First major US drugstore drops cigarettes

CVS Caremark has announced that it will stop selling tobacco products at its 7,600 stores by October, becoming the first national drugstore chain in the US to take cigarettes off the shelf.

Public health experts called the decision by the country’s second largest drugstore chain a precedent-setting step that could pressure other retailers to follow suit, the Reuters news agency reported.

President Barack Obama, a former smoker, praised the move, saying CVS had set a powerful example.

“Today’s decision will help advance my Administration’s efforts to reduce tobacco-related deaths, cancer, and heart disease, as well as bring down healthcare costs,” Obama said in a statement.

CVS, whose Caremark unit is a major pharmacy benefits manager for corporations and the US government’s Medicare programme, said on Wednesday the decision would strengthen its position as a healthcare provider.

“I think it will put pressure on other retailers who want to be in healthcare,” said Dr Troyen Brennan, CVS Caremark’s chief medical officer.

Although some cities, including Boston and San Francisco, already ban the sale of tobacco products in pharmacies, advocates hope the voluntary move by CVS will have a ripple effect across other drugstore chains, Reuters reported.

Walgreen, the country’s largest pharmacy chain, said it would still sell cigarettes for now but will continue to evaluate the product category. Third-ranked Rite Aid did not immediately respond to a request for comment.

Some retailers stopped selling cigarettes years ago: Target Corp decided to drop them in 1996, while East Coast supermarket chain Wegmans Food Markets did so in 2008.

Dr Risa Lavizzo-Mourey, chief executive officer of the Robert Wood Johnson Foundation, which focuses on public health, said CVS had made “a bold, precedent-setting move because it acknowledges that pharmacies have become healthcare settings”.

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 a smoke-free generation, the AP news agency reported.

Small financial impact

CVS said the decision would not make a big dent in its financial results.

The company said the cost would be about $2bn in annual sales and six cents to nine cents in profit per share this year.

Analysts expect CVS to report 2014 revenue of $132.9bn and earnings of $4.47 per share, according to Thomson Reuters.

Declining smoking rates, along with new competition in the last two years from the low-cost Family Dollar Stores and Dollar General chains, suggest prospects for tobacco product sales were shrinking at CVS.

Dollar stores have far more locations and offer goods at lower prices.

“We believe the move will be viewed as a positive long-term decision by CVS, despite the near-term profit drag, as it paves the way for increased credibility with both healthcare consumers and payors,” ISI Group analyst Ross Muken wrote in a note.

US cigarette sales fell 31.3 percent between 2003 and 2013, according to Euromonitor International.

Although adult smoking rates have fallen from 43 percent of Americans in 1965 to 18 percent currently, the habit remains the leading cause of preventable death in the US, killing more than 480,000 people each year.