CVS becomes first big U.S. drugstore chain to drop tobacco

Wed Feb 5, 2014 4:49pm EST
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By Phil Wahba and Julie Steenhuysen

(Reuters) - CVS Caremark Corp will stop selling tobacco products at its 7,600 stores by October 1, the company said on Wednesday, making it the first national drugstore chain in the United States to take cigarettes off the shelves.

Public health experts hailed the precedent-setting decision by the No. 2 U.S. drugstore as a step that could pressure other retailers to follow suit. With pharmacies taking on a larger role in the U.S. healthcare system with walk-in clinics and services such as managing health plans, many experts say they should no longer offer unhealthy products like tobacco.

President Barack Obama, a former smoker, praised CVS, saying in a statement the move will help wider efforts to "reduce tobacco-related deaths, cancer, and heart disease, as well as bring down healthcare costs."

CVS expects the decision to hurt profits initially, along with a $2 billion hit to annual sales. But the company, whose Caremark unit is a pharmacy benefits manager for corporations and the U.S. government's Medicare program, believes the move will boost its appeal as a healthcare provider.

CVS hopes to replace some sales through signing up customers to smoking cessation programs, which will be a selling point with potential corporate contracts.

Analysts said CVS could eventually recoup lost sales through increased use of its healthcare services. But investors focused on the short-term pain. CVS shares fell 1 percent. Larger rival Walgreen Co, which will keep selling cigarettes, rose 3.9 percent, while No. 3 Rite Aid Corp which also will still offer cigarettes rose 2 percent.

Shares of cigarette makers Lorillard Inc, Altria Group and Reynolds American all slipped.

Pharmacists have long been a source of community health information, and drugstore chains have embraced that tradition by adding walk-in clinics. CVS is the largest U.S. pharmacy healthcare provider, with more than 800 MinuteClinic locations.   Continued...

Shelves full of cigarettes are pictured at a CVS store in the Manhattan borough of New York February 5, 2014. REUTERS/Carlo Allegri