Doing the right thing first is seldom easy. CVS Caremark announced hat it would become the first national pharmacy chain to stop selling cigarettes along with other cigarettes and tobacco products altogether. The company’s chief executive, Larry J. Merlo, said “We came to the decision that cigarettes and providing health care just don’t go together within the same setting,” according to The New York Times.
It really is a gutsy, principled and potentially expensive move. It’s especially gutsy, and controversial, to get a publicly traded company.
The first estimates are that this decision will cost CVS Pharmacy Near Me about $2 billion in sales, or about 17 cents per share of stock, annually. I suspect these estimates are probably low. CVS may only sell $2 billion in tobacco products, however, not many customers just purchase a pack of cigarettes once they go to the drugstore. After they are available, they probably pick up other considerations too. Maybe milk. Maybe candy. Maybe the prescriptions they should counter the many ill effects of smoking.
CVS is increasingly moving toward providing more health services at their stores. The pharmacy chain provides the second largest variety of retail locations in the united states, 800 in which include “Minute Clinics” that offer basic care for common ailments and preventive measures like flu shots. Merlo has said CVS desires to add 700 more such clinics by 2017. The clear narrative CVS hopes to convey for the public is it is a company less about selling assorted retail products and much more about meeting medical care needs that do not require a trip to the doctor.
I actually have without doubt that, as CVS says, companies focused on protecting health have zero business within the tobacco business. Many will probably argue that they have no business in, say, the candy business either. I don’t buy that logic, though. Candy fails to inexorably poison us as tobacco does.
If CVS were a privately owned company, the analysis could stop there. Private business people can do anything they want making use of their companies. They can decide to forego profit for principle.
A call like that one is tougher for your directors and managers of a publicly traded enterprise like CVS. These people have a fiduciary duty to shareholders, and that duty generally takes the shape of maximizing the long-run value of the home – that is, the company – entrusted to them. CVS may argue that its long-run value is enhanced by sitting on principle this way. It seems like clear that the argument will, in large part, concern positioning the company to consider a larger share from the healthcare dollar going forward. The company’s leadership may also debate that sitting on principle is probably going to draw some customers in their mind, even because they lose others.
Maybe that logic is sound, yet it is not going to be easy to prove. I am sure someone will file a lawsuit obliging CVS to prove it, too. Unfortunately for CVS’ directors and management team, the likely influence on revenue and customer traffic is much more easily quantified compared to the projected and intangible benefits they presumably hope this decision will create.
Meanwhile, CVS is doubling down on its position. Not only will it stop selling tobacco products completely by October, but it will launch a “robust national smoking cessation program” this spring, the La Times reported.
While some shareholders may be hard to make an impression on, CVS’ decision is drawing praise from health care professionals and antismoking groups. Kathleen Sebelius, secretary of Health and Human Services, said in a statement, “Today’s CVS/Caremark announcement helps bring our country even closer to achieving a tobacco-free generation.” Dr. Risa Lavizzo-Mourey, president and chief executive officer in the Robert Wood Johnson Foundation, said in the decision, “CVS is clearly establishing a leadership position for making the land healthier as well as in constructing a culture of health.” (2) Such public endorsements will likely help CVS justify its choice, though they may not really enough alone to appease shareholders right away.
I don’t think CVS does wrong by doing the right thing. Even a public firm can lead by example, and also the illustration of a company in the healthcare business making its customers’ health its chief business focus is actually a powerful one. Time will zrfhfn if CVS’ shareholders will reap the rewards for being patient with this particular change. In almost any case, I do believe the position of What Time Does CVS Open – besides being ethically strong – has sufficient business justification that courts should refrain from second-guessing it. If shareholders are unhappy, they can elect a whole new board to pick new managers, or they can just sell their shares.
Congratulations to CVS on having the guts to visit first. This nonsmoker, at least, is willing to walk an added block or two to show my appreciation through my purchases. The walking will be great for me, too.