Novartis to close Puerto Rico plant and outsource to Eli Lilly

By Gareth Macdonald

- Last updated on GMT

Novartis to close Humacao  manufacturing facility by 2019
Novartis to close Humacao manufacturing facility by 2019

Related tags Eli lilly Pharmaceutical industry Puerto rico

Novartis will close an OTC plant in Puerto Rico by 2019 and transfer manufacturing and packaging actives to sites in the US and facilities operated by Eli Lilly and Virbac.

The Swiss drugmaker confirmed it will close its facility in Humacao today, telling the decision – which will result in the loss of 270 jobs - followed a review of its manufacturing network.

A spokesman told us “Novartis continually reviews its manufacturing infrastructure and capacity, including the number and size of its sites, to ensure we have the right production capacity in place to meet market demand, support our products and pipeline, and maximize productivity. 

Novartis Consumer Health decided to close Humacao in a phased manner over time following such a review of manufacturing infrastructure and capacity​.”

Production of the consumer health drugs - Gas-X (simethicone) and the laxative Ex-Lax – will be transferred to Novartis’ site in Lincoln, Nebraska as will the packaging of Novartis’ ulcer treatment, Prevacid.

Novartis will outsource production and packaging of the animal health products made in Humacao - Sentinel, Interceptor, and Milbemax – to facilities operated by either US drugmaker Eli Lilly or Virbac.

Puerto Rico trends

Novartis is not the only drugmaker to have transferred manufacturing operations away from Puerto Rico in recent years. In 2013​, for example, Pfizer and Merck & Co both announced plans to reduce their manufacturing footprints on the island.

The perceived wisdom is that a 2010 decision to phase out a tax credit​ that effectively made profits attributed to activities on Puerto Rico exempt from US taxes made the island less attractive to the pharmaceutical industry.

A 2012 report​ by the Federal Bank of New York concluded that: “Tax incentives led to an outsized presence of the pharmaceuticals industry on the Island. The incentives have been phased out and employment in the industry has declined.

The authors also predicted that: “Going forward, there appears to be only a limited prospect for the sector to be a driver of growth​.”

But while the Pfizer and Merck decisions, as well as Eli Lilly's more recently announced​ plan to close its Guayama facility, may support the view that Puerto Rico is less attractive to the drug industry, the picture is more complex. 

In recent months a number of drugmakers​ – including both Novartis’ new contractor Eli Lilly​ and fellow Big Pharma firm Bristol Myers-Squibb (BMS) – have announced plans to manufacture more products in Puerto Rico.

Novartis did not respond when we ask if changes to the tax laws had factored into its decision making and instead restated that the closure is part of a manufacturing network review.

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