CVS has announced it will stop selling tobacco products. This decision quickly drew praise from anti-smoking groups, doctors and even President Obama himself. The decision also raised controversy among some customers and stockholders.
The company estimates it could lose two billion dollars a year from customers who come in to purchase tobacco. Although there is not a large profit margin for stores selling cigarettes, patrons often purchase additional items while they are in the store. Management at CVS reported earning $123.1 billion dollars in revenue during 2012.
The move is being made as part of a change of business plan from the corporation. Once a regular drug store, management at CVS now wants storefronts to deliver additional health care services to customers. The decision will remove tobacco products from each of the company's 7,600 locations by Oct. 1, 2014.
Other drug store chains are also providing healthcare services at their locations, including flu shots, and the delivery of other vaccines. Many minor problems like sinus infections can now be treated at health centers located inside retail drug stores. They are also becoming popular for the maintenance of long-term disorders, such as high blood pressure and diabetes.
Focusing on patient health while selling tobacco products has become a challenge for the company in the last few years. Questions about the practice reached upper management.
"One of the first questions [customers] ask us is, 'Well, if you're going to be part of the health care system, how can you continue to sell tobacco products?' There's really no good answer to that at all," CVS Chief Medical Officer Dr. Troyen A. Brennan said.
This move by CVS could force other stores with large pharmacies, such as Wal-Mart, Rite-Aid, Walgreens and Duane Reade to follow suit. Along with their storefronts, CVS operates 800 MinuteClinics within retail locations. The company has more storefronts than any competitor, and the second-highest sales, after Walgreens.
"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. Today's CVS Caremark announcement helps bring our country closer to achieving a tobacco-free generation. I hope others will follow their lead in this important new step to curtail tobacco use," Health and Human Services Secretary Kathleen Sebelius, said in a statement.
However, shareholders of CVS were not obviously happy because the decision would lead to a substantial loss in revenues. Shares of CVS fell over 1 percent on Wednesday to close down at $65.44 on the NYSE.
Some critics charge that CVS is still selling junk food and alcohol. But, management is adamant these can be consumed in moderation with less damage than tobacco. Ironically, as the U.S. population grows older, the retail drug industry may need to be re-born. This new look for CVS may have a significant impact on the health industries, one way or another.
