grants the company exclusive rights to sell the drug and make a profit for a specific numbers of years. In the United Sates, the effective patent period is typically from seven to twelve years. After the patent has expired, any company can begin manufacturing and selling the drug. At that point, the drug is referred to as generic and the price usually drops dramatically. So Lilly and other pharmaceutical companies must continually come up with new drugs in order to make a profit. Part of Lilly’s solution to this problem was to branch out into other areas such as cosmetics, medical instruments, agricultural chemicals, and drugs for animals.

Colonel Eli Lilly began a tradition of philanthropy and humanitarian aid that the company has maintained throughout its history. When a massive earthquake hit San Francisco in 1906, Lilly provided the city with pharmaceutical supplies at no cost. During WWI, the company joined forces with the Red Cross to open a field hospital in France, staffed with medical personnel from Indiana, to treat wounded soldiers of all nationalities. During WWII, Lilly was one of the first companies to devise a method for mass-producing penicillin, the world’s first widely available antibiotic. In cooperation with the Red Cross, Lilly also processed blood plasma, eventually accounting for about 20% of the total used during the war. In 1937, members of the Lilly family formed the Lilly Endowment, a private charitable foundation, by donating company stock. The Lilly Endowment is one of the largest charitable foundations in the world. In 1968, the company established the Eli Lilly and Company Foundation, separate from the Lilly Endowment, as another private charitable foundation funded by the company’s profits.

Although Lilly has been a good corporate citizen, the company has not been immune to controversy. In 2009, Lilly was accused of illegally marketing Zyprexa, an antipsychotic drug, for uses that were not approved by the Food and Drug Administration, in particular, for use in treating elderly dementia. This practice is known as “off-label” marketing. Lilly pleaded guilty to the charges and agreed to pay a $1.415 billion penalty that included an $800 million civil settlement and a $615 million criminal fine. The criminal fine was, at the time, the largest ever imposed on an individual corporation.