CVS Caremark Corp. will end the sale of cigarettes and other tobacco products through its CVS/pharmacy outlets nationwide by October 1.

CVS Caremark Corp., CVS/pharmacy, Larry Merlo, Journal of the American Medical Association, Dr. Troyen Brennan, Steven Schroeder, Smoking Cessation Leadership Center, MinuteClinic, Tom Harkin, Iowa, Walgreen Co., Rite Aid Corp.

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Inside This Issue - News

CVS decides to halt sale of tobacco

February 24th, 2014

WOONSOCKET, R.I. – CVS Caremark Corp. will end the sale of cigarettes and other tobacco products through its CVS/pharmacy outlets nationwide by October 1.

The action, which has set off reverberations beyond the retail industry, has made CVS/pharmacy the first national drug chain to take this step.

"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," said president and chief executive officer Larry Merlo. "Put simply, the sale of tobacco products is inconsistent with our purpose."

An article that appeared online in the Journal of the American Medical Association on the day of the CVS announcement pointed out that more than 480,000 deaths occur annually in the United States as a result of smoking, with direct medical costs of $132 billion by some recent estimates. The article was coauthored by Dr. Troyen Brennan, CVS’ chief medical officer, and Steven Schroeder, director of the Smoking Cessation Leadership Center at the University of California, San Francisco.

While cigarette smoking in this country has declined from about 42% of American adults in 1965 to 18% today, the article notes that the rate of reduction has tapered off in the last decade, as 42 million people continue to smoke while 16 million current and former smokers have smoking-related illnesses.

"Most pharmacy chains are retooling themselves as an integral part of the health care system," wrote Brennan and Schroeder. "They are offering more counseling by pharmacists, an array of wellness products, and outreach to clinicians and health care centers. Perhaps more important, pharmacies are moving into the treatment arena, with the advent of retail health clinics. These retail clinics, originally designed to address common acute infections, are gearing up to work with primary care clinicians to assist in treating hypertension, hyperlipidemia and diabetes, all conditions exacerbated by smoking."

This spring CVS will launch a national smoking cessation program that will include information and treatment on smoking cessation at all CVS/pharmacy and MinuteClinic locations. The program, which will include online resources, will be available to CVS Caremark pharmacy benefit management plan ­members.

Management pointed out that the decision does not affect its 2014 projections for operating profit or earnings per share, nor the five-year financial projections provided at CVS’ Analyst Day last December. The company estimates that it will lose about $2 billion annually in sales from tobacco shoppers, with a negative impact on 2014 earnings of 6 cents to 9 cents per share. However, executives expect to offset that hit to profits with "incremental opportunities" they have identified.

Speaking to analysts during CVS’ recent fourth quarter conference call, Merlo said it was "the right decision at the right time," adding that the response across a broad range of constituents, including legislators and policy makers, has been "overwhelmingly positive."

In the wake of the announcement, eight Senate Democrats, led by Tom Harkin of Iowa, signed a letter to the chief executive officers of both Walgreen Co. and Rite Aid Corp., urging them to follow the CVS example.