(Reuters) CVS Caremark Corp will stop selling tobacco products at its 7,600 stores by October 1, the company said on Wednesday, making it the first national drugstore chain in the United States to take cigarettes off the shelves.

Public health experts hailed the precedent setting decision by the No. 2 U.S. drugstore as a step that could pressure other retailers to follow suit. With pharmacies taking on a larger role in the U.S. healthcare system with walk in clinics and services such as managing health plans, many experts say they should no longer offer unhealthy products like tobacco.

President Barack Obama, a former smoker, praised CVS, saying in a statement the move will help wider efforts to “reduce tobacco related deaths, cancer, and heart disease, as well as bring down healthcare costs.”

CVS expects the decision to hurt profits initially, along with a $2 billion hit to annual sales. But the company, whose Caremark unit is a pharmacy benefits manager for corporations and the U.S. government’s Medicare program, believes the move will boost its appeal as a healthcare provider.

CVS hopes to replace some sales through signing up customers to smoking cessation programs, which will be a selling point with potential corporate contracts.

Analysts said CVS could eventually recoup lost sales through increased use of its healthcare services. But investors focused on the short term pain. CVS shares fell 1 percent. Larger rival Walgreen Co, which will keep selling cigarettes, rose 3.9 percent, while No. 3 Rite Aid Corp which also will still offer cigarettes rose 2 percent.

Shares of cigarette makers Lorillard Inc, Altria Group and Reynolds American all slipped.

Pharmacists have long been a source of community health information, and drugstore chains have embraced that tradition by adding walk in clinics. CVS is the largest U.S. pharmacy healthcare provider, with more than 800 MinuteClinic locations.

“I think CVS recognized that it was just paradoxical to be both a seller of deadly products and a healthcare provider,” U.S. Centers for Disease Control and Prevention Director Thomas Frieden told Reuters.

CVS Caremark Chief Medical Officer Dr. Troyen Brennan said in a piece in the Journal of the American Medical Association that increased health coverage under the U.S. Affordable Care Act “comes with a price” of promoting public health.

Experts noted that healthcare organizations and advocacy groups such as Americans for Nonsmokers’ Rights have been urging pharmacies for years to get out of the tobacco business.

Cornell University communication professor Jeff Niederdeppe cited “an evolving social climate that has become less and less supportive of the marketing, sale, and use of tobacco products in the U.S.”

Some U.S. cities, including Boston and San Francisco, already ban the sale of tobacco products in pharmacies, and nonsmoking advocates hope other chains will follow CVS.

“This is a trend we’re going to see many, many retailers and food companies jump on,” said Alexandra von Plato, president and global chief creative officer of Publicis Healthcare Communications Group.

Only 18 percent of U.S. adults smoke, down sharply from 43 percent in 1965. But the habit still kills 480,000 Americans each year, remaining the leading cause of preventable death in the United States.


CVS said the decision to drop tobacco sales will cost the company 6 cents to 9 cents in profit per share this year. Analysts expect 2014 revenue of $132.9 billion and earnings of $4.47 per share, according to Thomson Reuters I/B/E/S.

Overall U.S. cigarette sales fell 31.3 percent from 2003 to 2013, according to Euromonitor International. And CVS faced more competition in selling to that shrinking market, as discount retailers Family Dollar Stores Inc and Dollar General Corp chains charge much less and have far more locations.

“We believe the move will be viewed as a positive long term decision by CVS, despite the near term profit drag, as it paves the way for increased credibility with both healthcare consumers and payers,” ISI Group analyst Ross Muken wrote in a note to investors.

CVS has been bolstering its position in the healthcare market in recent months and in December, it said it expected pharmacy benefit manager revenue to rise between 7.25 percent and 8.5 percent in 2014, more than double the rate of retail business growth.

Tobacco companies shrugged off the announcement even as shares dipped on concerns about potential disruption to sales.

“It’s up to retailers to decide if they’re going to sell tobacco products,” said Brian May, spokesman for Altria Group, maker of Marlboro and other popular brands.

RBC Capital Markets analyst Nik Modi said he expected little impact on tobacco companies. He noted that they rely on convenience stores for more than 75 percent of sales.

But Dr. Richard Wender of the American Cancer Society said CVS’s move would have an effect.

“Every time we make it more difficult to purchase a pack of cigarettes, someone quits.”

(Reporting by Phil Wahba in New York and Julie Steenhuysen in Chicago Editing by Jilian Mincer, Lisa Shumaker and David Gregorio)

Regulate e-cigarettes

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Proponents of e cigarettes say that it is a disruptive innovation and that smokers can quit smoking by using it as a nicotine delivery device, taking away the addictive craving of cigarettes.

Critics note that if one intentionally breathes in something other than clean air, it is a problem for the lungs. The chemicals placed in the cartridge and the long term consequences of inhaling the vapor still need further study. Others note that e cigarettes are expensive and can still be a gateway to actual cigarette use. To distance these new products from the old, some marketers are avoiding the term “cigarette,” renaming them “e hookahs” or “vape pens.”

In the last year alone, the use of e cigarettes has more than doubled, according to the New York Times, with sales at more than $1.7 billion. The number of e cigarette users in the United States reached 2.5 million last year and, at this rate, is expected to overtake conventional cigarette consumption within the next decade. The growth has come with almost no federal oversight or testing of the safety of the product, leaving it to local jurisdictions to regulate them.

Two bills are currently being proposed in City Council that relate to e cigarette use in Philadelphia. The first seeks to prevent the sale of e cigarette devices to minors, and the second would restrict the public spaces where a person could use the devices.

Teens are being targeted by e cigarette manufacturers. In order to find the next generation of addicted users, they have knowingly placed nicotine in these products and added sweet candy flavors with alluring names. There are now more than 400 brands available to American consumers. Some of these products are derived from tobacco extract some aren’t. The decades that have been spent persuading youths not to smoke are being undermined by clever marketing.

Second, although all e cigarettes are intended to deliver vaporized solutions deep into the body via inhalation, none are currently subjected to safety testing or labeling requirements. Would you knowingly let your kid inhale an untested product? Think about it. You have more information about the potential health impact of your mascara than you do about that of your e cigarette. The City Council bill clarifies that e cigarettes should not be sold to kids under age 18.

Since 2007, Philadelphia has had a highly successful public smoking ban. We simply should not confuse the public by allowing e cigarette vaping to pollute the air.

The safety of vaping remains untested, and the proper expectation of members of the public is that they should be able to enjoy a meal without wondering, “What is that smell in the air?” Major cities like New York, Chicago, and, most recently, Los Angeles have responded by banning the use of e cigarettes in public spaces, restaurants, bars, and nightclubs.

If these proposals seem familiar to you, there’s a reason. In the late 1990s, many municipalities in the United States were wrestling with the exact same questions regarding conventional cigarettes.

Though it’s probably safe to say that no municipal authorities were in favor of selling cigarettes to minors, there was little public appetite for enforcement of public smoking bans. Arguments at the time revolved around the anticipated negative economic impact and a desire for freedom from government regulations. Today, these laws are now so commonplace that it’s difficult to remember that their passage came only after decades of hard fought political battles.

Introducing these two ordinances on e cigarettes is the right thing for City Council to do. We should not repeat the awful mistakes of the past while the truth about the impact of these products on our lives is so uncertain.

Frank Leone is director of the Comprehensive Smoking Treatment Program at the University of Pennsylvania.

Walter Tsou is a former Philadelphia health commissioner.