CVS Caremark plans to stop tobacco products sales

0

CVS Caremark is kicking the habit of selling tobacco
products at its more than 7,600 drugstores nationwide as it focuses more
on providing health care.
The nation’s second-largest drugstore
chain said Wednesday that it will phase out cigarettes, cigars and
chewing tobacco by Oct. 1, a move that will cost about $2 billion in
annual revenue but won’t affect its 2014 earnings forecast. CVS Caremark
leaders say removing tobacco will help them grow the company’s business
of working with doctors, hospitals and other care providers to improve
customers’ health.
CVS Caremark Corp. and other major drugstore
chains have been adding clinics to their stores and expanding their
health care focus for several years now. They’ve been preparing, in
part, for an aging U.S. population that will need more care and for the
millions of people who are expected to gain health insurance coverage
under the federal health care overhaul.
Their pharmacists deliver
flu shots and other immunizations, and their clinics also have been
expanding the scope of care they deliver. They now help people manage
chronic illnesses like high blood pressure and diabetes in addition to
treating minor illnesses like sinus infections.
CEO Larry Merlo noted that chronic conditions are made worse by smoking.
"We’ve come to the conclusion that cigarettes have no place in a setting where health care is being
delivered," he said.
The
company declined to say what will take tobacco’s prominent shelf place
behind cash registers at the front of its stores. CVS Caremark will test
some items and may expand smoking cessation products that are already
sold near cigarettes. Its drugstores do not sell electronic cigarettes,
devices that heat a liquid nicotine solution and create a water vapor
that users inhale.
On its own, the CVS move won’t hurt cigarette
companies much. Drugstores overall account for only 4 percent of
cigarettes sold. That pales compared with gas stations, which generate
nearly half of those sales. But it’s another in a long line of changes
that have led cigarette sales to fall because of health concerns, higher
prices and taxes, and social stigma.
CVS Caremark has been
working to team up with hospital groups and doctor practices to help
deliver and monitor patient care, and the presence of tobacco in its
stores has made for some awkward conversations, CVS Chief Medical
Officer Dr. Troyen A. Brennan said.
"One of the first questions
they ask us is, ‘Well, if you’re going to be part of the health care
system, how can you continue to sell tobacco products?’" he said.
"There’s really no good answer to that at all."
The drugstore
chain also plans to expand its smoking cessation efforts. That includes
training its pharmacists to counsel people on how to quit smoking.
Brennan said the company does not plan to phase out alcohol sales.
"At
this point, we’re dealing with cigarettes, which are unalterably
unhealthy for people and different from any other substance that people
either drink or eat," he said.
The company’s tobacco plan drew praise from President Obama, who said in a statement that he applauded
the news.
"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.
Tobacco is
responsible for about 480,000 deaths a year in the U.S., according to
the Food and Drug Administration, which gained the authority to regulate
tobacco products in 2009.
On its own, the CVS move won’t hurt
cigarette companies much. Drugstores overall account for only 4 percent
of cigarettes sold. That pales compared to gas stations, which generate
nearly half of those sales. But it’s another in a long line of changes
that have led cigarette sales to fall because of health concerns, higher
prices and taxes, and social stigma.
The federal government has
renewed efforts to reduce the death and disease caused by tobacco use on
the heels of the 50th anniversary of the landmark 1964 surgeon
general’s report that launched the anti-smoking movement. A new 980-page
report issued last month by acting Surgeon General Boris Lushniak also
urged new resolve to make the next generation smoke-free.
Health and Human Services Secretary Kathleen Sebelius called on others to follow the CVS Caremark
example.
"We
need an all-hands-on-deck effort to take tobacco products out of the
hands of America’s younger generation, and to help those who are
addicted to quit," she said in a statement.
CVS Caremark
competitor Walgreen Co., the nation’s largest drugstore chain, sells
tobacco, as does the world’s largest retailer, Wal-Mart Stores Inc.,
which also operates pharmacies in its stores. But Target Corp., another
major retailer with pharmacies in its stores, does not.
Most independent pharmacies also do not sell tobacco, according to the National Community Pharmacists
Association.
On
the flip side, discounters such as Family Dollar have started selling
tobacco over the last couple years. They note that smokers make more
frequent stops at retailers in order to buy tobacco, and their customers
are more likely to be tobacco users.
Walgreen spokesman Michael
Polzin said in an email his company has been evaluating tobacco products
"for some time to balance the choices our customers expect from us,
with their ongoing health needs." He said the company will continue to
do this while also providing smoking cessation products.
The
nation’s biggest cigarette maker, Philip Morris USA, said in a statement
Wednesday that it is up to retailers to decide if they’re going to sell
tobacco products.
Several cities, including San Francisco, Boston
and many smaller Massachusetts communities have considered or passed
bans on tobacco sales in stores with pharmacies. Other places like New
York City have sought to curb retail displays and promotions and raise
the legal age someone can buy tobacco products.
Philip Morris,
which is owned by Richmond, Va.-based Altria Group Inc., had challenged
San Francisco’s tobacco sale ban, claiming it violated its
constitutional rights by suppressing communications directed at adult
smokers.
CVS notches about $1.5 billion annually in tobacco sales,
but it expects the $2 billion drop in revenue from phasing out tobacco
because smokers often buy other products when they visit their stores.
The company brought in more than $123 billion in revenue in 2012 and
ranks 13th on the 2013 Fortune 500 list of biggest U.S. companies.
While
the company trails only Walgreen in terms of number of drugstores, it
actually draws most of its revenue from its pharmacy benefits
management, or PBM, business. PBMs run prescription drug plans for
employers, insurers and other customers. They process mail-order
prescriptions and handle bills for prescriptions filled at retail
pharmacies.
CVS Caremark shares were down $1.11 to $65 Wednesday, shortly before markets opened and after the company
made its announcement.
U.S.
retail sales of tobacco, which is comprised largely of cigarettes, were
about $107.7 billion in 2012, according to market researcher
Euromonitor International.
The share of Americans who smoke has
fallen dramatically since 1970, from nearly 40 percent to about 18
percent. But the rate has stalled since about 2004, with about 44
million adults in the U.S. smoking cigarettes. It’s unclear why it
hasn’t budged, but some market watchers have cited tobacco company
discount coupons on cigarettes and a lack of funding for programs to
discourage smoking or to help smokers quit.
Tobacco companies also
have increasingly relied on their packaging and displays at retailers
to build brand loyalty and grab consumers because it is one of the few
advertising levers left to them after the government curbed their
presence in magazines, billboards and TV.
___
Murphy reported from Indianapolis and Felberbaum reported from Richmond, Va.
Copyright 2014 The Associated Press. All rights
reserved. This material may not be published, broadcast, rewritten or
redistributed.

No posts to display