No More Tobacco at CVS

September 5, 2014
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cvs tobacco freeAs of September 2, CVS–the ubiquitous pharmacy / convenience store–has stopped selling tobacco products, including both cigarettes and smokeless tobacco.

cvs tobacco freeAs of September 2, CVS–the ubiquitous pharmacy / convenience store–has stopped selling tobacco products, including both cigarettes and smokeless tobacco. This is a bold move from the retailer, which is also planning to rebrand itself as “CVS Health” to emphasize its place in the health care delivery chain. I personally applaud the decision, because there are simply no benefits to tobacco use in any form. And it’s also worth noting that this is a move that is financially risky for CVS. At the time that they first announced their plans to make this change, corporate leadership projected a loss of roughly $2 billion in annual revenue stemming not only from the lost sales of tobacco products, but also the sales of other incidental items that individuals in the store to purchase tobacco might have made. You can’t accuse CVS of not putting its money where its mouth is.

Does this lost revenue concern investors? It doesn’t appear so. The day after the shelves were emptied of tobacco, shares of CVS are up by nearly 1%, and over the last 52 weeks, the share price is up by nearly 43%. What has investors so confident? The answer is likely the new direction that CVS Health is taking. Yes, they are a pharmacy, but they aspire to be–and in many cases already are–much more than that. Many CVS locations also contain minute clinics where one can walk-in without an appointment and be seen by a physician assistant or nurse practitioner to receive a diagnosis–and perhaps a prescription–in a short amount of time. They are planning to have approximately 1,500 clinics in operation within the next 2 to 3 years. CVS Health also operates as a pharmacy benefits manager–you might be more familiar with the name Caremark that could be printed on your insurance card. There’s big money in that business too.

So, this looks like good news for the health of the population, and good business for CVS Health and its shareholders, but is it enough? If you’re really in the business of health care, should you be selling sugar-sweetened beverages, candy bars, and potato chips? What about household cleaning products? They can be hazardous to your health. Many of these stores also sell beer, wine, and liquor. The bottom line is: There are a lot of things one can find inside a CVS that aren’t good for your health. Perhaps none of them are as unequivocally bad for you as tobacco, but then again, you can’t buy a six-pack and a frozen pizza at your doctor’s office. So, again, I applaud CVS for their bold move to make tobacco slightly less available, and to aspire to become CVS Health, but I also wonder if they’ve gone far enough in pursuit of that goal. If they really want to be in the business of health, maybe they need to get completely out of the business of everything else.

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