Company Name: Eli Lilly and Co.
Public Availability Date: January 5, 2007

Document Sections:

INQUIRY LETTER
APPENDIX
STAFF REPLY LETTER

[INQUIRY LETTER]

December 15, 2006

Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100F Street, NE
Washington, D.C. 20549

RE: Eli Lilly and Company - Shareholder Proposal Submitted by the Minnesota State Board of Investment

Ladies and Gentlemen:

Enclosed on behalf of Eli Lilly and Company ("Lilly"), pursuant to Rule 14a-8(j) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are six copies of this letter as well as the shareholder proposal and supporting statement by the Minnesota State Board of Investment (the "Proponent") attached hereto as Exhibit A (the "Proposal") received by Lilly requesting a report "on the long-term economic stability of the company and on the risks of liability to [sic] legal claims that arise from the company's policy of limiting the availability of the company's products to Canadian wholesalers or pharmacies that allow purchase of its products by U.S. residents."

Except for the dates, this proposal is identical to the proposal we received last year from this proponent, and which we omitted from our proxy statement based on your letter of January 11, 2006, a copy of which is attached hereto as Exhibit B. In addition, the Division of Corporation Finance reached the same conclusion with regard to this proposal in response to requests from Merck & Co., Inc. (available January 11, 2006) and Pfizer Inc. (available January 13, 2006). On this basis, we have requested that the Proponent withdraw the proposal to avoid burdening the Division with another no-action request. However, as the Proponent has declined to do so, we are requesting your consideration of this matter again this year.

We are not aware of any more recent decision or opinion of the Division of Corporation Finance which runs counter to your letter of January 11, 2006. Therefore, we believe Lilly may properly omit the Proposal from Lilly's 2007 proxy statement for the same reasons we described in our letter to you of December 20, 2005, a copy of which is attached hereto as Exhibit C and resubmitted for your consideration. To the extent the arguments in our December 20, 2005 letter are based on matters of law, that letter represents a supporting legal opinion of counsel.

In accordance with Rule 14a-8(j), we are by separate letter advising the Proponent of Lilly's intention to omit the Proposal from its proxy statement and providing it with a copy of this letter and the attached exhibits.

We respectfully request your confirmation that the Division of Corporation Finance will not recommend to the Commission any action if Lilly omits the Proposal from its proxy materials for its 2007 Annual Meeting of Shareholders. We would appreciate your response not later than February 1, 2007 so that Lilly may be able to meet its timetable for distributing its proxy materials.

Should you disagree with our conclusions, we would appreciate an opportunity to confer with you prior to the issuance of the staff's Rule 14a-8(j) response. If you have any questions with respect to the foregoing, please do not hesitate to call me at 317-276-5835.

Please acknowledge receipt of this letter and the attached material by stamping and returning the enclosed copy of this letter in the self-addressed stamped envelope.

Very truly yours,

/s/

James B. Lootens

[APPENDIX]

WHEREAS, current business practices of the company have resulted in a pricing structure that charges United States customers significantly higher prices for the same prescription medicines made available at significantly lower prices in Canada, other developed countries and world markets; and

WHEREAS, governmental agencies and individuals in the United States are demanding affordable drug prices and are taking actions to access lower priced products from Canada and other world markets; and

WHEREAS, according to published reports, the company has cut supplies of its medicines to Canadian wholesalers and companies that it claims allowed its product to be sold to Americans seeking lower prices available in the Canadian market; and

WHEREAS, according to published reports, the company's actions have resulted in lawsuits and threatened lawsuits; and

WHEREAS, the company's actions to limit supply of medicines in Canada may violate local, national and international laws and could result in large settlements, large awards of damages and potential punitive damages which would negatively impact the economic stability of the company and the value of its shares.

Resolved:

Shareholders request the Board of Directors to prepare a report on the effects on the long-term economic stability of the company and on the risks of liability to legal claims that arise from the company's policy of limiting the availability of the company's products to Canadian wholesalers or pharmacies that allow purchase of its products by U.S. residents. The report should be prepared at reasonable cost and omitting proprietary information, by September 30, 2007.

SUPPORTING STATEMENT

We urge shareholders to vote FOR this proposal.

STAFF REPLY LETTER]

January 5, 2007

Response of the Office of Chief Counsel Division of Corporation Finance

Re: Eli Lilly and Company

Incoming letter dated December 15, 2006

The proposal requests the board to prepare a report on "the effects on the long-term economic stability of the company and on the risks of liability to legal claims" resulting from the company's policy of limiting the availability of the company's products to Canadian wholesalers or pharmacies that allow purchase of its products by U.S. residents.

The Commission has indicated that the burden is on the issuer to demonstrate that a provision of rule 14a-8 may properly be relied upon to omit a proposal. We are unable to conclude that Eli Lilly has satisfied the burden of demonstrating that the proposal may be omitted pursuant to a provision set forth in rule 14a-8. In this regard, we note that your letter dated December 15, 2006 does not advance a basis for exclusion. Staff Legal Bulletin 14 indicates that the staff considers the specific arguments asserted by the company and we will not consider any basis for exclusion that is not advanced by the company. Accordingly, we do not believe Eli Lilly may rely on rule 14a-8 for omission of the proposal.

Sincerely,

/s/

Derek B. Swanson
Attorney-Adviser