Teddy used Lenny to kill a drug dealer, not to help him.
Lenny escaped from a hospital abd made up a "John G" story through constant confusion, and over time conditioned himself to do certain things. Teddy helped him find the real John G and had Lenny kill him, when he realized LEnny forgot it, he decided to use him again to kill Grants. When Lenny found out about this in the end of the film, he realized he was used to kill someone, and wanted to make sure it would never happen again, hence making Teddy the new John G.
If you read the original script he states it at the end "I have to make sure you'll never do this again" to himself in the car. There are many other interpretations. Here's a good site.
http://www.designpattern.org/mementofaq.htm