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Item 1. Business

2024-02-21 compared with 2023-02-22 · 304 added, 283 removed, 288 unchanged (67% of the section changed)

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Most of the products that we sell today were discovered or developed by our own scientists, and our long-term success depends on our ability to continually discover or acquire, develop, and commercialize innovative medicines.

We manufacture and distribute our products through facilities in the United States (U.S.), including Puerto Rico, and 7 other countries.

We manufacture and distribute our products through facilities in the United States (U.S.), including Puerto Rico, and in Europe and Asia.

Our products are sold in approximately 105 countries.

Our products include:

Diabetes products , including:

• Basaglar ® , in collaboration with Boehringer Ingelheim, a long-acting human insulin analog for the treatment of diabetes.

• Humalog ® , Humalog Mix 75/25, Humalog U-100, Humalog U-200, Humalog Mix 50/50 , insulin lispro, insulin lispro protamine , and insulin lispro mix 75/25, human insulin analogs for the treatment of diabetes.

• Humulin ® , Humulin 70/30, Humulin N, Humulin R, and Humulin U-500 , human insulins of recombinant DNA origin for the treatment of diabetes.

• Jardiance ® , in collaboration with Boehringer Ingelheim, for the treatment of type 2 diabetes;

Therapeutic area

Certain Indications

Diabetes, Obesity and Other Cardiometabolic products

In collaboration with Boehringer Ingelheim, a long-acting human insulin analog for the treatment of diabetes.

Humalog ® , Humalog Mix 75/25, Humalog U-100, Humalog U-200, Humalog Mix 50/50, insulin lispro, insulin lispro protamine, and insulin lispro mix 75/25

Human insulin analogs for the treatment of diabetes.

Humulin ® , Humulin 70/30, Humulin N, Humulin R, and Humulin U-500

Human insulins of recombinant DNA origin for the treatment of diabetes.

In collaboration with Boehringer Ingelheim, for the treatment of type 2 diabetes;

to reduce the risk of cardiovascular death in adult patients with type 2 diabetes and established cardiovascular disease;

and to reduce the risk of cardiovascular death and hospitalizations for heart failure in adults.

• Mounjaro ® , a glucose-dependent insulinotropic polypeptide and glucagon-like peptide-1 receptor agonist, for the treatment of adults with type 2 diabetes in combination with diet and exercise to improve glycemic control.

• Trulicit y ® , for the treatment of type 2 diabetes in adults and pediatric patients 10 years of age and older, and to reduce the risk of major adverse cardiovascular events in adult patients with type 2 diabetes and established cardiovascular disease or multiple cardiovascular risk factors.

Oncology products , including:

• Alimta ® , for the first-line treatment, in combination with two other agents, of advanced non-small cell lung cancer (NSCLC) for patients with non-squamous cell histology and no epidermal growth factor receptor or anaplastic lymphoma kinase genomic tumor aberrations;

to reduce the risk of cardiovascular death and hospitalizations for heart failure in adults;

and to reduce the risk of sustained decline in estimated glomerular filtration rate (eGFR), end-stage kidney disease, cardiovascular death and hospitalization in adults with chronic kidney disease (CKD) at risk of progression.

A glucose-dependent insulinotropic polypeptide and glucagon-like peptide-1 receptor agonist, for the treatment of adults with type 2 diabetes in combination with diet and exercise to improve glycemic control.

For the treatment of type 2 diabetes in adults and pediatric patients 10 years of age and older;

and to reduce the risk of major adverse cardiovascular events in adult patients with type 2 diabetes and established cardiovascular disease or multiple cardiovascular risk factors.

For the treatment of adults with obesity or overweight with weight-related comorbidities as an adjunct to a reduced-calorie diet and increased physical activity (marketed under Mounjaro in the European Union (EU) and in various other markets outside the U.S.).

Therapeutic area

Certain Indications

Oncology products

For the first-line treatment, in combination with two other agents, of advanced non-small cell lung cancer (NSCLC) for patients with non-squamous cell histology and no epidermal growth factor receptor or anaplastic lymphoma kinase genomic tumor aberrations;

for the first-line treatment, in combination with another agent, of advanced non-squamous NSCLC;

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and in combination with another agent for the treatment of malignant pleural mesothelioma.

• Cyramza ® , for use as monotherapy or in combination with another agent as a second-line treatment of advanced or metastatic gastric cancer or gastro-esophageal junction adenocarcinoma;

For use as monotherapy or in combination with another agent as a second-line treatment of advanced or metastatic gastric cancer or gastro-esophageal junction adenocarcinoma;

in combination with another agent as a second-line treatment of metastatic NSCLC;

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and in combination with another agent as a first-line treatment of adult patients with metastatic NSCLC with activating epidermal growth factor receptor mutations.

• Erbitux ® , indicated both as monotherapy and in combination with another agent for the treatment of certain types of colorectal cancers;

Indicated both as monotherapy and in combination with another agent for the treatment of certain types of colorectal cancers;

and as monotherapy, in combination with chemotherapy, or in combination with radiation therapy for the treatment of certain types of head and neck cancers.

• Jaypirca TM , for the treatment of adult patients with relapsed or refractory mantle cell lymphoma (MCL) after at least two lines of systemic therapy, including a BTK inhibitor.

• Retevmo ® , for the treatment of metastatic NSCLC with a rearranged during transfection (RET) gene fusion in adult patients;

For the treatment of adult patients with relapsed or refractory mantle cell lymphoma (MCL) after at least two lines of systemic therapy, including a BTK inhibitor;

and for the treatment of adult patients with chronic lymphocytic leukemia or small lymphocytic lymphoma who have received at least two prior lines of therapy, including a BTK inhibitor and a BCL-2 inhibitor.

For the treatment of metastatic NSCLC with a rearranged during transfection (RET) gene fusion in adult patients;

for the treatment of advanced metastatic medullary thyroid cancer with a RET mutation who require systemic therapy in adult and pediatric patients;

for the treatment of advanced or metastatic thyroid cancer with a RET gene fusion in adult and pediatric patients who require systemic therapy and are radioactive iodine-refractory;

and for the treatment of adult patients with locally advanced or metastatic solid tumors with a RET gene fusion that have progressed on or following prior systemic treatment or who have no satisfactory alternative treatment options.

• Tyvyt ® , in collaboration with Innovent Biologics, Inc., for the treatment of relapsed or refractory classic Hodgkin's lymphoma;

and for the treatment of adult patients with locally advanced or metastatic solid tumors with a RET gene fusion who have progressed on or following prior systemic treatment or who have no satisfactory alternative treatment options.

In collaboration with Innovent Biologics, Inc., for the treatment of relapsed or refractory classic Hodgkin's lymphoma;

for the first-line treatment of non-squamous NSCLC in combination with Alimta and another agent;

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for the first-line treatment of esophageal squamous cell carcinoma in combination with certain other agents;

and for the first-line treatment of gastric cancer in combination with two other agents, each in China.

• Verzenio ® , for use as monotherapy or in combination with endocrine therapy for the treatment of HR+, HER2- metastatic breast cancer and in combination with endocrine therapy for treatment of HR+, HER2-, node positive, early breast cancer at high risk of recurrence and a Ki-67 score at least 20 percent, as determined by a U.S.

Food and Drug Administration (FDA) approved test.

Immunology products , including:

• Olumiant ® , in collaboration with Incyte Corporation, for the treatment of adults with moderately-to-severely active rheumatoid arthritis, moderate to severe atopic dermatitis, and severe alopecia areata, and for the treatment of hospitalized adults with COVID-19 who require supplemental oxygen, mechanical ventilation, or extracorporeal membrane oxygenation.

• Taltz ® , for the treatment of adults and pediatric patients aged 6 years or older with moderate-to-severe plaque psoriasis, adults with active psoriatic arthritis, adults with ankylosing spondylitis, and adults with active non-radiographic axial spondyloarthritis.

Neuroscience products , including:

• Cymbalta ® , for the treatment of major depressive disorder, diabetic peripheral neuropathic pain, generalized anxiety disorder, fibromyalgia, and chronic musculoskeletal pain due to chronic low back pain or chronic pain due to osteoarthritis.

• Emgality ® , for migraine prevention and the treatment of episodic cluster headache in adults.

• Zyprexa ® , for the treatment of schizophrenia, acute mixed or manic episodes associated with bipolar I disorder, and bipolar maintenance.

Other products and therapies , including:

• Bamlanivimab and etesevimab , administered together, for the treatment of mild-to-moderate COVID-19 in adults and pediatric patients from birth to 12 years old with positive results of direct SARS-CoV-2 viral testing and who are at high risk for progression to severe COVID-19, including hospitalization or death (Emergency Use Authorization (EUA) granted in 2021).

In May 2022, the FDA announced that bamlanivimab and etesevimab are not currently authorized for emergency use for any U.S.

• Bebtelovimab , for the treatment of mild-to-moderate COVID-19 in adults and pediatric patients (12 years of age and older and weighing at least 40 kilograms) with positive results of direct SARS-CoV-2 viral testing, and who are at high risk for progression to severe COVID-19, including hospitalization or death, and for whom alternative COVID-19 treatment options approved or authorized by the FDA are not accessible or clinically appropriate (EUA granted in 2022).

In November 2022, the FDA announced that bebtelovimab is not currently authorized for emergency use for any U.S.

• Cialis ® , for the treatment of erectile dysfunction and benign prostatic hyperplasia.

• Forteo ® , for the treatment of osteoporosis in postmenopausal women and men at high risk for fracture and for glucocorticoid-induced osteoporosis in men and postmenopausal women.

for the first-line treatment of gastric cancer in combination with two other agents;

and, in combination with two other agents, for patients with epidermal growth factor receptor (EGFR)-mutated non-squamous NSCLC that progressed after EGFR-tyrosine kinase inhibitor therapy, each in China.

For use as monotherapy or in combination with endocrine therapy for the treatment of HR+, HER2- metastatic breast cancer and in combination with endocrine therapy for treatment of HR+, HER2-, node positive, early breast cancer at high risk of recurrence.

Therapeutic area

Certain Indications

Immunology products

For the treatment of adult and adolescent patients 12 years or older with moderate to severe atopic dermatitis in Japan and, in collaboration with Almirall S.A., in Europe.

In collaboration with Incyte Corporation, for the treatment of adults with moderately to severely active rheumatoid arthritis after treatment with one or more tumor necrosis factor (TNF) blockers that did not work well enough or could not be tolerated;

moderate to severe atopic dermatitis;

severe alopecia areata;

and for the treatment of hospitalized adults with COVID-19 who require supplemental oxygen, mechanical ventilation, or extracorporeal membrane oxygenation.

For the treatment of adults with moderately to severely active ulcerative colitis.

For the treatment of adults and pediatric patients aged 6 years or older with moderate to severe plaque psoriasis;

adults with active psoriatic arthritis;

adults with ankylosing spondylitis;

and adults with active non-radiographic axial spondyloarthritis.

Neuroscience products

For the treatment of major depressive disorder;

diabetic peripheral neuropathic pain;

generalized anxiety disorder;

fibromyalgia;

and chronic musculoskeletal pain due to chronic low back pain or chronic pain due to osteoarthritis.

For migraine prevention and the treatment of episodic cluster headache in adults.

Other products and therapies

For the treatment of erectile dysfunction and benign prostatic hyperplasia.

For the treatment of osteoporosis in men and postmenopausal women at high risk for broken bones or fracture and for glucocorticoid-induced osteoporosis in men and women.

Marketing and Distribution

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We also educate healthcare providers about our products in various other ways, including promoting in online channels, distributing literature and samples of certain products to physicians, and exhibiting at medical meetings.

In addition, we advertise certain products directly to consumers in the U.S., and we maintain websites and other media channels with information about our major products.

In addition, we advertise certain products directly to consumers in the U.S., and we maintain websites and other media channels (e.g., social media) with information about our major products.

We supplement our employee sales force with contract sales organizations to leverage our resources and reach additional patients in need.

We maintain special business groups to service wholesalers, pharmacy benefit managers, managed care organizations, group purchasing organizations, government and long-term care institutions, hospitals, and certain retail pharmacies.

We enter into arrangements with these organizations providing for discounts or rebates on our products.

Our account managers service wholesalers, pharmacy benefit managers, managed care organizations, group purchasing organizations, government and long-term care institutions, hospitals, and certain retail pharmacies.

We enter into arrangements with these organizations to provide discounts or rebates on our products.

In the U.S., most of our products are distributed through wholesalers that serve pharmacies, physicians and other healthcare professionals, and hospitals.

In 2022, 2021, and 2020, three wholesale distributors in the U.S.—McKesson Corporation, AmerisourceBergen Corporation, and Cardinal Health, Inc.—each accounted for a significant percentage of our consolidated revenue.

In 2023, 2022, and 2021, three wholesale distributors in the U.S.—McKesson Corporation, Cencora, Inc.

(formerly AmerisourceBergen Corporation), and Cardinal Health, Inc.—each accounted for a significant percentage of our consolidated revenue.

No other customer accounted for more than 10 percent of our consolidated revenue in any of these years.

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Outside the U.S.

The products we market and distribution of our products vary from country to country.

The products we market and their distribution vary from country to country.

Outside the U.S., we promote our products to healthcare providers through sales representatives and other channels.

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Certain of our products are marketed in arrangements with other pharmaceutical companies.

For example, we and Boehringer Ingelheim have a global agreement to develop and commercialize a portfolio of diabetes products, including Trajenta ® , Jentadueto ® , Jardiance, Glyxambi ® , Synjardy ® , Trijardy ® XR, and Basaglar.

For additional information, see Item 8, "Financial Statements and Supplementary Data—Note 4:

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and research and development of new products, processes, modalities, and uses.

Early market entry and rapid patient access can also be important to achieve product acceptance and success.

Most new products or uses that we introduce must compete with other branded, biosimilar, or generic products already on the market or that are later developed by competitors.

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There can be no assurance that our efforts will result in commercially successful products, and it is possible that our products will be, or will become, uncompetitive from time to time as a result of products or uses developed by our competitors.

Generic Pharmaceuticals

One of the biggest competitive challenges we face is from generic pharmaceuticals.

In the U.S., Europe, Japan, and other jurisdictions, the regulatory approval process for pharmaceuticals (other than biological products (biologics)) exempts generics from costly and time-consuming clinical trials to demonstrate their safety and efficacy, allowing generic manufacturers to rely on the safety and efficacy of the innovator product.

Generic Pharmaceuticals and Biosimilars

Generic pharmaceuticals and biosimilars can pose major competitive challenges to our business.

In most major jurisdictions, the regulatory approval process for pharmaceuticals (other than biological products (biologics)) exempts generics from costly and time-consuming clinical trials to demonstrate their safety and efficacy, allowing generic manufacturers to rely on the safety and efficacy of the innovator product.

As a result, generic manufacturers generally invest far fewer resources than we do for our branded products in research and development and can price their products significantly lower than our branded products.

Accordingly, when a branded non-biologic pharmaceutical loses its market exclusivity, it normally faces intense price competition from generic forms of the product, which can result in the loss of a significant portion of the product's revenue in a very short period of time.

Moreover, governments in some countries leverage generic entrants to drive price concessions through the utilization of volume-based procurement bidding and other measures.

Further, public and private payers typically encourage the use of generics as alternatives to brand-name drugs in their healthcare programs.

Further, public and private payers typically encourage the use of generics as alternatives to branded products.

Laws in the U.S.

generally allow, and in many cases require, pharmacists to substitute generic drugs that have been rated under government procedures to be essentially equivalent to a brand-name drug.

generally allow, and in many cases require, pharmacists to substitute generics that have been rated under government procedures to be essentially equivalent to a branded product.

Where substitution is mandatory, it must be made unless the prescribing physician expressly forbids it.

In certain countries outside the U.S., intellectual property protection is weak, and we must compete with generic or counterfeit versions of our products relatively shortly after launch.

A number of our products and potential new medicines in our clinical-stage pipeline are biologics.

In the U.S., the FDA regulates biologics under the Federal Food, Drug and Cosmetic Act, the Public Health Service Act, and implementing regulations.

Competition for Lilly's biologics may be affected by the approval of follow-on biologics, also known as biosimilars.

In certain countries, intellectual property protection is weak, and we must compete with generic versions of our products at or relatively shortly after launch.

In addition, competition for our biologics, which constitute a substantial portion of our products and pipeline, may be affected by the approval of follow-on biologics, also known as biosimilars.

A biosimilar is a subsequent version of an approved innovator biologic that, due to its analytical and clinical similarity to the innovator biologic, may be approved based on an abbreviated data package that relies in part on the full testing required of the innovator biologic.

Approval by the FDA ultimately depends on many factors, including a showing that the biosimilar is "highly similar" to the original product and has no clinically meaningful differences from the original product in terms of safety, purity, and potency.

Globally, most governments have developed abbreviated regulatory pathways to approve biosimilars as follow-ons to innovator-developed biologics, including the Biologics Price Competition and Innovation Act of 2009 (the BPCIA) in the U.S.

Globally, most governments have developed abbreviated regulatory pathways to approve biosimilars as follow-ons to innovator biologics, including the Biologics Price Competition and Innovation Act of 2009 (the BPCIA) in

A number of biosimilars have been licensed under the BPCIA, as well as in Europe and Japan.

The patent and regulatory exclusivity for the existing innovator biologic generally must expire in a given market before biosimilars may enter that market.

In addition, the extent to which a biosimilar, once approved, will be substituted for the innovator biologic in a way that is similar to traditional generic substitution for non-biologic products is not yet entirely clear, and will depend on a number of regulatory and marketplace factors that are still developing.

In the U.S., currently only a biosimilar product that is determined to be "interchangeable" by the FDA will be considered substitutable for the original biologic product without the intervention of the healthcare provider who prescribed the original biologic product.

The FDA requirements for interchangeability are evolving but the FDA has issued several "interchangeable" designations for biosimilar products, including for competitive insulin products, and is expected to continue doing so in the future.

Regulatory interpretation of important aspects of the laws regulating biosimilars continues to evolve, and therefore the impact of these laws on our business remains subject to substantial uncertainty.

For example, the extent to which a biosimilar, once approved, will be substituted for the innovator biologic in a way that is similar to traditional generic substitution for non-biologic products will depend on a number of regulatory and marketplace factors that are still developing.

Biosimilars may present both competitive challenges and opportunities.

While competitors have developed biosimilars that compete with our products, we have developed, and may continue to develop, our own biosimilars.

While competitors have developed biosimilars that compete with our products, we have developed our own biosimilar and may develop others in the future.

Private Sector Dynamics

private sector, consolidation and integration among healthcare organizations significantly affects the competitive marketplace for pharmaceuticals.

Health plans, managed care organizations, pharmacy benefit managers, wholesalers, and other supply chain stakeholders have been consolidating into fewer, larger entities, thus enhancing their market power and importance.

Health plans, managed care organizations, pharmacy benefit managers, wholesalers, pharmacies, and other supply chain entities have been consolidating into fewer, larger entities, thus enhancing their market power and importance.

Private third-party insurers, as well as governments, typically maintain formularies that specify coverage (the conditions under which drugs are included on a plan's formulary) and reimbursement (the associated out-of-pocket cost to the consumer) to control costs by negotiating discounts or rebates in exchange for formulary inclusion and placement.

Formulary placement can lead to reduced usage of a drug for the relevant patient population due to coverage restrictions, such as prior authorizations and formulary exclusions, or due to reimbursement limitations that result in higher consumer out-of-pocket cost, such as non-preferred co-pay tiers, increased co-insurance levels, and higher deductibles.

Formulary placement can lead to reduced usage of a product for the relevant patient population due to coverage restrictions, such as prior authorizations and formulary exclusions, or due to reimbursement limitations that result in higher consumer out-of-pocket cost, such as non-preferred co-pay tiers, increased co-insurance levels, and higher deductibles.

Consequently, pharmaceutical companies face increased pressure in negotiations, and compete fiercely for formulary placement, not only on the basis of product attributes such as efficacy, safety profile, or patient ease of use, but also by providing rebates or other concessions.

As payers and pharmaceutical companies continue to negotiate formulary placement and rebates, value-based agreements, where rebates may be based on achievement (or not) of specified outcomes, are another tool that has become increasingly prevalent.

Cost is an increasingly important factor in formulary decisions, particularly in treatment areas in which the payer has taken the position that multiple branded products are therapeutically comparable.

Rebates and net cost are increasingly important factors in formulary decisions, particularly in treatment areas in which the payer has taken the position that multiple branded products are therapeutically comparable.

These pressures have negatively affected, and could continue to negatively affect, our consolidated results of operations.

In addition to formulary placement, changes in insurance designs continue to drive greater consumer cost-sharing through high deductible plans and higher co-insurance or co-pays.

In addition to formulary placement, changes in insurance designs continue to drive greater consumer cost-sharing through high deductible plans, higher co-insurance, or co-pays, including increased utilization of co-pay accumulator adjustment or maximization programs.

Supply chain entities have also increasingly imposed utilization management tools to favor the use of generic products or otherwise limit access to our products.

For additional information on pricing and reimbursement for our pharmaceutical products, see "—Regulations and Private Payer Actions Affecting Pharmaceutical Pricing, Reimbursement, and Access—U.S."

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Intellectual property protection is critical to our ability to successfully commercialize our life sciences innovations and invest in the search for new medicines and uses.

Loss of effective patent protection for pharmaceuticals, especially for non-biologic products, typically results in the loss of effective market exclusivity for the product, often leading to a severe and rapid decline in revenues for the product.

We own, have applied for, or are licensed under, a large number of patents in the U.S.

and many other countries relating to products, product uses, formulations, and manufacturing processes.

In addition, as discussed below, for some products we have effective intellectual property protection in the form of data protection under pharmaceutical regulatory laws.

The patent protection anticipated to be of most relevance to pharmaceuticals is provided by national patents claiming the active ingredient (the compound patent) for our products, particularly those in major markets such as the U.S., major European countries, and Japan.

These patents may be issued based upon the filing of international patent applications, usually filed under the Patent Cooperation Treaty (PCT).

Patent applications covering compounds are generally filed during the discovery phase of the drug discovery process, which is described in the "Research and Development" section below.

In general, national patents in each relevant country are available for a period of 20 years from the filing date of the PCT application, which is often years prior to the launch of a commercial product.

In addition, for some products we have effective intellectual property protection in the form of data protection under pharmaceutical regulatory laws.

The patent protection anticipated to be of most relevance to pharmaceuticals is provided by patents claiming the active ingredient (the compound patent) for our products, particularly those in major markets such as the U.S., major European countries, and Japan.

In general, patents in each relevant country last for a period of 20 years from their filing date, which is often years prior to the launch of a commercial product.

Further patent term adjustments and restorations may extend the original patent term:

• Patent term adjustment is a statutory right available to all U.S.

• Patent term adjustment is available to all U.S.

patent applicants to provide relief in the event that a patent grant is delayed during examination by the U.S.

Patent and Trademark Office (USPTO).

• Patent term restoration is a statutory right provided to U.S.

patent holders that claim inventions subject to review by the FDA.

To compensate for a portion of the time invested in clinical trials and the FDA review process, a single patent for a pharmaceutical product may be eligible for patent term restoration.

Patent term restoration is determined by a formula that cannot be calculated until product approval due to the uncertainty of the duration of clinical trials and the time it takes the FDA to review an application.

There is a five-year cap on any restoration, and no patent's expiration date may be extended beyond 14 years from FDA approval.

• Patent term restoration for a single patent for a pharmaceutical product is provided to U.S.

patent holders to compensate for a portion of the time invested in clinical trials and the U.S.

Food and Drug Administration (FDA) review process.

There is a five-year cap on any restoration, and no patent's

expiration date may be extended beyond 14 years from FDA approval.

Some countries outside the U.S.

similarly offer forms of patent term restoration for patents claiming inventions subject to a local review by a regulatory agency.

For example, Supplementary Protection Certificates are available to extend the life of a European patent up to an additional five years (subject to a 15-year cap from European Medicines Agency (EMA) approval).

Also, in Japan, South Korea, Australia, and other jurisdictions, patent terms can be extended up to five years, depending on the length of regulatory review and other factors.

However, in some cases the innovator company may retain exclusivity despite approval of the generic, biosimilar, or other follow-on versions of a new medicine beyond the expiration of the compound patent through manufacturing trade secrets, later-expiring patents on manufacturing processes, methods of use or formulations, or data protection that may be available under pharmaceutical regulatory laws.

Changes to the laws and regulations governing these protections could result in earlier loss of effective market exclusivity.

similarly offer forms of patent term restoration.

In some cases, the innovator company may retain exclusivity despite approval of the generic, biosimilar, or other follow-on versions of a new medicine beyond the expiration of the compound patent through market dynamics and challenges, later-expiring patents on manufacturing processes, methods of use or formulations, or data protection that may be available under pharmaceutical regulatory laws.

The primary forms of data protection are as follows:

• Regulatory authorities in major markets generally grant data package protection for a period of years following new drug approvals in recognition of the substantial investment required to complete clinical trials.

Data package protection prohibits other manufacturers from submitting regulatory applications for marketing approval in reliance on the innovator company's regulatory submission data for the drug.

The base period of data package protection depends on the country.

For example, the period is generally five years in the U.S.

(12 years for new biologics as described below), effectively 10 years in Europe, and eight years in Japan.

The period begins on the date of product approval and runs concurrently with the patent term for any relevant patent.

• Under the BPCIA, the FDA has the authority to approve biosimilars.

A competitor seeking approval of a biosimilar must file an application to show its molecule is highly similar to an approved innovator biologic and include a certain amount of safety and efficacy data that the FDA will consider on a case-by-case basis.

Under the data protection provisions of this law, the FDA cannot approve a biosimilar application until 12 years after initial marketing approval of the innovator biologic, subject to certain conditions.

• In the U.S., the FDA has the authority to grant additional data protection for approved drugs where the sponsor conducts specified testing in pediatric or adolescent populations within a specified time period.

If granted, this "pediatric exclusivity" provides an additional six months of exclusivity, which is added to the term of data protection and, for products other than biologics, to the term of any relevant patents, to the extent these protections have not already expired.

While the term of the pediatric exclusivity begins upon the expiration of the relevant patent, pediatric exclusivity is a regulatory exclusivity—i.e., a bar to generic or biosimilar approval, not a patent right.

• Under the U.S.

orphan drug law, a specific use of a drug or biologic can receive "orphan" designation if it is intended to treat a disease or condition affecting fewer than 200,000 people in the U.S., or affecting more than 200,000 people but not reasonably expected to recover its development and marketing costs through U.S.

Among other benefits, orphan designation entitles the particular use of the drug to seven years of market exclusivity, meaning that the FDA cannot (with limited exceptions) approve another marketing application for the same drug for the same indication until expiration of the seven-year period.

Unlike pediatric exclusivity, the orphan exclusivity period is independent of and runs in parallel with any applicable patents.

Outside the major markets, the adequacy and effectiveness of intellectual property protection for pharmaceuticals varies widely, and in a number of these markets we are unable to patent our products or to enforce the patents that we receive for our products.

Under the Trade-Related Aspects of Intellectual Property (TRIPs) Agreement administered by the World Trade Organization, more than 140 countries have agreed to provide non-discriminatory protection for most pharmaceutical inventions and to assure that adequate and effective rights are available to patent owners.

Certain developing countries limit protection for biopharmaceutical products under their interpretation of "flexibilities" allowed under the TRIPs Agreement.

Thus, some types of patents, such as those on new uses of compounds or new forms of molecules, are not available in certain developing countries.

• Data package protection generally prohibits other manufacturers from submitting regulatory applications for marketing approval in reliance on the innovator company's regulatory submission data for the drug.

The base period is generally five years in the U.S.

(12 years for new biologics under the BPCIA, subject to certain conditions), effectively 10 years in Europe, and eight years in Japan.

The period begins on the date of product approval and runs concurrently with the patent term for any relevant patents.

• In the U.S., the FDA has the authority to grant additional data protection for approved drugs where the sponsor conducts specified testing in pediatric populations within a specified time period.

If granted, this "pediatric exclusivity" provides an additional six months of exclusivity, which is added to the term of data protection, orphan drug exclusivity and, for products other than biologics, to the term of any relevant and non-expired patents.

• A specific use of a drug or biologic can receive "orphan" designation in the U.S.

if it is intended to treat a disease or condition affecting fewer than 200,000 people in the U.S., or where it is not reasonably expected to recover development and marketing costs through U.S.

Orphan designation entitles a particular use of the drug to seven years of market exclusivity, which runs in parallel with any applicable patents.

Outside the major markets, the adequacy and effectiveness of intellectual property protection for pharmaceuticals vary widely.

International and U.S.

free trade agreements like the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs Agreement) administered by the World Trade Organization provide global protection of certain intellectual property rights.

But in a number of markets we are unable to patent our products or to enforce the patents that we receive for our products.

Further, many developing countries, and some developed countries, do not provide effective data package protection even though it is specified in the TRIPs Agreement.

Our Intellectual Property Portfolio

We consider intellectual property protection for certain products, processes, uses, and formulations—particularly with respect to those products discussed below—to be important to our operations.

We consider intellectual property protection for certain products, processes, uses, and formulations to be important to our business.

In addition to the patents and data protection identified below, we may hold patents on manufacturing processes, formulations, devices, or uses that extend exclusivity beyond the dates shown below.

For approved products, dates include, where applicable, pending or granted patent term extensions.

The most relevant U.S.

patent protection or data protection and associated expiry dates for our major or recently launched patent-protected marketed products are as follows:

• Cyramza is protected by a compound patent and biologics data protection (2026).

• Emgality is protected by a compound patent (2033) and biologics data protection (2030).

• Jardiance, and the related combination product Glyxambi, is protected by a compound patent (2028).

• Jaypirca is protected by a compound patent (2037) and by data protection (2028).

• Mounjaro is protected by a compound patent (2036) and by data protection (2027).

• Olumiant is protected by a compound patent (2032).

• Retevmo is protected by a compound patent (2037) and by data protection (2025).

• Reyvow ® is protected by a compound patent (2030).

• Taltz is protected by a compound patent (2030) and by biologics data protection (2028).

• Trulicity is protected by a compound patent (2027) and by biologics data protection (2027).

• Verzenio is protected by a compound patent (2031).

Outside the U.S., important patent protection or data protection includes:

• Baqsimi ® is protected by data protection in Japan (2026).

• Cyramza is protected by a compound patent (2028) and by data protection (2024) in major European countries, and by a compound patent (2026) and by data protection (2023) in Japan.

• Emgality is protected by a compound patent (2033) and by data protection (2028) in major European countries, and by a compound patent (2035) and by data protection (2029) in Japan.

• Jardiance is protected by a compound patent in major European countries (2029) and Japan (2030).

• Mounjaro is protected by a compound patent in major European countries (2037) and Japan (2040).

• Olumiant is protected by a compound patent (2032) and by data protection (2027) in major European countries, and by a compound patent (2033) and by data protection (2025) in Japan.

• Retevmo is protected by a compound patent (2037) and by data protection (2031) in major European countries, and by a compound patent (2038) and by data protection (2029) in Japan.

• Reyvow is protected by data protection (2032) in major European countries, and a compound patent ( 2028 ) and by data protection ( 2032 ) in Japan.

• Taltz is protected by a compound patent (2031) and data protection (2027) in major European countries and a compound patent (2030) and data protection (2024) in Japan.

• Trulicity is protected by a compound patent (2029) and by data protection (2024) in major European countries and by a compound patent (2029) and by data protection (2023) in Japan.

• Verzenio is protected by a compound patent (2033) and data protection (2028) in major European countries and by a compound patent (2034) and data protection (2026) in Japan.

The following product candidates are the most relevant currently under regulatory review.

The most relevant patent protection or data protection and associated expiry dates for our major or recently launched patent-protected marketed products are as follows:

Therapeutic Area

Diabetes, Obesity and Cardiometabolic products

compound patent

major European countries

Mounjaro/ Zepbound

compound patent

major European countries

data protection

major European countries

compound patent

major European countries

biologics data protection

data protection

major European countries

Oncology products

compound patent

major European countries

biologics data protection

data protection

major European countries

compound patent

major European countries

data protection

major European countries

compound patent

major European countries

data protection

major European countries

compound patent

major European countries

data protection

major European countries

Therapeutic Area

Immunology products

compound patent

major European countries

data protection

major European countries

compound patent

major European countries

data protection

major European countries

compound patent

major European countries

biologics data protection

data protection

major European countries

compound patent

major European countries

biologics data protection

data protection

major European countries

Neuroscience products

compound patent

major European countries

biologics data protection

data protection

major European countries

compound patent

data protection

major European countries

* Jardiance and the related combination product, Glyxambi.

The following product candidates are the most relevant that are currently under regulatory review.

Upon approval, we expect relevant compound patent and data protections to apply:

• Donanemab has been submitted for regulatory review in the U.S.

for the treatment of early Alzheimer's disease.

In January 2023, the FDA issued a complete response letter for our accelerated approval submission.

Phase III trials are ongoing.

• Donanemab has been submitted for regulatory review in the U.S., the EU and Japan for the treatment of early Alzheimer's disease.

• Lebrikizumab has been submitted for regulatory review in the U.S.

and Europe for the treatment of atopic dermatitis.

• Mirikizumab has been submitted for regulatory review in the U.S., Europe, and Japan for the treatment of ulcerative colitis.

Worldwide, we sell all of our major products under trademarks consisting of our product names, logos, and unique product appearances (e.g., the appearance of our Trulicity autoinjector) that we consider in the aggregate to be important to our operations.

Trademark protection varies throughout the world, with protection continuing in some countries as long as the mark is used, and in other countries as long as it is registered.

Registrations are normally for fixed but renewable terms.

for the treatment of moderate to severe atopic dermatitis.

• Pirtobrutinib has been submitted for regulatory review in Japan for the treatment of certain patients with relapsed or refractory mantle cell lymphoma.

Worldwide, we sell all of our major products under trademarks consisting of our product names, logos, and unique p roduct appearances that we consider in the aggregate to be important to our operations.

Trademark protection varies throughout the world.

Trademark protection typically extends beyond the patent and data protection for a product.

We also rely in some circumstances on trade secrets and other unpatented know-how.

We seek to protect our confidential information in part through confidentiality agreements with our employees, corporate partners, collaborators, and vendors.

These agreements may be breached, and we cannot be certain that we have adequate remedies.

If our trade secrets or confidential information become known or are independently discovered by competitors, or if we enter into disputes over ownership of inventions, our business and results of operations could be adversely affected.

Patent Licenses and Collaborations

Most of our major products are not subject to significant license and collaboration agreements.

Some of our products are subject to significant license and collaboration agreements.

For information on our license and collaboration agreements, see Item 8, "Financial Statements and Supplementary Data—Note 4:

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Patent Challenges

In the U.S., the Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the Hatch-Waxman Act, authorizes the FDA to approve generic versions of innovative pharmaceuticals (other than biologics, which are discussed below in more detail) when the generic manufacturer has not conducted safety and efficacy studies but files an Abbreviated New Drug Application (ANDA).

In an ANDA, the generic manufacturer must demonstrate only "pharmaceutical equivalence" and "bioequivalence" between the generic version and the New Drug Application (NDA)-approved-drug, not safety and efficacy.

Establishing pharmaceutical equivalence and bioequivalence is generally straightforward and inexpensive for the generic company.

In the U.S., the Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the Hatch-Waxman Act, authorizes the FDA to approve generic versions of innovative pharmaceuticals (other than biologics) when the generic manufacturer files an Abbreviated New Drug Application (ANDA).

Absent a patent challenge, the FDA cannot approve an ANDA until after certain of the innovator's patents expire.

However, after the innovator has marketed its product for four years, a generic manufacturer may file an ANDA alleging that one or more of the patents listed in the innovator's NDA are invalid or not infringed.

This allegation is commonly known as a "Paragraph IV certification." If the innovator responds by filing suit against the generic manufacturer, the FDA is then prohibited from approving the generic company's application for a 30-month period (which can be shortened or extended by the trial court judge hearing the patent challenge).

If one or more of the NDA-listed patents are challenged, the first filer(s) of a Paragraph IV certification may be entitled to a 180-day period of market exclusivity over all other generic manufacturers.

Generic manufacturers use Paragraph IV certifications extensively to challenge patents on innovative pharmaceuticals.

However, after the innovator has marketed its product for four years, a generic manufacturer may file an ANDA alleging that the patent(s) listed in the innovator's New Drug Application (NDA) are invalid, unenforceable or not infringed.

Generic manufacturers use this process extensively to challenge patents on innovative pharmaceuticals.

In addition, generic companies have shown willingness to launch "at risk," i.e., after receiving ANDA approval but before final resolution of their patent challenge.

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Courts have held that biosimilar applicants are not required to engage in the BPCIA patent litigation scheme and patent holders retain the right to bring suit under normal patent law procedures if a biosimilar applicant attempts to commercialize a product prior to patent expiration.

Further, in the U.S., the increased likelihood of generic and biosimilar challenges to innovators' intellectual property has increased the risk of loss of innovators' market exclusivity.

See also "—Competition—Biosimilars." In addition, there is a procedure in U.S.

In addition, there is a procedure in U.S.

patent law, known as inter partes review (IPR), which allows any member of the public to file a petition with the USPTO seeking the review of any issued U.S.

patent for validity.

IPRs are conducted before Administrative Patent Judges in the USPTO using a lower standard of proof than used in federal district court.

In addition, the challenged patents are not accorded the presumption of validity as they are in federal district court.

IPRs are conducted before Administrative Patent Judges in the USPTO using a lower standard of proof than used in federal district court and challenged patents are not accorded the presumption of validity.

Generic drug companies and even some investment firms have engaged in the IPR process in attempts to invalidate our patents.

The use of IPR proceedings after the institution of litigation pursuant to the BPCIA or Hatch-Waxman Act is currently a topic of debate among legislators.

We have also observed, and may continue to observe, changes at the Patent Trial and Appeal Board (PTAB), including with respect to the PTAB's policy to discretionarily deny an otherwise meritorious petition for IPR in light of a concurrent district court proceeding.

See Item 1A, "Risk Factors—Risks Related to Our Business—Our long-term success depends on intellectual property protection;

if our intellectual property rights are invalidated, circumvented, or weakened, our business will be adversely affected."

In addition, in December 2023, the U.S.

presidential administration released a proposed framework that would permit the federal government to consider the price of a drug developed using federal funds as a factor in determining whether it may exercise "march-in rights" and license it to a third party to manufacture.

A comment period on the proposal runs through February 6, 2024, and we are not able to predict whether a final rule will be adopted in accordance with the proposed framework.

Outside the U.S., the legal doctrines and processes by which pharmaceutical patents can be challenged vary widely.

In recent years, we have experienced an increase in patent challenges from generic manufacturers in many countries outside the U.S.

For more information on administrative challenges and litigation involving our intellectual property rights, see Item 8, "Financial Statements and Supplementary Data—Note 16:

For more information on patent challenges and litigation involving our intellectual property rights, see Item 1A, "Risk Factors—Risks Related to Our Business—Our long-term success depends on intellectual property protection;

if our intellectual property rights are invalidated, circumvented, or weakened, our business will be adversely affected." and Item 8, "Financial Statements and Supplementary Data—Note 16:

Contingencies."

Government Regulation of Our Operations

Our operations are regulated extensively by numerous national, state, and local agencies.

Our operations are regulated extensively by numerous government agencies.

Regulation of Products

The lengthy process of laboratory and clinical testing, data analysis, manufacturing development, and regulatory review necessary for governmental approvals of our products is extremely costly and can significantly delay product introductions and revenue generation.

In addition, our operations are subject to complex federal, state, local, and foreign laws and regulations concerning relationships with healthcare providers and suppliers, the environment, occupational health and safety, data privacy, and other matters.

Evolving regulatory priorities have intensified governmental scrutiny of our operations, including with respect to current Good Manufacturing Practices (cGMP), quality assurance, and similar regulations.

Compliance with the laws and regulations affecting the manufacture and sale of current products and the discovery, development, and introduction of new products and uses will continue to require substantial effort, expense, and capital investment.

In addition, our operations are subject to complex federal, state, local, and foreign laws and regulations concerning relationships with healthcare providers and suppliers, pricing and reimbursement for our products, the environment, occupational health and safety, data privacy and security, and other matters.

Evolving regulatory priorities have intensified governmental scrutiny of our operations and those of other healthcare intermediaries, including with respect to current Good Manufacturing Practices (cGMP), quality assurance, and similar regulations.

Regulatory oversight of the pharmaceutical industry entails judgment and interpretation, which can result in inconsistent administration of laws and regulations by health authorities.

Compliance with the laws and regulations affecting the manufacture and sale of current products and the discovery, development, and introduction of new products and uses has and will continue to require substantial effort, expense, and capital investment.

Of particular importance to our business is regulation by the FDA in the U.S.

Pursuant to laws and regulations that include the Federal Food, Drug, and Cosmetic Act, the FDA has jurisdiction over all of our products and devices in the U.S.

Pursuant to laws and regulations that include the Federal Food, Drug, and Cosmetic Act (FDCA), the FDA has jurisdiction over all of our products and devices in the U.S.

and administers requirements covering the testing, safety, effectiveness, manufacturing, quality control, distribution, labeling, marketing, promotion, advertising, dissemination of information, and post-marketing surveillance of those products and devices.

Following approval, our products remain subject to regulation by various agencies in connection with labeling, import, export, storage, recordkeeping, advertising, promotion, and safety reporting.

We conduct extensive post-marketing surveillance of the safety of the products we sell.

The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after a product reaches the market.

The FDA also strictly regulates marketing, labeling, advertising, and promotion of products that are placed on the market.

The FDA holds broad discretion under the FDCA and other statutes to interpret the conditions and evidence necessary for timely approval of our drugs and devices.

Following approval, our products remain subject to regulation by various government and regulatory agencies in connection with labeling, import, export, sale, storage, recordkeeping, advertising, promotion, and safety reporting.

We conduct extensive post-marketing surveillance of the safety of the products we sell and comply with notification requirements related to safety and efficacy, product supply, and other aspects of our products and operations.

The FDA may withdraw approval of a product if compliance with regulatory requirements and standards is not maintained or if problems occur after a product reaches the market, including as may be identified through market surveillance or third-party studies involving our products.

The FDA may also mandate labeling changes to products at any point in a product's life cycle based on new safety information or as part of a labeling change to a particular class of products.

In addition, the FDA strictly regulates marketing, labeling, advertising, and promotion of products to prescribers and patients.

Pharmaceutical products may be promoted only for approved indications and in accordance with the provisions of the approved label.

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extensively regulate all aspects of manufacturing quality for pharmaceuticals under their cGMP regulations.

Regulators assess compliance with these regulations by inspecting the equipment, facilities, laboratories, and processes used in the manufacturing and testing of our products prior to marketing approval with periodic reinspection thereafter;

this may include inspection of our third-party business partners.

We make substantial investments of capital and operating expenses to implement comprehensive, company-wide quality systems and controls in our manufacturing, product development, and process development operations in an effort to maintain sustained compliance with cGMP and other regulations.

However, in the event we fail to adhere to these requirements, we become subject to potential government investigations, regulatory and legal actions, product recalls and seizures, fines and penalties, interruption of production leading to product shortages, import bans or denials of import certifications, delays or denials in new product approvals or line extensions or supplemental approvals of current products pending resolution of the issues, and reputational harm, any of which would adversely affect our business.

Certain of our products are manufactured by third parties, and their failure to comply with these regulations could adversely affect us, including through failure to supply product to us or delays in approvals of new products or indications.

Nonetheless, manufacturing quality and other aspects of pharmaceutical regulatory compliance is heavily scrutinized and results in government investigations, regulatory and legal actions, product recalls and seizures, fines and penalties, interruption of production leading to product shortages, import bans or denials of import certifications, delays or denials in new product approvals or line extensions or supplemental approvals of current products pending resolution of any issues, any of which have and could adversely affect our business and reputation.

Certain of our products, devices and components are manufactured by third parties, and their failure to comply with these regulations has and could in the future adversely affect us, including through failure to supply product to us or delays in approvals of new products or indications.

For example, in 2023 we received complete response letters based on FDA observations made during inspections of manufacturing facilities rather than any issues related to efficacy or safety.

These resulted in certain delays in the approval of new products.

Any determination by the FDA or other regulatory authorities of manufacturing or other deficiencies could adversely affect our business and reputation.

We are also subject to a variety of federal, state, local, and foreign environmental, health and safety, and other laws and regulations that may affect our research, development or production efforts.

For more information on product regulation challenges, see Item 1A, "Risk Factors—Risks Related to Our Operations—Reliance on third-party relationships and outsourcing arrangements could adversely affect our business."

Emergency Use Authorizations

The Secretary of Health and Human Services may issue an EUA to authorize unapproved medical products, or unapproved uses of approved medical products, to be manufactured, marketed, and sold in the context of an actual or potential emergency that has been designated by the government.

The Secretary of Health and Human Services may issue an Emergency Use Authorization (EUA) to authorize unapproved medical products, or unapproved uses of approved medical products, to be manufactured, marketed, and sold in the context of an actual or potential emergency that has been designated by the government.

For example, certain of our products were previously made available for the treatment of COVID-19 under respective EUAs.

An EUA terminates when the emergency determination underlying the EUA terminates, and EUAs can be revoked under other circumstances, the timing of which may occur unexpectedly or be difficult to predict.

Outside the U.S., the emergency use of medical products is subject to regulatory processes and requirements that vary and differ from those in the U.S.

The COVID-19 pandemic has been designated as a national emergency in the U.S.

On the basis of such determination, the FDA granted EUAs for bamlanivimab and etesevimab administered together, certain COVID-19-related uses of baricitinib, and bebtelovimab, and similar actions have been taken by other regulators in certain jurisdictions outside the U.S.

However, the FDA has revised, and may in the future further revise, these EUAs in response to the changing conditions of the COVID-19 pandemic, such as the prevalence of variants against which our antibodies have varying degrees of efficacy.

In May and November 2022, respectively, the FDA announced that bamlanivimab and etesevimab are, and bebtelovimab is, not currently authorized for emergency use for any U.S.

Other Laws and Regulations

The marketing, promotional, and pricing practices of pharmaceutical manufacturers, as well as the manner in which manufacturers interact with purchasers, prescribers, and patients, are subject to various other U.S.

federal and state laws, as well as analogous foreign laws and regulations, including the federal anti-kickback statute, the False Claims Act, and state laws governing kickbacks, false claims, unfair trade practices, and consumer protection.

These laws are administered by, among others, the Department of Justice, the Office of Inspector General of the Department of Health and Human Services, the Federal Trade Commission, the Office of Personnel Management, and state attorneys general.

federal and state laws, as well as analogous foreign laws and regulations, including the federal anti-kickback statute, the False Claims Act, antitrust laws, and state laws governing kickbacks, false claims, unfair trade practices, and consumer protection.

These laws are administered by, among others, the Department of Justice, the Office of Inspector General of the U.S.

Department of Health and Human Services (HHS), the Federal Trade Commission, the Office of Personnel Management, and state attorneys general.

State, federal, and foreign governments, agencies, and other regulatory bodies are active in their oversight, enforcement activities, and coordination with respect to pharmaceutical companies, which has resulted in intensified scrutiny, litigation costs, corporate criminal sanctions, and substantial civil settlements in the pharmaceutical industry.

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In recent years, several jurisdictions have enhanced their laws and regulations in this area, increased their enforcement activities, and/or increased the level of cross-border coordination and information sharing.

We are, and could in the future become, subject to administrative and legal proceedings and actions, which could include claims for civil penalties (including treble damages under the False Claims Act), criminal sanctions, and administrative remedies, including exclusion from U.S.

We are, and could in the future become, subject to administrative and legal proceedings and actions, which could include claims for civil penalties (including treble damages), criminal sanctions, and administrative remedies, including exclusion from U.S.

federal and other healthcare programs.

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government enacted the Inflation Reduction Act of 2022 (IRA).

Among other measures, the IRA will require the U.S.

Department of Health and Human Services to effectively set prices for certain single-source drugs and biologics reimbursed under Medicare Part B and Part D.

Generally, these government prices apply nine (medicines approved under an NDA) or thirteen (medicines approved under a Biologics License Application) years following initial FDA approval and will be capped at a statutory ceiling price that is likely to represent a significant discount from average prices to wholesalers and direct purchasers.

It is too soon to tell how the U.S.

government will set these prices as the law specifies a ceiling price, but not a minimum or floor price.

One or more of our significant products may be selected, which would have the effect of accelerating revenue erosion prior to patent expiry.

Among other measures, the IRA requires HHS to effectively set prices for certain single-source drugs and biologics reimbursed under Medicare Part B and Part D.

Generally, these government prices apply nine years (for medicines approved under an NDA) or thirteen years (for medicines approved under a Biologics License Application (BLA)) following initial FDA approval and will be set at a price that is likely to represent a significant discount from existing average prices to wholesalers and direct purchasers.

While the law specifies a ceiling price, it does not set a minimum or floor price.

In August 2023, HHS selected Jardiance, which is part of our collaboration with Boehringer Ingelheim, as one of the first ten medicines subject to government-set prices effective in 2026.

Given our product portfolio, we expect additional significant products will be selected in future years, which would have the effect of accelerating revenue erosion prior to expiry of exclusivities.

The effect of reducing prices and reimbursement for certain of our products would significantly impact our business and consolidated results of operations.

The establishment of payment limits or other restrictions by drug affordability review boards and other state level actors would similarly impact us.

Other IRA provisions provide for rebate obligations on drug manufacturers that increase prices of Medicare Part B and Part D medicines at a rate greater than the rate of inflation and Part D benefit redesign that includes replacing the Part D coverage gap discount program with a new manufacturer discounting program.

Other IRA provisions require drug manufacturers to provide rebates for Medicare Part B and Part D medicines under certain circumstances.

Also, the Part D benefit redesign will replace the Part D Coverage Gap Discount Program (CGDP) with a new manufacturer discount program.

Beginning in January 2025, the 70 percent CGDP discount will be replaced by a 10 percent manufacturer discount for all Medicare Part D beneficiaries that have met their deductible and incurred out of pocket drug costs below a $2,000 threshold and a 20 percent discount for beneficiaries that have incurred out of pocket drug costs above the $2,000 threshold under the Part D benefit redesign.

Manufacturers that fail to comply with the IRA may be subject to various penalties, including civil monetary penalties, which could be significant.

The IRA takes effect progressively starting in 2023, with the first government-set prices effective in 2026.

The IRA may meaningfully influence our business strategies and those of our competitors.

In particular, the nine-year timeline to set prices for medicines approved under an NDA may reduce the attractiveness of investment in small molecule innovation.

The implications to us of a competitor’s product being selected for price setting are also uncertain.

Provisions of the IRA may be subject to legal challenges or other reformation, and the full impact of the IRA on our business and the pharmaceutical industry remains uncertain.

Heightened governmental scrutiny over the manner in which drug manufacturers price their marketed products has also resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products.

The IRA has and will meaningfully influence our business strategies and those of our competitors.

In particular, the nine-year timeline to set prices for medicines approved under an NDA reduces the attractiveness of investment in small molecule innovation.

The IRA can cause changes to development approach, and timing and investments at-risk.

The full impact of the IRA on our business and the pharmaceutical industry, including the implications to us of a competitor's product being selected for price setting, remains uncertain.

Heightened governmental scrutiny over the manner in which drug manufacturers price their marketed products and the practices of pharmacy benefit managers and other supply chain entities has also resulted in several U.S.

Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, require advance notice of list price increases, establish upper payment limits or other restrictions by drug affordability review boards, allow the importation of drugs from other countries, address pharmacy benefit manager practices, and reform government program reimbursement methodologies for drug products.

Restrictive or unfavorable pricing, coverage, or reimbursement determinations for our medicines or product candidates by governments, regulatory agencies, courts, or private payers could also adversely impact our business and financial results.

For example, in April 2022, the Centers for Medicare & Medicaid Services issued the Monoclonal Antibodies Directed Against Amyloid for the Treatment of Alzheimer’s Disease national coverage determination (the Alzheimer's Monoclonal Antibody NCD) limiting coverage of FDA-approved monoclonal antibodies that target amyloid for the treatment of Alzheimer's disease for people with Medicare only if they are enrolled in qualifying clinical trials.

In its current form, the Alzheimer’s Monoclonal Antibody NCD would result in significantly reduced coverage for, and negatively impact, our product candidate donanemab, and may negatively impact our business and financial results.

Additional policies, regulations, legislation, or enforcement, including those proposed or pursued by the U.S.

Congress, the current U.S.

presidential administration, and regulatory authorities worldwide, could intensify these efforts and adversely impact our business and consolidated results of operations.

In the U.S., we are required to provide rebates to the federal government and state governments on their purchases of our pharmaceuticals under various federal and state healthcare programs, including state Medicaid and Medicaid Managed Care programs (minimum of 23.1 percent plus adjustments for price increases above the consumer price index over time) and discounts to private entities who treat patients in certain types of healthcare facilities intended to serve low-income and uninsured patients (known as 340B covered entities).

Congress, the U.S.

executive branch and regulatory authorities worldwide, could intensify these efforts and adversely impact our business and consolidated results of operations.

In the U.S., we are required to provide rebates to the federal government and state governments on their purchases of our pharmaceuticals under various federal and state healthcare programs, including state Medicaid and Medicaid Managed Care programs (a minimum of 23.1 percent plus adjustments for price increases above the consumer price index over time) and discounts to private entities who treat patients in certain types of healthcare facilities intended to serve low-income and uninsured patients (known as 340B covered entities).

Additionally, an annual fee is imposed on pharmaceutical manufacturers and importers that sell branded prescription drugs to specified government programs.

Since 2019, the Bipartisan Budget Act has required manufacturers of brand-name drugs, biologics, and biosimilars to provide a discount of 70 percent of the cost of branded prescription drugs for Medicare Part D participants who are in the "doughnut hole" (the coverage gap in Medicare prescription drug coverage).

Beginning in October 2024, under the IRA the 70 percent discount will be replaced by a 10 percent discount for all Medicare Part D beneficiaries that have met their deductible and incurred out of pocket drug costs below a $2,000 threshold and a 20 percent discount for beneficiaries that have incurred out of pocket drug costs above the $2,000 threshold.

Changes to the 340B program or the Medicaid programs could have a material adverse impact on our business.

For example, continued expansion of the 340B program and growth of entities claiming entitlement to 340B pricing, including in ways that may be inconsistent with the statutory scheme, impacts our revenue on an increasing percentage of sales.

Changes to the calculation of rebates under the Medicaid program could also increase our Medicaid rebate obligations and decrease the prices charged to 340B covered entities.

We have implemented a Contract Pharmacy Limited Distribution System applicable to sales through the 340B program, which generally limits distribution of 340B-priced product to:

(i) covered entities and their child sites;

(ii) contract pharmacies wholly owned by the covered entity;

or (iii) if a covered entity lacks an in-house outpatient pharmacy, a single contract pharmacy designated by a covered entity to establish a 340B bill to/ship to arrangement.

Our Contract Pharmacy Limited Distribution System contains certain exceptions that permit broader contract pharmacy usage, including for "penny priced" insulin products, provided that the covered entity passes through all discounts to eligible patients at the point of sale and meets other conditions.

We believe our Contract Pharmacy Limited Distribution System complies with the 340B statute, but it remains subject to ongoing inquiries and litigation that could have a material impact on our business, as discussed in Item 8, "Financial Statements and Supplementary Data—Note 16:

Contingencies." Other aspects of the 340B program, including the proper definitions of "patient" and "child site" under the 340B statute, are also subject to ongoing litigation by other parties, the resolution of which could impact the growth and scope of the 340B program.

Rebates are also negotiated in the private sector.

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These rebates are affected by the introduction of competitive products and generics in the same class.

Our approach to the rebates we offer to private payers that provide prescription drug benefits to seniors covered by Medicare may be impacted by the 2020 regulatory amendments to the anti-kickback statute's discount safe harbor, which have currently been stayed until at least January 1, 2032.

For a discussion of risks related to how we price our products, see Item 1A, "Risk Factors—Risks Related to Our Business—We face litigation and investigations related to our products, how we price our products, and how we commercialize our products;

we could face large numbers of claims in the future, which could adversely affect our business, and we are self-insured for such matters."

For a discussion of risks related to how we price our products, see Item 1A, "Risk Factors—Risks Related to Our Business—We face litigation and investigations related to our products, how we price or commercialize our products, and other aspects of our business, which could adversely affect our business, and we are self-insured for such matters."

Outside the U.S.

Globally, public and private payers are increasingly restricting access to pharmaceuticals based on assessments of comparative effectiveness and value, including through the establishment of formal health technology assessment processes.

In addition, third-party organizations, including professional associations, academic institutions, and non-profit entities associated with payers, conduct and publish comparative effectiveness and cost/benefit analyses on medicines, the impact of which are uncertain.

In most international markets, we operate in an environment of government-mandated cost-containment programs, which may include price controls, international reference pricing (to other countries' prices), discounts and rebates, therapeutic reference pricing (to other, often generic, pharmaceutical choices), restrictions on physician prescription levels, and mandatory generic substitution.

In October 2022, the German Parliament passed cost cutting reforms and these reforms were followed by activation of a clawback mechanism in France and implementation of increased mandatory rebates in the United Kingdom.

These changes may be followed in 2023 by biopharmaceutical-focused austerity measures in more countries in Europe and in other markets.

Reforms, including those that may stem from periods of economic downturn or uncertainty, or as a result of high inflation, emergence or escalation of, and responses to, war or unrest (including the Russia-Ukraine war), or government budgeting priorities (including as exacerbated by the COVID-19 pandemic), may continue to result in added pressure on pricing and reimbursement for our products.

We cannot predict the extent to which our business may be affected by these or other potential future legislative, regulatory, or payer developments.

However, in general we expect to see continued focus on regulating pricing, resulting in additional state, federal, and international legislative and regulatory developments that could have further negative effects on pricing and reimbursement for our products.

In most international markets, we operate in an environment of government-mandated cost-containment programs, which may include price controls, international reference pricing (to other countries' prices), discounts and rebates, therapeutic reference pricing (to other, often generic, pharmaceutical choices), regulatory hurdles, restrictions on physician prescription levels, and mandatory generic substitution.

In these markets, healthcare services and the determination of pricing and reimbursement for pharmaceutical products are impacted by government control at the point of care or as the primary payer.

The European Commission published its draft General Pharmaceutical Legislation in April 2023.

While certain elements in the European Commission draft could expedite regulatory timelines, we anticipate that the overall market and patient impact would be negative if the legislation is approved as drafted.

Implementation timing is unknown at this time.

Health care cost containment remains a focus in the EU, among other jurisdictions.

Most countries in the EU attempt to contain drug costs by engaging in some form of reference pricing in which authorities examine pre-determined internal or external markets for published prices of a product or national class of drugs.

Member states also have the power to restrict the range of pharmaceutical products for which their national health insurance systems provide reimbursement and may condition access on agreement of a reimbursement price or completion of cost-effectiveness or other gating studies.

In Japan, our products generally are subject to government-mandated annual price reductions.

The government may also order re-pricings for specific products or classes of products if certain criteria are met, including exceeding product use thresholds.

China has introduced and implemented reforms to accelerate access to innovative products and reduce costs.

To drive patient access, we seek inclusion of many of our branded products on China's National Reimbursement Drug List, a list of drugs fully or partially reimbursed by China’s national basic health insurance.

In exchange for broad access, these products are generally subject to negotiation of significant price concessions.

China also utilizes a value-based procurement program process for products that have generic substitutes.

Products that we choose to tender through this process are similarly subject to price reductions.

Our performance in China may be significantly impacted by the country's evolving pharmaceutical regulatory environment, including access, intellectual property protection, regulatory enforcement and compliance, and trade policies.

Governments in many emerging markets are also focused on limiting health care costs and have enacted price controls and measures impacting intellectual property.

Reforms in our product markets, including those that may stem from periods of uneven economic growth or downturns or uncertainty, or as a result of high inflation, emergence, or escalation of, and responses to, international tension and conflicts, or government budgeting priorities, may continue to result in added pressure on pricing and reimbursement for our products.

We cannot predict the extent to which our business may be affected by current or potential future legislative, regulatory, or payer developments.

See Item 7, "Management's Discussion and Analysis—Executive Overview—Other Matters—Trends Affecting Pharmaceutical Pricing, Reimbursement, and Access" for additional information regarding recent legislative, administrative, and other pricing initiatives and their impact on our results.

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At the end of 2023, we employed approximately 10,000 people in pharmaceutical research and development activities, including a substantial number of physicians, scientists holding graduate or postgraduate degrees, and highly skilled technical personnel.

Our internal pharmaceutical research focuses primarily on the areas of obesity & diabetes, immunology, neuroscience, and oncology.

At the outset of the COVID-19 pandemic, we also focused on researching and developing potential treatments for COVID-19.

In addition to discovering and developing new medicines, we seek to expand the value of existing products through new uses, formulations, and therapeutic approaches that provide additional value to patients.

Our internal pharmaceutical research focuses primarily on the areas of metabolism (including diabetes, obesity and cardiovascular), immunology, neuroscience, and oncology.

In addition to discovering and developing new medicines, we seek to expand the value of existing products through new uses, formulations, and therapeutic approaches, including complementary delivery devices or diagnostic tools, that can provide additional value to patients.

To supplement our internal efforts, we collaborate with others, including academic institutions and research-based pharmaceutical and biotechnology companies.

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Candidates can fail at any stage of the process, and even late-stage candidates sometimes fail to receive regulatory approval or achieve commercial success.

In addition, novel modalities can present more challenging or lengthy development timelines.

The following describes in more detail the research and development process for pharmaceutical products:

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In general, the first human tests (often referred to as Phase I) are conducted in small groups of subjects to assess safety and evaluate the potential dosing range.

Subsequently, larger populations of patients are studied (Phase II) to identify initial signs of efficacy while continuing to assess safety.

Subsequently, larger populations of patients are studied (Phase II) to identify signs of efficacy while continuing to assess safety.

In parallel, scientists work to identify safe, effective, and economical manufacturing processes.

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These studies are designed to demonstrate the benefit and risk of the potential new medicine and may be compared to competitive therapies, placebo, or both.

Phase III studies are generally conducted globally and are designed to support regulatory filings for marketing approval.

The duration of Phase III testing varies by disease and may take two to four years.

Phase III studies are generally conducted globally, are costly, and are designed to support regulatory filings for marketing approval.

The duration of Phase III testing varies by disease and may take years.

• Submission Phase

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There is no guarantee that a potential medicine will receive marketing approval, or that decisions on marketing approvals or indications will be consistent across geographic areas.

We believe our investments in research, both internally and in collaboration with others, have resulted in a robust pipeline of potential new medicines and new treatment indications in all stages of development.

We have a number of new medicine candidates in clinical development or under regulatory review, and we have a larger number of projects in the discovery phase.

See Item 7, "Management's Discussion and Analysis—Executive Overview—Late-Stage Pipeline," for more information on our late-stage product candidates.

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Most of the principal materials we use in our manufacturing operations are available from more than one source.

However, we obtain certain raw or intermediate materials primarily from only one source.

We generally seek to maintain sufficient inventory to supply the market until an alternative source of supply can be implemented, in the event one of these suppliers becomes unable to provide the materials or product.

However, certain raw or intermediate materials are procured from a single source.

We seek to maintain sufficient inventory to provide reliability of production and manage unforeseen supply variability.

However, various developments have led, and may in the future lead, to interruption or shortages in supply until we establish new sources, implement alternative processes, bring new manufacturing facilities online, or pause or discontinue product sales in one or more markets.

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Finishing operations, including formulation, filling, assembling, delivery device manufacturing, and packaging, take place at a number of sites throughout the world.

We utilize third parties for certain active ingredient manufacturing and finishing operations.

We manage our supply chain (including our own facilities, contracted arrangements, and inventory) in a way that is intended to allow us to meet substantially all expected product demand while maintaining flexibility to reallocate manufacturing capacity to improve efficiency and respond to changes in supply and demand.

To support anticipated demand for our current and prospective products, we have undertaken significant manufacturing expansion initiatives.

During 2023, commercial production commenced at our Research Triangle Park manufacturing site in Durham, North Carolina.

Further investments to increase our manufacturing capacity include planned sites in Concord, North Carolina, Limerick, Ireland, Alzey, Rhineland-Palatinate, Germany, and two in Lebanon, Indiana.

We also utilize and are expanding arrangements with third parties for certain active ingredient manufacturing, filling, finishing operations, and for device or component production and assembly.

We manage our supply chain (including our own facilities, contracted arrangements, and inventory) in a way that is intended to allow us to meet product demand while maintaining flexibility to reallocate manufacturing capacity to improve efficiency and respond to changes in supply and demand.

To maintain supply of our products, we use a variety of techniques, including comprehensive quality systems, inventory management, and back-up sites.

However, pharmaceutical production processes are complex, highly regulated, and vary widely from product to product.

Shifting or adding manufacturing capacity can be a very lengthy process requiring significant capital expenditures, process modifications, and regulatory approvals.

Accordingly, developments such as unplanned plant shutdowns, manufacturing or quality assurance difficulties at one of our facilities or contracted facilities, failure or refusal of a supplier or contract manufacturer to supply contracted quantities, increases in demand on a supplier, or difficulties in predicting or variability in demand for our products and those of our competitors have led, and may in the future lead, to interruption or higher costs in the supply of certain products, product shortages, or pauses or discontinuations of product sales in one or more markets.

Further, global transportation and logistics challenges, cost inflation, and tight labor markets, have caused, and in the future may cause, delays in and/or increased costs related to distribution of our medicines, the construction or acquisition of manufacturing capacity, procurement activity, and supplier or contract manufacturer arrangements.

Shifting or adding manufacturing capacity is a very lengthy process requiring significant capital expenditures, process modifications, and regulatory approvals.

Accordingly, developments such as unanticipated demand, unplanned plant shutdowns, manufacturing or quality assurance difficulties at one of our facilities or contracted facilities, failure or refusal of a supplier or contract manufacturer to supply contracted quantities, increases in demand on a supplier, or difficulties in predicting or variability in demand for our products and those of our competitors have led, and may in the future lead, to interruption or higher costs in the supply of certain products, product shortages, or pauses or discontinuations of product sales in one or more markets.

For example, we have experienced challenges in meeting strong demand for our incretin products in recent periods, partially due to the limited availability of competitor therapies, and expect tight supply to persist while additional manufacturing capacity is operationalized.

Further, cost and wage inflation, availability of adequate capacity in global transportation, supply chain complexities, including consolidation therein, labor market issues, international tension and conflicts, uneven economic growth or downturns, an increase in overall demand in our industry for certain products and materials, and public health outbreaks, epidemics, or pandemics, such as the COVID-19 pandemic, have caused, and in the future may cause, delays or disruptions in and/or increased costs related to distribution of our medicines, the construction or acquisition of manufacturing capacity, procurement activity, and supplier or contract manufacturer arrangements, as well as other general business impacts.

For more information on the additional risks we face in connection with any difficulties, disruptions, and shortages in the manufacturing, distribution, and sale of our products, see Item 1A, "Risk Factors—Risks Related to Our Business—Manufacturing, quality, or supply chain difficulties, disruptions, or shortages could lead to product supply problems."

In addition, cost inflation, the strain on global transportation, logistics, and labor markets (including as exacerbated by the COVID-19 pandemic and the emergence or escalation of, and responses to, war or unrest, including the Russia-Ukraine war), global economic downturns or uncertainty, and an increase in overall demand in our industry for certain products and materials have had, and may continue to have, a number of impacts on our business, including increased costs and disruptions in the supply of our medicines.

For more information, see Item 1A, "Risk Factors—Risks Related to Our Business—Public health outbreaks, epidemics, or pandemics, such as the COVID-19 pandemic, have adversely impacted and may in the future adversely impact our business and operations." and Item 7, "Management's Discussion and Analysis—Executive Overview—Other Matters—COVID-19 Pandemic."

Quality Assurance

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Prior to joining WellCare, she served as divisional vice president and associate general counsel of intellectual property litigation at Abbott Laboratories from 2010 to 2013 and divisional vice president and associate general counsel of litigation from 2013 to 2016.

Hakim has three years of service with Lilly.

Hakim has four years of service with Lilly.

Edgardo Hernandez 49 Executive Vice President and President, Manufacturing Operations (since 2021).

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Hernandez has 19 years of service with Lilly.

Patrik Jonsson 56 Executive Vice President and President, Lilly Immunology, Lilly USA, and Chief Customer Officer (since 2021).

Previously, Mr.

Jonsson held various leadership roles with Lilly, including senior vice president and president, Lilly USA, and chief customer officer, senior vice president and president, Lilly Bio-Medicines and president and general manager, Lilly Japan.

Patrik Jonsson 57 Executive Vice President and President, Lilly Diabetes and Obesity and President, Lilly USA (since 2024).

Jonsson has held various leadership roles with Lilly, including, most recently, as Executive Vice President and President, Lilly Immunology and Lilly USA, and Chief Customer Officer.

Previously, he served as senior vice president and president, Lilly Bio-Medicines and president and general manager, Lilly Japan.

Jonsson has 33 years of service with Lilly.

Michael Mason 56 Executive Vice President and President, Lilly Diabetes (since 2020).

Previously, Mr.

Mason held various leadership roles with Lilly, including senior vice president, connected care and insulins and vice president of U.S.

Mason has 33 years of service with Lilly.

Johna Norton 57 Executive Vice President, Global Quality (since 2017).

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Norton has 33 years of service with Lilly.

Leigh Ann Pusey 60 Executive Vice President, Corporate Affairs and Communications (since 2017).

Prior to joining Lilly, Ms.

Pusey was president and chief executive officer of the American Insurance Association from 2009 to 2017.

Pusey has five years of service with Lilly.

Diogo Rau 49 Executive Vice President and Chief Information and Digital Officer (since 2021).

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Prior to his tenure at Apple, he served as a partner at McKinsey & Company.

Rau has two years of service with Lilly.

Rau has three years of service with Lilly.

Daniel Skovronsky, M.D., Ph.D.

49 Executive Vice President, Chief Scientific and Medical Officer, and President, Lilly Research Laboratories (since 2021).

Previously, Dr.

Skovronsky held various leadership roles with Lilly, including senior vice president, chief scientific officer, and president, Lilly Research Laboratories, and senior vice president, clinical and product development.

50 Executive Vice President, Chief Scientific Officer and President, Lilly Research Laboratories and Lilly Immunology (since 2024).

Prior to assuming his current role, Dr.

Skovronsky served as Executive Vice President, Chief Scientific and Medical Officer, and President, Lilly Research Laboratories since 2018.

Skovronsky has held other leadership roles with Lilly, including as senior vice president, clinical and product development and vice president, diabetes research.

Skovronsky has 13 years of service with Lilly.

Jacob Van Naarden 38 Executive Vice President, CEO, Loxo@Lilly, and President, Lilly Oncology (since 2021).

Jacob Van Naarden 39 Executive Vice President and President, Loxo@Lilly (since 2021).

Previously, Mr.

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Van Naarden worked in various biotechnology investing, operating, and advisory capacities, including positions with HealthCor Management, Aisling Capital, and Goldman Sachs.

Van Naarden has four years of service with Lilly.

Van Naarden has five years of service with Lilly.

Alonzo Weems 53 Executive Vice President, Enterprise Risk Management, and Chief Ethics and Compliance Officer (since 2021).

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Human Capital Management

Our core values—integrity, excellence, and respect for people—shape our approach to attracting, retaining, engaging, and developing a highly skilled and ethical workforce, which is critical to executing our strategy.

Our core values—integrity, excellence, and respect for people—shape our approach to attracting, retaining, engaging, and developing a diverse and highly skilled and ethical workforce, which is critical to executing our strategy.

We believe the strength of our workforce significantly contributes to our financial performance and enables us to make life better for people around the world.

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We are committed to creating a safe, supportive, ethical, and rewarding work environment through strategic focus on our human capital management process, fairness and nondiscrimination in our employment practices, robust training and development opportunities, and competitive pay and benefits.

We believe our dedication to promoting diversity, equity, and inclusion (DEI) within our company reflects our values and is a key driver of business success and growth.

We regularly conduct anonymous employee surveys to seek feedback from our workforce on a variety of topics.

We believe our dedication to promoting diversity, equity, and inclusion within our company reflects our values and is a key driver of business success and growth.

We regularly conduct confidential employee surveys to seek feedback from our workforce on a variety of topics.

These results are reviewed and analyzed by our leaders to identify opportunities to adjust our policies and benefits to improve our employees' experience.

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Strategy and Oversight

In order to build diverse and inclusive teams, our CEO and executive committee set expectations for inclusive leadership and hold leaders accountable for achieving results.

Because dedication to human capital management is also a core component of our corporate governance, our board of directors regularly engages with management and facilitates a system of reporting designed to monitor human capital management initiatives and progress as part of the overarching framework that guides how we attract, retain, engage, and develop a workforce that aligns with our values and mission.

Diversity, Equity, and Inclusion

We are committed to fairness and nondiscrimination in our employment practices, and we deeply value diverse backgrounds, skills, and global perspectives.

To fulfill our purpose, we believe we must look at challenges from multiple viewpoints and understand the diverse experiences of the patients who depend on us.

We believe that fostering DEI begins with understanding.

For example, our Employee Journeys research has yielded important insights about the experiences of women, Black/African American, Latinx, Asian, and LGBTQ+ employees at Lilly.

The results of this research are reviewed by our senior leadership, and we deploy actions and activities in response to these insights to improve our workplace and corporate culture.

In 2020, as part of our DEI and community initiatives, Lilly and the Lilly Foundation launched the Racial Justice Commitment, with Lilly pledging 25,000 volunteer hours and the Lilly Foundation committing $25 million over five years to help decrease the burden of racial injustice and its effects on communities of color.

The Racial Justice Commitment aims to drive change across five areas:

internal people development, health equity, social impact, diversity partners, and family sustaining jobs, through the use of financial and people resources.

From 2020 through 2022, we have made progress in these efforts, including nearly tripling our spending with Black-owned businesses, committing over $98 million in minority-led venture capital firms, serving over 30,000 volunteer hours to advance racial justice initiatives, and expanding our Skills First Program at Lilly for individuals without four-year college degrees.

Since 2017, we have committed to increasing women, Black/African American, Latinx, and Asian representation in leadership roles, and we actively monitor our progress.

From the end of 2018 through the end of 2022, we increased the percentage of women in management globally from 42 percent to 49 percent.

For minority group members (MGM) in the U.S.

over the same period, we increased management representation from 19 percent to 25 percent.

Across all levels of our workforce, from the end of 2018 through the end of 2022, we have seen increased representation for MGMs in the U.S.

and women globally.

Our focus on DEI is also evident at our executive committee and board of directors.

Five of 15 current members (approximately 33 percent) of our executive committee (which includes our CEO) are women and three are MGMs.

In addition, as of the filing of this report, the company's 13-member board of directors includes five women and six members who are MGMs.

Our efforts in DEI and workplace benefits have garnered numerous recognitions, including, in 2022, Top 50 Companies for Diversity by DiversityInc., Top Companies for Board of Directors by DiversityInc., Top Companies for Supplier Diversity by DiversityInc., Top Companies for ESG by DiversityInc., America's Best Employers for Women by Forbes, Perfect Score on the Human Rights Campaign Foundation Corporate Equality Index, World's Most Ethical Companies by Ethisphere, Perfect Score on Disability Equity Index Best Places to Work by Disability:IN, Pharmaceutical Innovation Index, Zero Project Award for Access Lilly, and Top Companies for Executive Women, Best Companies for Multicultural Women, Best Companies for Dads, 70 percent and Higher Inclusion Index by Seramount.

Employee Development

We believe attracting and retaining the best, diverse talent begins with the hiring process.

We therefore require hiring managers to consider a diverse pool of candidates and we strive to provide a diverse panel of interviewers for open positions.

We believe that hiring in this way helps ensure that people from all backgrounds have equal opportunity to advance their careers.

In early 2022, we launched Discover , a 12-month new employee onboarding program with multiple touchpoints designed to foster integration into Lilly, to accelerate learning in their new roles and to create connections to further a sense of belonging at Lilly.

Discover was shaped in part by external benchmarking, feedback from employees, and learnings from onboarding remotely during the COVID-19 pandemic.

Across all levels of our workforce, from the end of 2019 through the end of 2023, we have seen positive changes in representation for minority group members (MGM) in the United States and women globally.

In addition, 4 of 13 current members (approximately 31 percent) of our executive committee (which includes our CEO) are women and 3 are MGMs.

In addition, as of the filing of this Annual Report on Form 10-K, the company's 12-member board of directors includes five women and five members who are MGMs.

Our recruitment strategy focuses on opportunities to expand our pool of candidates to reach more candidates across a variety of dimensions, including but not limited to race, religion, sexual orientation, gender identity, national origin, veteran status, disability status, education, and experience.

We also strive to provide a diverse panel of interviewers for open positions.

We believe that recruiting in this way helps ensure that everyone will have an equal opportunity to advance their careers.

We offer training to enable our employees to perform their duties in our highly regulated industry.

We also strive to cultivate a culture that promotes ongoing learning by encouraging employees to seek further education and growth experiences, helping them build rewarding careers.

We have introduced online programming to facilitate access to our learning and development offerings in addition to our in-person programs.

Many training courses are designed to improve accessibility for people with disabilities and other unique needs.

Across Lilly, we are continuously working to design learning experiences to be more inclusive and effective.

In addition, we have implemented development tools and resources for all employees, improved our talent programs and processes to provide broader access to information, and increased transparency regarding career development and advancement at Lilly.

Employee resource groups (ERGs) are another important component of developing talent at Lilly.

We currently have 11 ERGs representing groups including women, MGMs, LGBTQ+ individuals, veterans, and people with disabilities.

ERGs offer our diverse workforce opportunities to build relationships, engage with senior leaders, advance our caring community, and offer unique insights and perspectives to improve our business.

We have continued our efforts to create an inclusive workplace with the goal of ensuring that all employees feel safe to speak up and share their ideas at work.

Our Make it Safe to Thrive education and awareness program is designed to help employees and leaders understand how individual psychological safety can be created and enhanced and includes live and online training.

In late 2022, we introduced a new version of Make it Safe to Thrive for leaders that continues to focus on psychological safety and creating an inclusive environment.

Leaders are provided the opportunity to work through challenging conversations and situations currently being navigated in the workplace.

Lilly is committed to fostering a culture of diversity and respect in the workplace—an environment free of discrimination, harassment, or retaliation of any kind.

In 2022, as part of our annual review of The Red Book and related policies and procedures, we revised the Global Conduct in the Workplace procedure to continue to help ensure that we maintain a respectful, safe, inclusive, and professional workplace.

We have implemented development tools and resources for all employees, improved our talent programs and processes to provide broader access to information, and increased transparency regarding career development and advancement at Lilly.

Employee Health and Safety

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To do this, we assess and continuously attempt to improve our companywide safety performance to promote the well-being of employees and to help safeguard communities where we operate.

As the COVID-19 pandemic has evolved, we have continued to take various measures (as necessary) to protect and support the health and safety of our employees globally.

We believe a holistic approach and dedication to safety helps us be our best as we deliver on our company purpose to improve lives around the world.

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None of the information accessible on or through our website is incorporated into this Annual Report on Form 10-K.

We make available through the website, free of charge, our company filings with the SEC as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC.

We make available through the website, free of charge, our company filings with the Securities and Exchange Commission (SEC) as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC.

These include our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, registration statements, and any amendments to those documents.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business