CVS Stops Tobacco Sales Today, Changes Name To Reflect New Era
CVS employees removed tobacco products from stores ahead of schedule (CVS Health photo)CVS, the giant drugstore chain that shocked the U.S. public health community and Wall Street with its decision earlier this year to remove tobacco products from its shelves by October, said cigarettes are officially no longer on store shelves a month ahead of schedule.
The move to remove tobacco products effective this morning coincides with a company decision to also change its corporate name to CVS Health (CVS), from CVS/Caremark Corp. to reflect 'its broader health care commitment' and desire to change the future health of Americans.
When CVS first announced in February that it would end the sale of tobacco products at its stores effective October 1, chief executive officer Larry Merlo said it would cost the company about $2 billion in annual sales, or about 3 percent of company revenues.
Merlo said in an interview with Forbes that the loss of those sales continues and 'will cycle through the next 12 months.' He described the decision to stop selling tobacco as 'one of those intangibles' that helps the company win new business and make up for lost sales from cigarettes and related products.
Though not directly tied to the decision to stop selling tobacco, Merlo said the company has already tallied '$5.4 billion in new business wins for 2015.' The company operates a large pharmacy benefit management company, known as CVS/Caremark, as well as 7,700 retail pharmacies and 900 walk-in clinics.
'We offer a lot of benefits for clients and that is resonating in the marketplace,' Merlo said in an interview.
None of CVS competitors such as Walgreens (WAG) or Wal-Mart (WMT) have followed suit with decisions to stop selling tobacco products even as they, too, push further into the health care business with retail clinics staffed by nurse practitioners and offer more services from pharmacists.
'Changing the name catches up with what we have been doing,' Merlo told Forbes.
Merlo said CVS is creating a new model for the era that follows the implementation of the Affordable Care Act.
'ACA deals with access,' Merlo added. 'We have to focus on our quality role.'
Just last month, CVS said it entered into a clinical affiliation with MedStar Health, a 10-hospital system in the Washington D.C. area, bringing to 41 the number of health system and health care provider affiliations the drugstore giant has across the country.
Such relationships are critical as the Affordable Care Act, private insurance companies and self-insured employers increase their contracts with accountable care organizations. ACOs group providers of medical care together to care for a population of patients.
If the group of providers under the ACO reduces costs over a year's time, it shares in the savings with the insurance company. CVS and Walgreen say they help by providing lower-cost services and working more closely with doctors and hospitals to keep patients on their medications and away from high cost hospital settings.
Ending tobacco sales today boosts CVS' ability to partner with traditional health care providers, executives said.
'The sale of tobacco in a retail pharmacy conflicts with the purpose of he health care services delivered there,' said Dr. Troyen Brennan, chief medical officer at CVS Health . 'Even more important, there is evidence developing that indicates that removing tobacco products from retailers with pharmacies will lead to substantially lower rates of smoking with implications for reducing tobacco-related deaths.'
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