CVS to stop selling cigarettes by October 1st

Pharmacy chain CVS said Wednesday it will stop selling tobacco products at its 7,600 locations across the United States, a move that public-health advocates hope will become a watershed and pressure other large drug store franchises to follow suit.

CVS executives said the decision could cost billions of dollars in revenue because cigarettes draw so many customers to their stores. But by jettisoning tobacco products, CVS can further define its pharmacies as full-fledged health-care providers and strike more profitable deals with hospitals and health insurers.  CVS stores already are home to more than 750 MinuteClinics, the country's largest chain of pharmacy-based health clinics, offering flu shots and diagnosis of common ailments like ear infections and strep throat.

"An important and growing part of our business is the work we do with clients and health insurance plans," CVS Pharmacy President Helena Foulkes said in an interview Tuesday. "As we thought about supporting their goals about improving outcomes and lowering costs, we believe that's the future we're looking towards. As we become more connected to their health-care work, this is an important decision for us to make."

The company plans to phase out all tobacco sales by Oct. 1 and  expects it could lose about $2 billion in annual revenue generated by tobacco sales and other products purchased by the same shoppers. The pharmacy chain generates about $125 billion in revenue annually.

"CVS taking this step is a giant leap forward. From a purely commercial standpoint, it doesn't make any sense," said Robin Koval, president of the Legacy Foundation, a nonprofit that focuses on ending smoking. "It's a conversation that's been going on for quite some time between public health groups and retailers, but progress has been very slow."

President Obama -- himself a former smoker -- praised the CVS decision in a statement Wednesday morning, saying that the move by the pharmacy chain "sets a powerful example" that 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."

CVS expects that halting tobacco sales will reduce earnings per share by 6 to 9 cents. But the company said in a statement that it has "identified incremental opportunities that are expected to offset the profitability impact." Foulkes declined to prove additional details on those opportunities.

"I would say that we have made a decision that this is the right thing to do for our business," Foulkes says. "We have plans in place to be able to deliver the numbers that we promised [to investors] this year."

Walgreens spokesman Jim Cohn said that retail chain also has been "evaluating this product category for some time to balance the choices our customers expect from us with their ongoing health needs."

He said Walgreens "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.”

CVS has increasingly moved beyond its traditional role as a pharmacy in recent years, expanding its reach as a health-care provider. Its MinuteClinics services have allowed the company to increasingly enter into contracts with hospitals and health plans, often providing primary care services on the weekends and evenings, when doctors' offices tend to be closed.

CVS chief medical officer Troyen A. Brennan estimates that the company has between 30 and 40 partnerships with health-care systems across the country and is in talks with a similar number about starting additional arrangements.

He said the decision to halt tobacco sales will make it easier to strike such deals, particularly those that include financial rewards for CVS if they can help patients stop smoking and reduce their medical bills.

"Increasingly, our contracts have a particular parameter regarding performance," Brennan said. "Our clients are looking for us to be able to improve drug adherence and getting results. We're closely following that."

In tandem with the end of tobacco sales, CVS will roll out an anti-smoking campaign with both in-store and online components. The company did not elaborate but said the program will launch in the spring.

A recent report from the U.S. Surgeon General estimates that the country spends $132 billion annually treating smoking-related disease. Despite steep declines in the smoking rate over the past five decades -- and in the 50 years since the Surgeon General's Office issued its first report warning of tobacco's health risks -- tobacco use still remains the leading preventable cause of premature death in the United States. Eighteen percent of American adults are cigarette smokers, down from 42 percent in 1964.

"We were able to halve smoking rates over the past 50 years, but we still have 43 million Americans smoking daily," American Cancer Society chief executive John Seffrin said. "We've got to help them get off of cigarettes if we're not going to accept the carnage of this illness. The CVS decision is one important piece in solving the 21st century problem of tobacco use."

source:  Sarah Kliff,  The Washington Post