National Press Club

CVS quits tobacco sales, focuses on improving customers' health, care access

September 21, 2014 | By Varun Saxena |

CVS Health CEO Larry Merlo touted his company's decision to stop selling tobacco products at a Sept. 19 National Press Club luncheon.

CVS Health CEO Larry Merlo touted his company's decision to stop selling tobacco products at a Sept. 19 National Press Club luncheon.

Photo/Image: Marshall H. Cohen

CVS Health CEO Larry J. Merlo touted the company’s decision to forgo $2 billion in annual revenue by ending the sale of tobacco products, a move he said that coincides with other CVS efforts to improve healthcare access and lower costs.

“We’re officially tobacco free, one month ahead of schedule, and we’re proud to say we’re the first national pharmacy chain in the country to take this action to support the well-being of our patients and our customers,” Merlo said at a Sept. 19 National Press Club luncheon.

The move was made after much consultation.

“We weighed both the short term and the long term opportunities,” Merlo said.

Ultimately, the decision the long term benefits won out. Merlo said the sale of tobacco was hampering partnerships with others and inconsistent with CVS’ mission to “work hard to help people on their path to better health.”

Concurrent with the decision, the company launched a smoking cessation program that includes the use of smoking cessation medication and coaching.

“The combination of medication and coaching can be very powerful. It can double quit rates from nearly seven percent to 15 percent,” Merlo said.

The decision to stop selling tobacco was made in February, and also excludes the sale of e-cigarettes. So far none of CVS’ competitors have followed CVS' lead.

The company this month changed its name from CVS Caremark to CVS Health.

“Our new brand signals a fundamental shift about who we are and what we do,” Merlo said.

Other healthcare challenges being tackled by CVS include increasing access and lowering costs. The growth in healthcare costs as percentage of the economy is unsustainable, Merlo said.

As part of that effort, the company has more than 900 walk-in Minute Clinic outlets staffed by nurse practitioners. The Minute Clinics are helping to hold costs down by replacing emergency care visits and supplementing, but not replacing, primary care physicians, Merlo said.

They have served more than 21 million patients to date – about half of them at night or over the weekend, according to Merlo.

“Medication non-adherence is costing our healthcare system about $300 billion (per year) in avoidable and unnecessary healthcare costs,” Merlo said, describing the problem as an “epidemic.”

One-third of patients stop taking their medication before the first refill, he said.

CVS offers the Pharmacy Advisor program to improve patient compliance related to medications for 10 diseases. It offers a return on investment of $3 for every $1 invested, Merlo said.

“Traditionally people thought of pharmacies as pill dispensaries. We think of pharmacy as much more than that,” he said.

The Affordable Care Act has been a “modest benefit” to CVS because Medicaid expansion has increased the number of customers, according to Merlo.

He also said it was unclear how many of the people who enrolled on private exchanges received insurance for the first time.

“There are many that believe the healthcare industry will change more in the [next] 10 years than it has in the past 50,” Merlo said.

One change you shouldn’t expect is the sale of medical marijuana in pharmacies. Merlo said CVS has no plans to offer medical marijuana at its pharmacies.