Why CVS decided to pull cigarettes, other tobacco products from its shelves (+video)(Read article summary)
CVS is poised to become the first national pharmacy to pull tobacco products from its sales roster. The move could cost the retailer an estimated $2 billion in annual sales.
One major pharmacy is kicking the habit of leaning on tobacco sales profits at the expense of its increasingly health-focused mission.
CVS Caremark announced on Wednesday that it plans to stop selling cigarettes and other tobacco products at its stores by Oct. 1. That would make CVS, the second-largest drugstore chain in the United States, the first national pharmacy to pull tobacco products from its sales roster.
CVS’s announcement follows years of branding initiatives to retool the mega-retailer not just as a drugstore chain, but as a health-care clinic that is an active player in its customers’ healthful lives, offering flu shots and basic care at its 800 MinuteClinics within its 7,600 stores. That rebranding had proved incompatible with the message that the cigarettes behind the front counters in most of its stores had seemed to send, the company said on Wednesday.
"Put simply, the sale of tobacco products is inconsistent with our purpose," said Larry Merlo, president and CEO of CVS Caremark, in a statement.
"Ending the sale of cigarettes and tobacco products at CVS/pharmacy is the right thing for us to do for our customers and our company to help people on their path to better health," he said.
Though there is little doubt that tobacco users, rather than quit the habit, will get their fix and put their dollars elsewhere, CVS’s decision could put pressure on other retailers to follow its lead, setting off a gradual whittling of smokers’ options, CVS and antismoking advocates say.
“This action may not lead many people to stop smoking,” wrote Troyen Brennan, CVS’s chief medical officer, in an essay published in the Journal of the American Medical Association on Wednesday. “But if other retailers follow this lead, tobacco products will become much more difficult to obtain.”
Not since 1996, when Target announced it would stop selling tobacco products, has a national retailer answered calls to go tobacco-free, in large part because tobacco is a moneymaker.
Indeed, tobacco-free will be an expensive ethical position, CVS says. Ceding tobacco revenues will cost CVS Caremark some $2 billion in annual sales, or about 1.6 percent of the company’s revenue in 2012.
Still, some say, cutting tobacco from its sales and staking out a health-care-first niche within the pharmacy business could in the long term help CVS do even stronger business than it did with cigarettes in its product lineup.
"We believe the move will be viewed as a positive long-term decision by CVS, despite the near-term profit drag, as it paves the way for increased credibility with both healthcare consumers and payors," ISI Group analyst Ross Muken told Reuters.
The largest US pharmacy chain, Walgreens – which has also pursued rebranding as a healthcare provider – still sells tobacco. In 2008, the company sued the City of San Francisco over its ban on pharmacies selling tobacco. Walgreens won, but the city fought back two years later with a ban not just on pharmacies selling tobacco, but also on stores with in-house pharmacies selling the products, The New York Times reported. Several companies, including Safeway, took the San Francisco ban as notice to pull tobacco from all their locations with in-store pharmacies, but Walgreens did not do that.
“We have been evaluating this product category for some time to balance the choices our customers expect from us, with their ongoing health needs,” the company said in a statement released Wednesday, Politico reported. “We will continue to evaluate the choice of products our customers want, while also helping to educate them and providing smoking cessation products and alternatives that help to reduce the demand for tobacco products.”
Boston, as well as several other municipalities in Massachusetts, has enacted a ban similar to San Francisco’s on pharmacies selling tobacco. Other cities have gone after smoking not with retail bans, but with antismoking ad campaigns, tobacco tax hikes, and other measures. New York City, for example, raised the tobacco buying age from 18 to 21 last year, and Colorado, New Jersey, Vermont, and the District of Columbia are weighing similar measures.
Rite Aid, the third-largest US pharmacy chain, and Wal-Mart, which has in-house pharmacies, both continue to sell cigarettes.
On the whole, pharmacies represent just a sliver of tobacco sales. Of the some 290 billion cigarettes sold in the US in 2012, almost half were purchased at gas stations, about a fifth from specialty tobacco stores, and about 16 percent at convenience stores, according to Euromonitor International statistics quoted in The Wall Street Journal. Pharmacies sold just 3.6 percent of all cigarettes that year, according to the data.
Still, CVS’s announcement was received by health advocates as a decidedly positive sign in a fight against smoking that, at least in some ways, seems to have reached a plateau. Although smoking rates have declined dramatically over the past four decades or so – down from 42 percent in 1965 to 18 percent in 2012, according to government statistics – that decline appears to have stalled over the past decade. Last year, some 480,000 people died from causes related to smoking, according to the government.
“Today's CVS Caremark announcement helps bring our country closer to achieving a tobacco-free generation,” said Kathleen Sebelius, Health and Human Services secretary, in a statement. "I hope others will follow their lead."
President Obama, a former smoker who was recently described in a New Yorker article as applying a nicotine patch to his arm, also praised CVS.
“As one of the largest retailers and pharmacies in America, CVS Caremark sets a powerful example, and today’s decision will help advance my Administration’s efforts to reduce tobacco-related deaths, cancer, and heart disease, as well as bring down health care costs – ultimately saving lives and protecting untold numbers of families from pain and heartbreak for years to come,” the president said.
CVS’s decision also comes the same week as the Food and Drug Administration unveiled its new $115 million antismoking campaign, “The Real Cost,” which focuses on what many teens care about – their looks – to dissuade them from smoking.
“What’s a pack of smokes cost?” queries the voice-over in one ad, over an image of a teen girl’s skin curdling into wrinkles. “Your smooth skin.”
Each day, more than 3,200 US youths try their first cigarette, and almost 90 percent of adult smokers began smoking before they turned 18, according to the FDA.