The start of a trend?
From NY Times:
CVS/Caremark, the country’s largest drugstore chain in overall sales, announced on Wednesday that it planned to stop selling cigarettes and other tobacco products by October.
The company’s move was yet another sign of its metamorphosis into becoming more of a health care provider than a largely retail business, with its stores offering more miniclinics and health advice to aid customers visiting its pharmacies.
The company estimated that its decision would shave an estimated $2 billion in sales from customers buying cigarettes and other products, including incidental items like gum that those shoppers might also purchase. That is a mere dent in its overall sales of $123 billion in 2012, the latest figures available.
“We have about 26,000 pharmacists and nurse practitioners helping patients manage chronic problems like high cholesterol, high blood pressure and heart disease, all of which are linked to smoking,” said Larry J. Merlo, chief executive of CVS. “We came to the decision that cigarettes and providing health care just don’t go together in the same setting.”
CVS does not sell electronic cigarettes, the highly popular but debated devices that deliver nicotine without tobacco and emit a rapidly vanishing vapor instead of smoke. It said it was waiting for guidance on the devices from the Food and Drug Administration, which has expressed interest in regulating e-cigarettes.
Some major retail stores like Walmart and convenience stores still sell cigarettes and other tobacco products, although antismoking groups and health care professionals will probably use CVS’s decision to try to pressure others to consider doing so. Municipalities have also begun enacting legislation governing where cigarettes can be sold.
Kathleen Sebelius, secretary of Health and Human Services, said in a statement that the CVS decision was “an unprecedented step in the retail industry” and predicted it would have “considerable impact.”
Ms. Sebelius said that each day, some 3,200 children under 18 will try a cigarette and 700 will go on to become daily smokers. That means, she said, that 5.6 million American children alive today will die premature deaths because of diseases linked to smoking. Nik Modi, an investment analyst who follows tobacco stocks at RBC Capital Markets, said he doubted CVS’s move would have a major impact on tobacco sales, noting that roughly three-quarters of cigarette sales occur in convenience stores.
On Tuesday, CVS executives met with executives from tobacco companies to discuss the shift. “Obviously, you would expect they would be disappointed with this decision,” Mr. Merlo said. “At the same time, I think they understand the paradox we faced as an organization.”
A handful of municipalities have enacted laws curtailing the sale of tobacco at stores where a pharmacy is present. San Francisco passed such a ban in 2010 that included all stores with embedded pharmacies, and a number of municipalities in Massachusetts, including Boston, have similar bans in place, some of which also include prohibitions on the sale of e-cigarettes.
Otis W. Brawley, chief medical officer at the American Cancer Society, said other local government entities were weighing similar measures. “If you’re in the business of promoting health and providing health care, it’s very hypocritical to be selling tobacco products,” Dr. Brawley said. “It just doesn’t make sense and in fact is almost a conflict of interest.”
On Wednesday, Walgreens said it had been assessing its sales of tobacco products for some time. “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,” according to a statement released by the company. Although CVS ranks first in overall sales and pharmacy sales among the nation’s drugstores, according to analysts, Walgreens is the largest in the number of stores.
Rite-Aid, another large chain, said in a statement it continually reviewed product mix to make sure it suits the needs and desires of customers.
As for driving away customers to competitors, Troyen A. Brennan, the executive vice president and chief medical officer for CVS, said: “It’s obvious that the average person will just find somewhere else to buy cigarettes. What we’re thinking about is if others want to emulate this business decision we’ve made, then over time that will make cigarettes less available — and scientific literature does suggest that a reduction in the availability of cigarettes reduces smoking.”
Dr. Brennan, together with Steven A. Schroeder of the Smoking Cessation Leadership Center at the University of California, San Francisco, wrote an op-ed article making the case for eliminating tobacco products from drugstores in The Journal of the American Medical Association published online on Wednesday.
Some 18 percent of American adults smoke, down from 42 percent in 1965. In places like New York City, which has used a combination of steep taxes on cigarettes and bans on smoking in most places to discourage smokers, the decline is even greater, down to 14 percent.
CVS’s 800 MinuteClinics already account for most of such outlets, and Mr. Merlo said the company hoped to add another 700 for a total of 1,500 by 2017. For that reason, he said, the decision to stop selling tobacco products “was really more of a discussion about how to position the company for future growth.”
The company estimated that the decision would erase 17 cents in earnings per share of stock annually, but that it had identified ways of offsetting the impact on profits. (The earnings hit this year will only be 6 cents to 9 cents a share while the company works through its remaining inventory of tobacco products.)
The company hopes to make up some of the lost revenue and income with a smoking cessation program that it is starting this spring with the goal of getting half a million Americans to stop smoking. Helena Foulkes, executive vice president for CVS, said: “This is the kind of offering we can bring to clients like insurance plans and companies, many of which will pay for such a program.”