CVS stops selling cigarettes

February 10, 2014 at 3:46 PM Leave a comment

 

CVS/Caremark announced last week that it will no longer sell cigarettes in its drugstores, which has been widely hailed as progress in the war against tobacco.  Many now expect its competitors to follow suit, and potentially make it less convenient to buy cigarettes overall.  This remains to be seen, as cigarettes remain widely available through other very convenient outlets, like grocery stores and gas stations.  So why is this a big deal?

 

First, this represents a real amount of revenue for CVS, about $2 billion annually.  With that amount of money on the line, you know they didn’t make this decision lightly.  Ultimately deciding to stop selling something with such a reliable stream of customers has to have a real purpose behind it. 

 

At first glance, that purpose might be to be/appear to be more moral than its competitors.  While this might be the case, the more revealing reason might be this: the public feels health care companies shouldn’t create their own business.  Imagine what people would say if the Cleveland Clinic had cigarette machines in its lobby, or a bar in its cafeteria.  You get the picture: it wouldn’t go over well.

 

What this reveals about CVS is its intent.  CVS is trying to morph from a provider of drugs to a provider of care.  CVS has nearly 7,500 drugstores, but more importantly, owns Minute Clinic, the largest walk-in chain of clinics in the U.S., with 570 locations inside its drugstores.  In a classic disruptive innovation, Minute Clinic is providing basic primary care an aisle over from the ibuprofen and cough syrup.  Staffed by nurse practitioners, this care can be provided more cheaply and conveniently than its status quo competitors can, the primary care physicians.  Think about it: which did you visit last, your PCP or your drugstore?  How many visits do you make to your PCP a year?  How many to the drugstore?  For availability and convenience, its hard to beat something that close to where you live and work, and that’s in some cases open 24/7.

 

I’ve had this conversation many times with PCPs, many of whom continue to poo-poo Minute Clinic and its peers as “a flash in the pan”, or “inferior care”.  They can do that, but they should also be nervous.  The 40th largest company in the world just gave up $2 billion in revenue annually, because it’s betting that Minute Clinic is the future, and that unless traditional primary care changes radically in the next few years, it’s the past.  And CVS is polishing its image to accomplish just that.

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Debt, data, and deciders Synthesis, systems, and relationships

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