February 5

CVS Caremark to stop selling tobacco products

The nation’s second-largest drugstore chain says it will phase out cigarettes, cigars and chewing tobacco by Oct. 1.

By Michael Felberbaum And Tom Murphy
The Associated Press

(Continued from page 1)

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Marlboro cigarettes are on display in a CVS store in Pittsburgh. The move to phase out cigarettes, cigars and chewing tobacco by Oct. 1 will cost the nation’s second-largest drugstore chain about $2 billion in annual revenue.

The Associated Press

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Health and Human Services Secretary Kathleen Sebelius called on others to follow the CVS Caremark example.

“We need an all-hands-on-deck effort to take tobacco products out of the hands of America’s younger generation, and to help those who are addicted to quit,” she said in a statement.

CVS Caremark competitor Walgreen Co., the nation’s largest drugstore chain, sells tobacco, as does the world’s largest retailer, Wal-Mart Stores Inc., which also operates pharmacies in its stores. But Target Corp., another major retailer with pharmacies, does not.

Most independent pharmacies also do not sell tobacco, according to the National Community Pharmacists Association.

On the flip side, discounters such as Family Dollar have started selling tobacco over the last couple years.

Walgreen spokesman Michael Polzin said in an email his company has been evaluating tobacco products “for some time to balance the choices our customers expect from us, with their ongoing health needs.” He said Walgreen will continue to do this while also providing smoking cessation products.

The nation’s biggest cigarette maker, Philip Morris USA, said in a statement Wednesday that it is up to retailers to decide if they’re going to sell tobacco products.

Several cities, including San Francisco, Boston and many smaller Massachusetts communities have considered or passed bans on tobacco sales in stores with pharmacies. Other places like New York City have sought to curb retail displays and promotions and raise the legal age someone can buy tobacco products.

Philip Morris, which is owned by Richmond, Va.-based Altria Group Inc., had challenged San Francisco’s tobacco sale ban, claiming it violated its constitutional rights by suppressing communications directed at adult smokers.

CVS notches about $1.5 billion annually in tobacco sales, but it expects the $2 billion drop in revenue from phasing out tobacco because smokers often buy other products when they visit their stores. The company brought in more than $123 billion in revenue in 2012 and ranks 13th on the 2013 Fortune 500 list of biggest U.S. companies.

While the company trails only Walgreen in terms of number of drugstores, it actually draws most of its revenue from its pharmacy benefits management, or PBM, business. PBMs run prescription drug plans for employers, insurers and other customers. They process mail-order prescriptions and handle bills for prescriptions filled at retail pharmacies.

U.S. retail sales of tobacco, which is comprised largely of cigarettes, were about $107.7 billion in 2012, according to market researcher Euromonitor International.

The share of Americans who smoke has fallen dramatically since 1970, from nearly 40 percent to about 18 percent. But the rate has stalled since about 2004, with about 44 million adults in the U.S. smoking cigarettes. It’s unclear why it hasn’t budged, but some market watchers have cited tobacco company discount coupons on cigarettes and a lack of funding for programs to discourage smoking or to help smokers quit.

Tobacco companies also have increasingly relied on their packaging and displays at retailers to build brand loyalty and grab consumers because it is one of the few advertising levers left to them after the government curbed their presence in magazines, billboards and TV.

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