CVS decision to quit tobacco highlights its growing role as healthcare provider

Retail drugstore chain CVS Caremark's announcement that it will stop selling tobacco products at its 7,600 stores by Oct. 1 makes it clear that the company wants to emphasize its role as a healthcare provider offering in-store clinics and pharmacy benefit management. But its main competitors declined to say whether they would follow suit.

“Ending the sale of cigarettes and tobacco products at CVS/pharmacy is the right thing for us to do for our customers and our company to help people on their path to better health,” Larry Merlo, president and CEO of CVS Caremark, said in a written statement last week.

In a video, Merlo said the move “more closely aligns us with our (pharmacy benefit management) clients, health plans and healthcare provider partners who like us are working to deliver better health outcomes while reducing healthcare costs.”

He said the move “position(s) us for a growing role in the healthcare delivery system.”

CVS executives said the decision is expected to cost the company about $2 billion a year in sales. Its revenue figure for 2012 was $123 billion.

Public healthexperts and government officials lauded the decision, urging other pharmacy chains to stop selling tobacco products. “Today's CVS Caremark announcement helps to bring our country closer to achieving a tobacco-free generation,” HHS Secretary Kathleen Sebelius said.

In recent years, CVS, Walgreen Co. and Rite Aid have introduced in-store clinics to provide minor medical services such as vaccinations, physical examinations and wellness screenings. The scope of their offerings has expanded to some chronic care. In 2006, CVS acquired Minute Clinics. Staffed by nurse practitioners and physician assistants, there are more than 800 Minute Clinics in stores across 28 states.

According to the Convenient Care Association, there are more than 1,400 retail clinics nationally, with that number expected to rise to 3,000 by 2016. Retail clinics are expected to play a growing role in providing primary care given the shortage of primary-care physicians.

But the pharmacy chains have come under criticism for selling deadly tobacco products while providing healthcare services, said Joanna Cohen, director of the Institute for Global Tobacco Control at Johns Hopkins University's school of public health.

Walgreen declined to say whether it planned to follow CVS' lead. “We will continue to evaluate the choice of products our customers want, while also helping to educate them and providing smoking-cessation products and alternatives that help to reduce the demand for tobacco products,” Walgreen spokeswoman Emily Hartwig said in a written statement.

A Rite Aid spokeswoman also said her company continually “evaluates” its products to ensure they meet the needs of customers.

Vishnu Lekraj, a senior analyst for the financial investment research firm Morningstar, said CVS is focused on expanding its pharmacy benefit management division. “The reason why CVS was able to do this was because they have another business where they are trying to help plan sponsors save on healthcare costs and drug costs, and you can't really provide that service and then provide one of the most unhealthy products ever made within your stores, ” he said.

Walgreen, Rite Aid and Wal-Mart might not be in a position to stop selling tobacco products right away, he added, because the sales they generate from cigarettes may make up a larger portion of their overall revenue.

Follow Steven Ross Johnson on Twitter: @MHsjohnson