Why CVS Is Ready to Lose Billions and Stop Selling Cigarettes

The retail juggernaut will stop selling cigarettes and other tobacco products beginning Oct. 1.

Signs outside of a CVS store on November 5, 2013 in San Francisco, California.
National Journal
Dustin Volz Sophie Novack
Feb. 5, 2014, 3:05 a.m.

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CVS Care­mark will cease its sale of ci­gar­ettes and oth­er to­bacco products in all of its CVS/phar­macy stores by Oct. 1, the com­pany an­nounced Wed­nes­day.

The be­hemoth re­tail­er said it will take an an­nu­al hit of $2 bil­lion in rev­en­ue due to its de­cision, a siz­able sum that amounts to just 1.6 per­cent of the com­pany’s $125 bil­lion av­er­age yearly haul.

“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,” said Larry J. Merlo, pres­id­ent and CEO of CVS, in a state­ment. “Put simply, the sale of to­bacco products is in­con­sist­ent with our pur­pose.”

But this isn’t just about pub­lic health. Already the de­cision is gar­ner­ing heavy me­dia cov­er­age, which could serve to coun­ter­act the com­pany’s es­tim­ated rev­en­ue short­fall. The move, which some might see as long over­due at a one-stop shop that doubles as a con­veni­ence store and phar­macy, could be a savvy pub­li­city coup that builds brand loy­alty with cer­tain demo­graph­ics. That’s es­pe­cially true of the 67 per­cent of Amer­ic­ans who view smoking as either an ex­tremely or a very ser­i­ous prob­lem for so­ci­ety.

Already Wed­nes­day, Merlo ap­peared on CBS’s This Morn­ing to talk about the de­cision, and his store. “This de­cision really un­der­scores the role that CVS is play­ing in our health care sys­tem,” he told Charlie Rose. “There’s a grow­ing em­phas­is on healthy out­comes, man­aging chron­ic dis­ease.” Merlo also said that the $2 bil­lion an­nu­al loss is part of his com­pany’s long-term growth strategy, and em­phas­ized that “we’re evolving in­to a health care com­pany.”

And it’s per­son­al. Merlo’s fath­er, he told CBS, was a smoker who died young from can­cer. Merlo said he hasn’t yet spoken with oth­er ma­jor drug­store ex­ec­ut­ives about the move.

The White House im­me­di­ately praised the de­cision. Pres­id­ent Obama, who has been a smoker, hailed it as a “power­ful ex­ample” that could help mil­lions of Amer­ic­ans quit smoking.

“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,” Obama said.

The phar­macy will also un­der­take a na­tion­al smoking-ces­sa­tion pro­gram, Merlo said in a state­ment. The pro­gram will be­gin in the spring and in­clude on­line re­sources as well as in­form­a­tion and treat­ment at CVS phar­ma­cies and Minute­Clin­ics.

The an­nounce­ment comes as ef­forts to curb to­bacco use are again in­creas­ing na­tion­wide. The 50th An­nu­al Sur­geon Gen­er­al’s Re­port on Smoking and To­bacco, re­leased last month, ad­ded sev­er­al ail­ments to the roster of dis­eases caused by smoking.

The FDA an­nounced a ma­jor an­ti­to­bacco cam­paign Tues­day to pre­vent and re­duce smoking among young people.

Health and Hu­man Ser­vices Sec­ret­ary Kath­leen Se­beli­us joined the pres­id­ent in ap­plaud­ing the de­cision, call­ing it an “un­pre­ced­en­ted step in the re­tail in­dustry.”

“We need an all-hands-on-deck ef­fort to take to­bacco products out of the hands of Amer­ica’s young gen­er­a­tion, and to help those who are ad­dicted to quit,” she said in a state­ment. “Today’s CVS Care­mark an­nounce­ment helps bring our coun­try closer to achiev­ing a to­bacco-free gen­er­a­tion.”

CVS is the second-largest drug­store chain in the na­tion, be­hind Wal­greens, which also sells to­bacco products. Mi­chael Polzin, a Wal­greens spokes­man, told the Wall Street Journ­al that the com­pany has been “eval­u­at­ing this product cat­egory for some time to bal­ance the choices our cus­tom­ers ex­pect from us, with their on­go­ing health needs.”

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