Doing the right thing first is seldom easy. CVS Caremark announced hat it would become the first national pharmacy chain to avoid selling cigarettes along with other 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,” in accordance with the New York Times.
This is a gutsy, principled and potentially expensive move. It’s especially gutsy, and controversial, for a publicly traded company.
The initial estimates are the decision will surely cost CVS Near Me about $2 billion in sales, or about 17 cents per share of stock, annually. I suspect these estimates are most likely low. CVS may only sell $2 billion in tobacco products, although not many customers just purchase a pack of cigarettes whenever they visit the drugstore. Once they are there, they probably pick up other considerations too. Maybe milk. Maybe candy. Maybe the prescriptions they have to counter the many ill effects of smoking.
CVS is increasingly moving toward providing more health services at their stores. The pharmacy chain has the second largest quantity of retail locations in the country, 800 which include “Minute Clinics” that provide basic take care of common ailments and safety measures like flu shots. Merlo has said CVS would like to add 700 more such clinics by 2017. The clear narrative CVS hopes to convey towards the public is that it is actually a company less about selling assorted retail products and a lot more about meeting health care needs that do not require a trip to the doctor.
I have no doubt that, as CVS says, companies focused on protecting health do not have business inside 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 will not inexorably poison us as tobacco does.
If CVS were a privately held company, the analysis could stop there. Private business people can do anything they want using their companies. They can decide to forego profit for principle.
A call like this is tougher for that directors and managers of a publicly traded enterprise like CVS. They have a fiduciary duty to shareholders, and this duty generally takes the type of maximizing the long-run value of the home – which is, the company – entrusted in their mind. CVS may reason that its long-run value is enhanced by sitting on principle by doing this. It seems like clear that this argument will, in large part, concern positioning the company to adopt a larger share of the medical care dollar going forward. The company’s leadership may also reason that sitting on principle is probably going to draw some customers in their mind, even as they lose others.
Maybe that logic is sound, but it is not likely to be very easy to prove. I am certain someone will file a lawsuit obliging CVS Wholesale to prove it, too. Unfortunately for CVS’ directors and management team, the likely effect on revenue and customer traffic is way more easily quantified than the projected and intangible benefits they presumably hope this decision can provide.
In the meantime, CVS is doubling down on its position. Not only will it stop selling cigarettes and tobacco products completely by October, nevertheless it will launch a “robust national smoking cessation program” this spring, the Los Angeles Times reported.
While some shareholders may be hard to win over, CVS’ decision is drawing praise from medical 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 from the Robert Wood Johnson Foundation, said of the decision, “CVS is clearly establishing a leadership position for making the land healthier and in building a culture of health.” (2) Such public endorsements are likely to help CVS justify its choice, though they may not be enough alone to appease shareholders right away.
I don’t think CVS is doing wrong by doing the right thing. Even a public firm can lead by example, and the example 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 of being patient with this particular change. In every case, I do believe the position of CVS`Pharmacy Holiday Hours – besides being ethically strong – has sufficient business justification that courts should refrain from second-guessing it. If shareholders are unhappy, they can elect a brand 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, a minimum of, is ready to walk an added block or two to show my appreciation through my purchases. The walking is going to be good for me, too.