CVS and the long road to wellness: Cigarettes are just the beginning
CVS, a company whose candy aisle is larger than their produce section, is attempting to reshape its image as a company that places the health of their customers over profit. Realizing this image, however, may require a more extensive renaissance than the company is willing to stomach. Although the decision to ban tobacco sales is an ingenious first step toward the company’s rebirth, CVS must continue to contemplate the duplicity of being a promoter of wellness with the detrimental effects of many of their products. CVS/Caremark, the largest drug store chain in the United States, has recently made the daring decision to ban the sale of tobacco products across all branches starting Oct. 1 in an effort to refocus the company’s mission as a health care supplier rather than a retailer.
“We have about 26,000 pharmacists and nurse practitioners helping patients manage chronic problems like high cholesterol, high blood pressure and heart disease, all of which are linked to smoking,” Larry J. Merlo, chief executive of CVS, told Stephanie Strom of The New York Times. “We came to the decision that cigarettes and providing health care just don’t go together in the same setting.”
The estimated loss of revenue from tobacco sales is relatively insignificant, amounting to $2 billion of the $123 billion in total annual revenue for the company. This translates to an estimated loss of 6 to 9 cents of the $4.36 to $4.50 CVS projects to earn per share in 2014, and an estimated 17 cents per share annually after 2014.
In hopes of recovering some of those losses, CVS plans to implement an addiction treatment plan this spring in order to help smokers shed their addiction. The estimated losses are a miniscule burden to bear if the tobacco ban successfully paints the company as an unwavering and morally consistent health care provider. Through this bold strategy, CVS has set itself apart from other drug stores as a company that is truly devoted to improving the health of its customers.
As prescription drug sales continue to stagnate, drug stores must redefine their business model. For companies like CVS or Walgreens, the new frontier is clinical services. With the massive increase in health care access and the shortage of doctors under the Affordable Care Act, drug stores have the opportunity to pick up the slack by providing routine clinical services like vaccinations and physicals.
In Strom’s Times article, Merlo admits that the decision was less about diminishing tobacco use in the U.S., and instead “was really more of a discussion about how to position the company for future growth.” According to The Wall Street Journal, only 4 percent of cigarette sales come from drug stores, which indicates that CVS’s decision is certainly more about image and setting a precedent than fighting big tobacco.
Merlo understands the importance of maintaining a partnership with health care systems and hospitals in order to continue to provide clinical services when hospitals become overwhelmed. Those partnerships rest on having mutual interests and a unified mission of improving the health of the customers, and the sale of tobacco is counterproductive for that purpose.
There is no question that the decision to ban tobacco is clever, but it merely buys the company more time to truly redefine its image. As health care systems and insurance companies focus more intently on preventative medicine and nutrition under the Affordable Care Act, the deceit of retailers such as CVS will rear its ugly head yet again. For instance, CVS may no longer sell “cowboy killers,” but many of the products that make up a greater portion of the company’s revenue, such as multivitamins, alcohol, processed food and dietary supplements, are becoming increasingly scrutinized by the medical community for links to obesity, cancer, heart disease and a host of developmental disorders, including ADD and depression. Would the company take a loss in the name of wellness?
This critique does not even include the products sold by drug stores that are proven not to accomplish their intended purpose, such as topical creams intended to improve the overall health of one’s skin. Although useless products (topical lotions or vitamin C tablets intended for use after the symptoms have already manifested) may not have the detrimental effects of cigarettes or dip, they deceive consumers and waste resources by claiming to accomplish something that they cannot.
If CVS wants to shed its reputation as a peddler of medically detrimental goods, it must be consistent with all of its products, even those that make up a larger percentage of its revenue.
Healthcare providers and physicians that partner with CVS will continue to have a vested interest in the nutritional and dietary wellbeing of their patients. According to the Center for Disease Control, obesity-related healthcare costs alone are well over $100 million per year. As the cooperation between healthcare systems and drug stores increases, the true mission of CVS will be questioned again. Next time it may cost more than 17 cents a share.