US: CVS''s Tobacco Ban Could Make Its Bottom Line Healthier

Source from:  The Plain Dealer 02/11/2014

By banning cigarettes and other tobacco products, CVS Caremark, the second-largest pharmacy chain in the United States, is making a big bet that it can profit more from the rapidly expanding and quite lucrative health care market than it can from cigarette sales.

And it could be right: This decision could prove beneficial for CVS' bottom line and the bottom line of communities that are trying to marginalize smoking, particularly for young people. Boston and San Francisco, for example, have been ahead of CVS in banning tobacco sales in drug stores. Both cities banned the sale of tobacco in CVS and other stores a few years ago.

While CVS will take a $2 billion annual loss when it dumps cigarettes and other tobacco products, this is hardly a death blow to tobacco sales. Just four percent of cigarette sales are made through drug stores, according to a CVS vice president.

However, CVS' nationwide ban, which begins Oct. 1, is a sign of tobacco's waning influence -- and of CVS' bold bid to take its 7,600 stores into the health care business. The goal is to expand its ties to hospitals and commercial and government health care plans that frown on smoking and use those contracts to drive business to its 750 MinuteClinics where patients can get immunizations, physicals and other health care.

CVS CEO and President Larry Merlo, whose father was a smoker who died early of cancer, put it correctly when he said in a statement that "cigarettes and tobacco products have no place in a setting where healthcare is delivered. This is the right thing to do."

Walgreen's, the nation's biggest drug store chain, Rite Aid and the rest are sure to be watching CVS' experiment and any possible backlash.

CVS hopes to make up its loss in tobacco sales in part by offering anti-smoking cessation programs in store and online, beginning this spring -- something that could be useful in Ohio that has shamefully limited publicly funded smoking-cessation programs since 2009.

And CVS' rejection of tobacco could lead to more lucrative partnerships with medical centers, which may be overwhelmed by patients who take advantage of the new government health care plan, and could consider referring patients to CVS' walk-in health clinics.

Does that mean that high-calorie chips and dental-wrecking candy might be next to get the boot from CVS? That could depend on whether CVS' anti-tobacco crusade proves to be a healthy, thriving business proposition. It just might be. Enditem