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CVS Caremark plans to stop selling tobacco products

CVS Caremark

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.


CVS Pharmacies Pull Tobacco Products From U.S. Stores

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john February 06 2014 at 10:20 PM

First, I am not a smoker. Secondly, the CVS decision is laughable. They have obviously done this for marketing, so as to be a stand out and for publicity, not caring one iota about their consumers' health. If they care so much about the consumers' health, why not get rid of the candy, chips, alcohol products, soda pop? Maybe they forgot that their tobacco products are drawing customers into the store to make other purchases, such as candy, and cosmetics, and prescription medication, as well as their walk in "clinics", and being an MD, I object to the irresponsible use of that term, "clinics". Lastly, when anyone or any entity takes on a holier than thou attitude, there will be pay back. What goes up, must come down. This is a law of nature above which CVS is not.

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john February 06 2014 at 10:25 PM

And besides, if someone who is addicted to nicotine can't find what they need when walking into a CVS, they will be even more desperate, and go elsewhere, getting even more satisfaction out of the cigarette when they do find one elsewhere, thusly enhancing the individual's addiction. Did the CEO of CVD, fool that she is, consult with an addiction specialist? The more you go after something Ms. CEO, the more it will elude you. Take my advise, renege the policy, or pay the price.

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john February 06 2014 at 10:33 PM

or get rid of all of the other unhealthy products. It is time that Americans stop telling others how to run their lives and that we make people take responsibility for their own actions. It is time that we take a hard look in the mirror first. Remember, if you wish to change the world, change yourself.

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jimscarppaint February 06 2014 at 3:50 PM

The only reason there going to stop selling cigarettes is because they make no money on them. Some inside information facts also a good PR focus. You are 100% right about the alcohol why don't they stop selling alcohol because they make money. Its all about the money for the big wigs because lord knows they don't care about there employes. Just ask one !

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timothymarcc February 06 2014 at 4:02 PM

I WAS AN EMPLOYEE!!! You are right.

THEY DON'T GIVE A RAT'S *** ABOUT THEIR EMPLOYEES.

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Ken February 06 2014 at 2:22 PM

BRAVO - but

Good for you for cutting out selling cigs, now could you cut your high prices, that would be even more helpful.

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john February 06 2014 at 10:43 PM

First, I am not a smoker. Secondly, the CVS decision is laughable. They have obviously done this for marketing, so as to be a stand out and for publicity, not caring one iota about their consumers' health. If they care so much about the consumers' health, why not get rid of the candy, chips, alcohol products, soda pop? Maybe they forgot that their tobacco products are drawing customers into the store to make other purchases, such as candy, and cosmetics, and prescription medication, as well as their walk in "clinics", and being an MD, I object to the irresponsible use of that term, "clinics". Lastly, when anyone or any entity takes on a holier than thou attitude, there will be pay back. What goes up, must come down. This is a law of nature above which CVS is not.
And besides, if someone who is addicted to nicotine can't find what they need when walking into a CVS, they will be even more desperate, and go elsewhere, getting even more satisfaction out of the cigarette when they do find one elsewhere, thusly enhancing the individual's addiction. Did the CEO of CVD, fool that she is, consult with an addiction specialist? The more you go after something Ms. CEO, the more it will elude you. Take my advice, renege the policy, or pay the price.
Or get rid of all of the other unhealthy products. It is time that Americans stop telling others how to run their lives and that we make people take responsibility for their own actions. It is time that we take a hard look in the mirror first. Remember, if you wish to change the world, change yourself.
Over the years of my practice of medicine, I have of course encouraged and counseled patients to stop the tobacco thing. Other than that, it is their decision and their responsibility for which they must be willing to suffer the ramifications. It is like raising kids. You advise, you set standards by example, and after that, it is out of your hands, and you must cut some slack.

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Cheryl February 06 2014 at 12:18 PM

THINK THIS IS STUPID, PEOPLE HAVE A RIGHT TO DECIDE WEATHER THE CAN SMOKE OR NOT,

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Butch February 06 2014 at 11:47 AM

Part of Obama's team now are we?????? Why not stop alcohol sales as well? Then we will know you are serious. Walgrens my wife and I are headed your way with our 38 medications

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majdr1 February 06 2014 at 11:14 AM

How about they stop selling beer & wine too? After-all alcohol is responsible for DWI car fatalities and long list of medical problems, conditions and diseases that end in death... as well as domestic problems.. Lets not forget about junk food, chips and soda

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2 replies to majdr1's comment
Carmel February 06 2014 at 3:31 PM

You are so correct

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Carmel February 06 2014 at 3:34 PM

Not only are you so correct. But I wonder how much education you have to have to be a CEO to think up something so dumb

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chefdan44 February 06 2014 at 11:12 AM

It is about time somebody has taken a chance fighting the big killer all tobacco products,

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**ERIN** February 06 2014 at 8:52 AM

Sorry - I failed to mention it was a syringe!

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**ERIN** February 06 2014 at 8:49 AM

Funny thing is tho - I just heard hours earlier how CVS was going to seize selling tobacco products due to the fact they plan on focusing more on HEALTH. I was a customer in a CVS about 9pm (same day they made the announcement) and was checking out with items I wanted to purchase. The manager approaches me to the left and says to the chashier "I found this on the floor - could you throw this away" and toss it on the counter where my items where. Cashier said: " Im not touching that"... Manager says, "well it's got something in it - it's full of something". Im a customer, I do NOT need to see/hear this. The manager should be reported - super tacky. Customer in Tempe Arizona, CVS disgusting.

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pdbliz February 06 2014 at 8:31 AM

FEDS NOW HAVE CVS ON THERE LIST FOR ,,,MEDS........FREE TO ...WELFARE ,,,EBT CARD HOLDERS,,, THANKS TO THE ONES WHO WORK AND PAY TAX.!!
SO,,,,MONEY WILL FLOW IN,,DESPITE THE CUT IN TABACCO SALES....

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