Doing the right thing first is seldom easy. CVS Caremark announced hat it would become the first national pharmacy chain to stop selling cigarettes as well as 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,” in accordance with the New York City Times.
This is a gutsy, principled and potentially expensive move. It’s especially gutsy, and controversial, for a publicly traded company.
The first estimates are the decision will definitely cost CVS 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 cigarettes and tobacco products, although not many customers just purchase a pack of cigarettes whenever they visit the drugstore. When they are available, they probably pick up other considerations too. Maybe milk. Maybe candy. Maybe the prescriptions they need to counter the many harmful 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 country, 800 which include “Minute Clinics” that offer basic look after 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 towards the public is that it is actually a company less about selling assorted retail products and much more about meeting health care needs which do not require visiting the doctor.
I have no doubt that, as CVS says, companies centered on protecting health have zero business within the tobacco business. A few will probably argue they may 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 owners can do whatever they want making use of their companies. They can choose to forego profit for principle.
A phone call like that one is tougher for that directors and managers of a publicly traded enterprise like CVS. There is a fiduciary duty to shareholders, and this duty generally takes the shape of maximizing the long-run value of the house – that is certainly, the company – entrusted in their mind. CVS may argue that its long-run value is enhanced by standing on principle in this way. It appears clear that this argument will, in large part, concern positioning the company to consider a bigger share from the healthcare dollar moving forward. The company’s leadership may also debate that standing on principle is probably going to draw some customers to them, even since they lose others.
Maybe that logic is sound, however it is not likely to be simple to prove. I am sure someone will file a lawsuit obliging https://www.Headquarterscomplaints.com/CVS-Pharmacy-Corporate-Office-Hq-Contact-Number/ to prove it, too. Unfortunately for CVS’ directors and management team, the likely impact on revenue and customer traffic is way more easily quantified than the projected and intangible benefits they presumably hope this decision can create.
In the meantime, CVS is doubling down on its position. It will not only stop selling tobacco products completely by October, but it will launch a “robust national quitting smoking program” this spring, the Los Angeles Times reported.
While many shareholders may be hard to conquer, 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 nearer to achieving a tobacco-free generation.” Dr. Risa Lavizzo-Mourey, president and chief executive officer of the Robert Wood Johnson Foundation, said from the decision, “CVS is clearly establishing a leadership position to make the nation healthier and then in creating 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 performing 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 believe the positioning of CVS Pharmacy 24 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 whole new board to pick new managers, or they can just sell their shares.
Congratulations to CVS on obtaining the guts to travel first. This nonsmoker, at least, is ready to walk an additional block or two to show my appreciation through my purchases. The walking is going to be beneficial to me, too.