Will CVS's Decision to Stop Tobacco Sales Put Heat on Its Rivals?

Drugstore chain CVS Caremark's decision to stop selling cigarettes at its stores may put pressure on its major rivals, Walgreens/Duane Reade and Rite Aid, to follow suit.

Last week, the number two drugstore chain said it would stop all tobacco sales in its 7,600 drugstores by October, a move that was was both shocking and overwhelmingly welcomed by the public and the media. While not unprecedented, its not often that a corporation voluntarily acts in a manner that isn't motivated by its bottom line.The decision will cost CVS some $2 billion in annual sales, or about 1.6 percent of its revenue.

Not only will the chain cease tobacco sales, it will also begin offering cessation programs to help smokers quit. The move certainly brings the nationwide retailer some goodwill with anti-smoking advocates.

But will rival drug chains follow CVS's lead? Like CVS, retail pharmacies are seeking to play a larger role in the health system by becoming more comprehensive service providers, including providing clinic care and vaccinations in an attempt to capture a many of the newly insured Americans getting coverage through the Affordable Care Act. The ACA is expected to expand coverage by more than 11 million people by the end of this year. The sales of tobacco — a decidedly unhealthy product — in the same stores that provide health care services would seem odd, and perhaps even cynical, so the pressure is certainly on the other giant chains to follow suit.

But CVS's rivals don't appear to be in a hurry to change their tobacco policies.

Walgreens spokesperson Michael Polzin, told the Wall Street Journal that the top pharmacy chain has been "evaluating this product category for some time to balance the choices our customers expect from us, with their ongoing health needs."

Rite Aid seems even less inclined to end tobacco sales, if the company's recent statement is a good indicator. Spokesperson Ashley Flower says the retailer "offers a wide range of products, including tobacco products, which are available for purchase in accordance with federal, state and local laws. Additionally, Rite Aid also sells a variety of smoking cessation products and provides additional resources, including our pharmacists, who are available to counsel people trying to stop smoking."

Not everyone is convinced that CVS's decision will start a chain reaction among retailers. Forbes magazine views CVS's decision with a hint of skepticism, stating: “Despite the obvious PR and possible operational benefits, however, the cold, hard fact remains that the chain will be saying goodbye to a lot of primary and accompanying sales.”

Forbes is not alone in its doubt. Dr. Stephen Needel a panelist for RetailWire, an industry news service says, “good for them that they’re taking a stand, and I’m selling my CVS stock.”