Cigarettes have been sold in pharmacies for so long that we rarely contemplate the inherent contradiction stocking the leading cause of preventable death next to prescriptions and vitamins. So when CVS announced its decision earlier this week to stop stocking tobacco products in order to establish itself as a committed health care provider, the news was on every front page. Immediately, competitor Walgreens flip flopped on a statement it made last year about selling cigarettes and announced it was “evaluating” the possibility of dumping them.
But analysts say the announcement is a manifestation of an existing trend, rather than the sign of a new one. CVS s decision to forfeit $2 billion in revenue will have little impact on the industry, they say, and no impact on people smoking. Another competitor, Rite Aid, announced it s sticking to tobacco for now, while other chains such as Dollar General just started selling cigarettes last year.
Even if CVS did trigger a mass exodus of newly health conscious pharmacies from the tobacco market, it wouldn t make much difference. Less than 4 percent of cigarettes are sold in pharmacies versus 16 percent in convenience stores, 21 percent in tobacco stores, and 48 percent in gas stations, according to market research from Euromonitor. The US would also just be catching up to the rest of the world, where many countries consider selling cigarettes in pharmacies hypocritical. The sale of tobacco products in pharmacies is illegal in most of Canada, for example. If pharmacies stop stocking tobacco products, this “would simply bring the US into line with wider international tobacco distribution norms,” says Shane McGuill, Euromonitor s tobacco expert.
Even if CVS inspires pharmacies to drop cigarettes en masse, it wouldn t make much difference
The news is still bad for the US tobacco industry. CVS s move is part of the overall “dwindling enthusiasm” for tobacco in the US, McGuill writes in a blog post. Cigarette sales fell 31 percent between 2003 and 2013 with no signs of rebounding. With public smoking bans on the rise, brands have shifted to a “total tobacco” strategy, pushing snuff, snus, nicotine lozenges, and e cigarettes.
RJ Reynolds, the second largest tobacco company in the US, offered a gracious statement in response to CVS s decision. “We value the long term relationship we had with CVS and respect their commercial decision,” a representative says in an email. “We will work with them as they transition out of the tobacco category in the coming months.”
But the company s relationship with CVS likely isn t entirely over. Like most tobacco companies, RJ Reynolds also makes e cigarettes which could potentially replace traditional cigarettes on CVS shelves. The pharmacy doesn t sell e cigarettes yet but says it is “monitoring” them a common line from retailers as the Food and Drug Administration (FDA) dawdles on releasing regulations for how the products are marketed and sold. Like many US pharmacies, CVS is pushing further into health care by adding in store clinics and basic medical services. The company needs to know whether e cigarettes fit this new image. If the FDA determines that e cigarettes are safe and can be used as a smoking cessation aid, it s likely that CVS will snap them up, and be more profitable as a result e cigarette sales doubled in 2013 to $1.5 billion, and are projected to surpass cigarette sales by as early as 2023, according to Bloomberg Industries.
When asked whether their tobacco products ban would affect their decision on whether to sell e cigarettes in the future, CVS indicated it would not. “There is no tobacco in e cigarettes,” a representative tells The Verge. “FDA is evaluating whether they are effective nicotine replacement products with any health benefit.”
“There is no tobacco in e cigarettes.”
The FDA, which regulates cigarettes and tobacco products, was supposed to issue proposed regulations for e cigarettes back in October. The agency only regulates e cigarettes that are marketed as therapeutic devices, which is why most e cigarette companies shy away from claiming they help smokers quit. But amid the uncertainty, news about potential health dangers continues to trickle out. Jurisdictions including New York City and the state of Oklahoma have banned them in public places and state owned property, respectively.
E cigarette makers lobbied the FDA for a new regulatory category that would separate the vapor products from tobacco products, officially disassociating e cigarettes from their out of vogue predecessors. Assuming there aren t any surprises about the health impacts of e cigarettes, which experts say are less harmful than smoking tobacco, the FDA classification will be the dominant factor in where the devices get sold.
“We see electronic cigarettes as an anti smoking product and we understand the pushback against combustible tobacco cigarettes,” says Jeff Holman, president of Vapor Corp., a publicly traded e cigarette company whose products are already on shelves in Family Dollar, Dollar General, and Rite Aid. “Ultimately, we are hopeful that our product category will benefit from this trend away from tobacco.”
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But this isn’t just about public health. Already the decision is garnering heavy media coverage, which could serve to counteract the company’s estimated revenue shortfall. The move, which some might see as long overdue at a one stop shop that doubles as a convenience store and pharmacy, could be a savvy publicity coup that builds brand loyalty with certain demographics. That’s especially true of the 67 percent of Americans who view smoking as either an extremely or a very serious problem for society.
Already Wednesday, Merlo appeared on CBS’s This Morning to talk about the decision, and his store. “This decision really underscores the role that CVS is playing in our health care system,” he told Charlie Rose. “There’s a growing emphasis on healthy outcomes, managing chronic disease.” Merlo also said that the $2 billion annual loss is part of his company’s long term growth strategy, and emphasized that “we’re evolving into a health care company.”
And it’s personal. Merlo’s father, he told CBS, was a smoker who died young from cancer. Merlo said he hasn’t yet spoken with other major drugstore executives about the move.
The White House immediately praised the decision. President Obama, who has been a smoker, hailed it as a “powerful example” that could help millions of Americans quit smoking.
“Today’s decision will help advance my administration’s efforts to reduce tobacco related deaths, cancer, and heart disease, as well as bring down health care costs ultimately saving lives and protecting untold numbers of families from pain and heartbreak for years to come,” Obama said.
The pharmacy will also undertake a national smoking cessation program, Merlo said in a statement. The program will begin in the spring and include online resources as well as information and treatment at CVS pharmacies and MinuteClinics.
The announcement comes as efforts to curb tobacco use are again increasing nationwide. The 50th Annual Surgeon General’s Report on Smoking and Tobacco, released last month, added several ailments to the roster of diseases caused by smoking.
The FDA announced a major antitobacco campaign Tuesday to prevent and reduce smoking among young people.
Health and Human Services Secretary Kathleen Sebelius joined the president in applauding the decision, calling it an “unprecedented step in the retail industry.”
“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,” she said in a statement. “Today’s CVS Caremark announcement helps bring our country closer to achieving a tobacco free generation.”
CVS is the second largest drugstore chain in the nation, behind Walgreens, which also sells tobacco products. Michael Polzin, a Walgreens spokesman, told the Wall Street Journal that the company has been “evaluating this product category for some time to balance the choices our customers expect from us, with their ongoing health needs.”