Leslie Schrader's picture

CVS Quits Tobacco, Chooses Health and Wealth

CVS Caremark Corporation recently announced that[[wysiwyg_imageupload:177:]]
it will stop selling cigarettes and other tobacco products at its more than 7,600 CVS/pharmacy stores across the U.S. by October 1, 2014.

The bold decision, estimated to cost the company $2 billion in revenue on an annual basis, leaves no doubt that CVS, which once stood for Consumer Value Store, is making a significant investment in rebranding itself as a healthcare provider. It also raises the question of how CVS will replace the lost revenue.

Retailers like CVS are poised to play a major role in the delivery of primary care as payment reform and physician shortages make traditional healthcare systems increasingly difficult to navigate, fueling the growing demand for convenient, retail health clinics.

This year, The Patient Protection and Affordable Care Act will extend coverage to an estimated 32 million uninsured Americans, many of whom may find that retail chains offer a convenient, low-cost alternative to traditional office-based medicine for easily accessible, routine medical care. From a consumer perspective, the growth of high-deductible plans is a major reason people are looking to retail clinics for more cost-effective options.

CVS Caremark’s MinuteClinics, retail pharmacy and pharmacy benefit management business is already growing significantly faster than its brick and mortar retail business -- in the third quarter of 2013, it accounted for 54 percent of the company’s total revenues. This growth indicates this is no longer a trend, but an accepted approach to consumer-centric healthcare.

The decision to stop selling tobacco products begs the question, is a preferred retail health clinic system one that sells cigarettes, or has CVS raised the bar, putting pressure on competitors to follow suit? The decision is expected to be a key selling point as CVS tries to leverage its commitment to reducing costs and improving health outcomes to land more corporate contracts this year.

It is worth considering whether, in their expanding role as a healthcare provider, CVS and other retailers with a similar focus will remove alcohol and candy from its shelves. More importantly, consider the opportunities for products and services that promote health and wellness to fill the empty shelf space and customers’ carts. If you leave a MinuteClinic with a diagnosis of strep throat and filled antibiotic prescription what impulse purchases will you make to aid in your recovery? Tissues, juice, hand sanitizer, throat lozenges, soup…

As Americans continue to look beyond traditional doctors’ offices and emergency rooms for affordable, convenient healthcare, major retailers will continue to expand their healthcare offerings, and we need to consistently evaluate the best way to communicate with their customers from both a retail and healthcare perspective.