Quite soon, nicotine addicts will no longer be able to pop in to their local CVS outlet to purchase a fix. The company announced that it would begin phasing out all sales of tobacco products, noting that the health harms these products produce do not align with the chain’s position as a health care provider.
The move resonates with the broader CVS effort to create value with consumers, rather than just selling them products. Its Minute Clinics, pharmacist counseling services, and vaccination offerings all drive toward a view of CVS as a partner, seeking to ensure consumers’ health. This positioning was a key determinant of the decision. In the words of CVS Caremark’s CEO, “This is the right decision at the right time as we evolve from a drugstore into a health-care company.”
This evolution also features a shift in CVS’s business plan, such that it increasingly pursues partnerships with health care systems across the country. In these partnerships, CVS enjoys a position as the pharmacy of choice, such that the hospital systems send patients there for their follow-up prescriptions and treatments. By eliminating tobacco products, CVS has gained a notable competitive advantage over its competitors that continue to sell the items that ultimately caused many of the health problems the hospitals treat.
In addition, the move reflects some growing societal trends. A few municipalities, such as Boston and San Francisco, already ban pharmacies from selling cigarettes. Several states have already or are considering raising the age at which people may buy cigarettes, from 18 to 21 years. Other legislative efforts raise taxes on tobacco products to discourage their sale. These moves reflect the continually growing recognition of the costs of tobacco usage—namely, an estimated $289 billion in health care costs and approximately 480,000 deaths each year.
But still, the decision was not an easy one. CVS anticipates that it will lose approximately $2 billion in revenue by eliminating tobacco products from its shelves. None of its major competitors, such as Walgreens or RiteAid, have indicated that they would follow suit.
Source: Timothy W. Martin and Mike Esterl, “CVS to Stop Selling Cigarettes,” The Wall Street Journal, February 5, 2014